A Solitary Opportunity of one day given to respond with Show Cause Notice is not valid: ITAT quashes Revisional Order [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal(ITAT)while quashing the revisional order held that a solitary opportunity of one day given to respond with show cause notice is not valid.

M/s. R.N. Khemka Enterprises Private Ltd, the assessee challenged the revisional order of the Pr. Commissioner of Income Tax, Delhi-VII [‘Pr. CIT’] dated 30.03.2022 passed under Section 263 of the Income Tax Act, 1961 [‘the Act’] whereby the assessment order passed by the Assessing Officer [AO] dated 18.12.2019 under Section 143(3) of the Act concerning Assessment Year 2017-18 was set aside for reframing the assessment order in terms of supervisory directions.

The assessee filed its return of income for Assessment Year 2017-18 in question inter alia claiming bad debt of Rs.2,28,12,685/- as a deduction under Section 36(2) of the Income Tax Act. The Assessing Officer who was satisfied with the compliance of the conditions stipulated under Section 36(1)(vii) r.w. Section 36(2) of the Act, assessed the income of the assessee without any adjustment on this score.  

The Pr. CIT by the exercise of its revisionary powers, alleged that the assessee is not eligible for deduction towards bad debts under Section 36(1)(vii) r.w. Section 36(2) of the Act where the debts written off do not arise from business transactions and were not part of the business transaction. The debts were alleged to be loans and advances in the balance sheet unconnected to the business of the assessee.

The Pr. CIT proceeded with the revisional action on the ground that the Assessing Officer has not conducted a proper inquiry concerning bad debt deduction and the aspect as to whether loans and advances were given in the ordinary course of business or that money lending was the regular business of the assessee, was not examined by the Assessing Officer while making an assessment.

It was submitted that a solitary opportunity of one day was given to the assessee to respond to the show cause notice to the satisfaction of the Pr. CIT. A Coram consisting of Shri Chandra Mohan Garg, Judicial Member & Shri Pradip Kumar Kedia, Accountant Member observed that one day opportunity, by no means, can be said to be any effective opportunity.

The Tribunal held that such lackadaisical action of the Pr.CIT is in the negation of overriding principles of natural justice inbuilt into the power conferred under Section 263 itself. Further held that an opportunity to answer to show cause is not a gift but an absolute right which cannot be bypassed.

While allowing the appeal, the impugned revisional order passed under Section 263 of the Act was set aside and quashed.

To Read the full text of the Order CLICK HERE

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