Case Law Details
Pravir Polymers Private Limited Vs ITO (Bombay High Court)
Introduction: The Bombay High Court recently issued a significant order in the case of Pravir Polymers Private Limited Vs. ITO, directing a fresh consideration by the Commissioner of Income Tax (Appeals) [CIT(A)] due to the violation of Rule 46A. This article delves into the details of the case, exploring the background, legal provisions, and the court’s crucial observations.
Detailed Analysis: The petitioner, Pravir Polymers Private Limited, faced a reopened assessment based on information from the Investigation wing, alleging that the lenders were merely name lenders. The Assessing Officer added the amount under section 68 of the Income Tax Act. The petitioner, in appeal, presented additional evidence, leading to the CIT(A) deleting the addition.
However, the Revenue filed an appeal before the Tribunal, questioning the admission of additional evidence without raising Rule 46A violation. The Tribunal allowed the Revenue’s appeal, stating that the CIT(A) didn’t follow the prescribed procedure under Rule 46A. The petitioner sought rectification under section 254(2), but the Tribunal rejected it, citing the non-consent of the petitioner’s counsel to produce the lenders.
The petitioner then moved the High Court through a writ petition, challenging the Tribunal’s orders. The High Court, in its judgment dated December 18, 2023, quashed the Tribunal’s orders, emphasizing the necessity for adherence to Rule 46A. The Court directed the CIT(A) to decide the appeal afresh, ensuring due process and compliance with Rule 46A.
The Court highlighted that if the Assessing Officer requires the presence of certain parties for further investigation, they should use their powers under Section 131 of the Income Tax Act, issuing summons to those parties. The judgment, in WP No. 2440 of 2023, also referenced ITA No. 2373 of 2023 and other relevant case numbers.
Conclusion: In conclusion, the Bombay High Court’s directive in the Pravir Polymers case serves as a reminder of the significance of procedural compliance, especially under Rule 46A. The judgment reinforces the principles of natural justice and emphasizes the Assessing Officer’s responsibility to utilize statutory powers for thorough investigations. As the case is remanded to the CIT(A), it opens avenues for a fresh assessment, bringing attention to the meticulous adherence to due process in income tax proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
This petition is filed impugning an order dated 21st November 2022 passed by the Income Tax Appellate Tribunal (ITAT) rejecting two misc. applications filed by petitioner under Section 254 (2) of the Income Tax Act, 1961 (the Act) being MA No.178/MUM/2022 and MA No.179/ MUM/2022 for Assessment Years 2011-2012.
2 The two misc. applications were filed by petitioner (assessee) seeking recall of an order dated 29th April 2022 passed by the ITAT in ITA No.2595/MUM/2019 alongwith Cross Objection No.103/MUM/202 1. Following are the mistakes that were alleged to be apparent on record in the impugned order :
I. Violation of Rule 46A of the Rules : The Revenue had neither raised the violation of the Rule 46A in the grounds of appeal, nor was it argued by the revenue, nor an opportunity was given to the appellant to explain the case there by violating the principle of natural justice.
Without prejudice to the above, If Department has raised the violation of Rule 46A, the respondent would have made an application before the Appellate Tribunal to admit the additional evidence.
II. Sufficient Opportunity of Hearing : The Assessing Officer has not given sufficient opportunity of hearing (Page 51) of paper book I) hence supplementary papers were filed before the CIT(A). Therefore, there is no violation of Rule 46A.
III. Not dealt with the cases relied on by the Applicant : The Hon’ble Tribunal has not dealt with the decision of the Hon’ble Supreme Court, Jurisdictional High Court and Jurisdictional Tribunal, inter alia which were relied on by the Applicant at the time of hearing.
IV. Non-compliance of Daily Order : Direction of the Hon’ble Tribunal via daily Order dated January 24, 2022 to the Departmental Representative to produce information/document to ascertain as to why the assessment was made under section 148 read with section 143(3) of the Act; The same was not complied by the Departmental Representative.
3 The misc. applications came to be rejected by the impugned order. The ITAT, while considering the rival submissions of the parties while hearing the misc. applications, as regards the alleged violation of Rule 46A of the Income Tax Rules, 1962 (the Rules) has observed that during the course of the hearing before the ITAT, the authorised representative of the assessee was asked whether the assessee could appear before the learned Commissioner of Income Tax (Appeals) [CIT(A)] or the Assessing Officer in case the matter was restored but the counsel of the assessee did not accept that suggestion because according to the assessee’s representative it was not possible for the assessee to produce the parties, from whom the assessee is alleged to have obtained unsecured loans, before the Assessing Officer or the learned CIT(A).
4 Dr. Shivaram stated and rightly so that it was not within the power of the assessee to produce third parties before the Income Tax officer. If the officer feels presence of certain parties are required for him to probe the matter further or go behind the entries made by the assessee in its books of accounts, the Assessing Officer should exercise his powers under Section 131 of the Act by issuing a summons to those parties. Dr. Shivaram stated that of course the assessee would provide the address as the assessee may have as on date and also co-operate in tracking those third parties.
5 As a background, against the Assessing Officer’s order, petitioner had preferred an appeal before the CIT(A). During the proceedings before the CIT(A), the assessee tendered certain documents. Mr. Suresh Kumar submitted that the CIT(A), at that stage, should have followed the procedure prescribed under Rule 46A of the Rules, forwarded copy of those documents to the Assessing Officer and called for a remand report. Mr. Suresh Kumar submitted that instead of calling for such a remand report, the CIT(A) proceeded to consider those documents and passed an order in favour of the assessee. Mr. Suresh Kumar submitted that in effect it is the department who is more affected by the CIT(A) not following the procedure prescribed under Rule 46A of the Rules.
6 Dr. Shivaram submitted that no such issue was raised by the Revenue in its grounds of appeal nor an opportunity was given to the assessee to explain the case of violation of principles of natural justice.
7 Be that as it may, the position is the assessee had relied on certain documents before the CIT(A) whereas the CIT(A) did not follow the procedure prescribed under Rule 46A of the Rules and call for a remand report.
8 In our view, instead of making the parties to go back and forth or devoting precious judicial time including in the appeals that have been filed by petitioner against the order dated 29th April 2022 passed by the ITAT, interest of justice would be meet if we remand the matter to the CIT(A) for denovo consideration.
9 The CIT(A) shall follow the procedure as prescribed under Rule 46A of the Rules and may also exercise all powers that he has under the Act to summon third parties to appear before him and record their statements. After hearing the parties, the CIT(A) may pass such orders, as he deems fit, in accordance with law.
10 In view of the above, we hereby quash and set aside the order dated 29th April 2022 passed by the ITAT in ITA No.2595/MUM/ 2019 alongwith Cross Objection No.103/MUM/202 1 for Assessment Years 2011- 2012 and also the impugned order dated 21st November 2022.
11 Petition disposed accordingly.
12 We clarify that we have not made any observation on the merits of the matter.
13 In view of the above, Dr. Shivaram, on instructions, seeks leave to withdraw Income Tax Appeal No.2372 of 2022.
14 Income Tax Appeal No.2372 of 2022 dismissed as withdrawn
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