2014 (2) TMI 519 - HC - Income Tax

Court upholds decision under Section 263, rejects challenge on notice specificity, dismisses Writ Appeal

Hemanth Kumar Bothra Versus Commissiner of Income Tax

The Court upheld the Single Judge's decision, finding the assessment order erroneous and prejudicial to revenue interests, justifying the invocation of ... Petition for quashing the Notice issued u/s 263 of the Act – Held that:- The Commissioner has stated that on perusal of the assessment records in the case of the appellant for the assessment year 2009-10 shows that the assessment was completed under Section 143(3) of the Act vide order dated 19.12.2011 - the immovable property sale proceeds were treated as Long Term Capital Gains instead of Short Term Capital Gain, which has resulted into an order which is prejudicial to the interests of revenue - The expression 'resulted into an order which is prejudicial to the interest of revenue' has to be held to be sufficient for the purpose of invoking the power under Section 263 of the Act - the petitioner ought not to have approached the Writ Court at the stage of show cause notice - It is appropriate for the assessee to submit his reply to the notice and raise all the contentions available before the Assessing Authority – Decided against Assessee. Issues:Challenge to show cause notice under Section 263 of the Income Tax Act for alleged erroneous assessment leading to long term capital gains treatment.Analysis:The appellant filed a writ petition seeking to quash a notice issued under Section 263 of the Income Tax Act, arguing that the notice did not specify the term 'erroneous,' thus making the proceedings liable for dismissal. The appellant claimed entitlement to long term capital gains due to possessing a property for over three years. The Revenue countered, stating the writ petition was not maintainable against the notice and denied the appellant's factual assertions.The Single Judge found the assessment order to be erroneous based on primary evidence provided by the Revenue, causing prejudice to revenue interests. Referring to the Supreme Court's decision in Malabar Industrial Co. vs. C.I.T., the Single Judge emphasized that the phrase 'prejudicial to the interest of revenue' must be read in conjunction with an erroneous order. It was noted that the appellant should present contentions before the Assessing Authority, as per the Supreme Court's rulings in various cases.The appellant's counsel argued that the absence of the term 'erroneous' in the notice warranted interference by the Single Judge. However, the Court disagreed, emphasizing that the Commissioner's notice adequately indicated the prejudice caused to revenue interests, justifying the invocation of Section 263 powers. The Court reiterated that the appellant should have responded to the notice and raised contentions before the Assessing Authority rather than approaching the Writ Court at the notice stage.Ultimately, the Court found no grounds to overturn the Single Judge's order. Notably, the Court expressed surprise at the appellant's irrelevant grounds raised in the appeal, which were not aligned with the case's facts or arguments presented. The Writ Appeal was dismissed with no costs, and the connected Miscellaneous Petition was closed.