Adequate opportunity of being heard to the assessee does not mean only to give written notice, if proper communication had been made through advocate before passing revisionary order, would be sufficient.
The initiation of proceedings under section 263 does not depend on the issuing of a notice in writing. The written notice can be one of the forms as it is likely to ensure the best results but it cannot be the only form of communication. In each case it will have to be seen whether the effective and adequate oportunity of being heard was provided to the assessee. The opportunity of being heard as contemplated in section 263 was in fact provided to the assessee also for the second year and the assessee had availed of the same when his counsel made submissions. The order of the Commissioner therefore, was not bad.
1. Relating to a combined order under Section 263 of the Income-tax Act, 1961 ('the Act') by the Commissioner, Baroda, and on merits involving similar facts, both these appeals of the assessee for the assessment years 1977-78 and 1978-79 are conveniently disposed of by a combined order.
2. On merits the setting aside of the assessment orders by the Commissioner as per directions in paras 4 to 7 of his order was acceptable to the assessee's learned counsel, Shri K.C. Patel, provided there was no dispute that the Commissioner had kept the issue of investment allowance open for the ITO to decide in accordance with law and not necessarily in accordance with the opinion expressed by the Commissioner in his order. Shri Harne, the departmental representative, stated that it was clear from the reading of paras 4 to 7 that the Commissioner had left the entire issue open to the ITO to be decided in accordance with law and had not fettered him in any manner.
3. We have gone through paras 4 to 7 of the order of the Commissioner and are also of the view that the directions given by the Commissioner to the ITO do not restrict him to act in accordance with the views expressed by the Commissioner in his order. He has clearly stated that the ITO was to re-examine the assessee's claim for investment allowance afresh thoroughly in the light of the relevant provisions of law covering the deductions on account of investment allowance under Section 32A of the Act as well as the relevant judicial decisions and then reframe the assessments for the two years under appeal after hearing the assessee. Consequently, we find no basis for the fears expressed by Shri K.C. Patel and make it clear once again that the ITO is fully at liberty to decide the issue in accordance with law unfettered by the views expressed by the Commissioner in the order under appeal.
4. However, for the assessment year 1978-79, Shri Patel raised a preliminary objection, viz., as the Commissioner had not given a notice in writing proposing taking of action under Section 263 to the assessee, the order of the Commissioner was bad in law and according to him the proceedings were not correctly initiated. He invited our attention to para 4.5 of the order of the Commissioner to show that no notice in writing was issued to the assessee for the assessment year.
It was further the contention of Shri Patel that merely hearing the assessee's counsel, Shri N.M. Ghoel, Advocate, would not amount to an opportunity of being heard provided to the assessee. He vehemently contended that the Commissioner started action simultaneously under Section 263 for the assessment year 1978-79 with the action taken for the earlier year. On this preliminary ground, it was submitted that the order for 1978-79 should not be upheld.5. On behalf of the revenue, Shri Harne submitted that there was no need to issue a notice in writing by the Commissioner in every case and what is required is that the position about the proposed action under Section 263 by the Commissioner be communicated to the assessee and he be provided with an opportunity of being heard. He pointed out to order-sheet entry dated 11-3-1981 recorded by the Commissioner wherein he had called the assessee's advocate and communicated to him the fact that as the facts involved for the assessment year 1978-79 were similar, he proposed to revise that assessment also under Section 263.
The assessee's counsel was asked to make his submissions before any decision was taken. Shri Harne pointed out that this amounted to both the communication to the case to the assessee and giving an opportunity of being heard to his counsel. He next pointed out that the counsel not only appeared but also made submissions, thus availing of the opportunity. Shri Harne further produced the authority letters filed by Shri Ghoel before the Commissioner which related to both the assessment years 1977-78 and 1978-79 and invited particular attention to the fact that the authorisation for both the years was signed by a partner of the firm and it clearly shows that the partner was aware about the proceedings under Section 263 for the assessment year 1978-79 for which he gave necessary authorisation to the advocate.
6. Shri Patel in reply submitted that the procedure followed was perfunctory and it was apparent from the Commissioner's earlier order-sheet entry dated 27-2-1981 that he had already completed the hearing for the assessment year 1977-78 and then later on 11-3-1981, realising that the limitation is also expiring on the same date as for the preceding assessment year, called the counsel of the assessee and heard him. According to him, this did not amount to either correct initiation of proceedings or providing an opportunity of being heard.
7. We have considered the rival submissions about the preliminary objection relating to the assessment year 1978-79 but do not find any substance in the grievance of the assessee in the facts and circumstances of this case. It is not in dispute that the facts involved for the two assessment years are similar and for the first assessment year the Commissioner had issued even a notice in writing in respect of his proposed action under Section 263. The initiation of proceedings under Section 263 does not depend on the issuing of a notice in writing. It is settled law that the Commissioner acquires the jurisdiction when he considers that any order passed by the ITO is erroneous in so far as it is prejudicial to the interests of revenue.
However, the law further provides that no order adverse to the assessee shall be passed without giving the assessee an opportunity of being heard. It is to render effective the right given to the assessee to defend himself that he is communicated about the nature of the action proposed to be taken by the Commissioner and, therefore, in respect of that action he is provided an opportunity to be heard. Now what is necessary in law is to meet crucial requirements. The written notice can be one of the forms as it is likely to ensure the best results but as stated earlier, we cannot say that that is the only form of communication provided in law as is the claim of Shri Patel. In each case it will have to be seen whether the effective and adequate opportunity of being heard is provided to the assessee. In the instant case, it is not in dispute that the facts relating to the assessment years 1977-78 and 1978-79 are similar and the assessee was duly notified in respect of the assessment year 1977-78 about the proposed action by the Commissioner. In addition to that the Commissioner communicated with the assessee's duly authorised counsel, Shri N.M.Ghoel, explained the point for the assessment year 1978-79 and heard him. From these facts, it is clear that the opportunity of being heard as contemplated in Section 263 is in fact provided to the assessee also for the assessment year 1978-79 and as stated in para 4-5 of the Commissioner's order the assessee has availed the same when his counsel made submissions. It is difficult to hold that the communication made to assessee's duly authorised counsel will not amount to a communication to the assessee or giving of an opportunity of being heard to the assessee. In view of this, we reject the preliminary contention of the assessee and accept the submissions of the departmental representative.
8. In the result, for statistical purposes, appeals of the assessee for both the years may be treated to be dismissed.