Order under Section 263 quashed for lack of notice and hearing

The Tribunal held that the order under Section 263 was invalidated due to non-service of notice on the assessee, who was in judicial custody, and the failure to grant the assessee an opportunity to be heard. Consequently, the order under Section 263 was quashed, and the assessee's appeals were allowed.

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Issues Involved:
1. Validity of service of notice under Section 263 of the Income Tax Act.
2. Opportunity of being heard for the assessee.
3. Procedural compliance by the Principal Commissioner of Income Tax (Pr. CIT).

Detailed Analysis:

1. Validity of Service of Notice under Section 263 of the Income Tax Act:
The primary issue revolves around whether the notice issued under Section 263 was validly served on the assessee. The Revenue argued that the notice was sent via Speed Post to the address mentioned in the PAN, relying on various judicial precedents to support the validity of such service. These precedents include decisions from the Co-ordinate Bench of the Tribunal, Hon'ble Jharkhand High Court, Hon'ble Delhi High Court, Hon'ble Allahabad High Court, and Hon'ble Supreme Court, which collectively uphold that service by Speed Post is valid if not returned undelivered.

2. Opportunity of Being Heard for the Assessee:
The Tribunal emphasized that Section 263 of the Act requires the Pr. CIT to give the assessee an opportunity of being heard before revising any order. In this case, the assessee was in judicial custody, and the notice was responded to by an individual claiming to be an employee (Sri Uttam Kumar) without a Power of Attorney. The Tribunal noted that once the Pr. CIT was informed of the assessee's judicial custody, he should have served the notice through the Superintendent of the Jail. The failure to do so meant that the assessee was not given a proper opportunity to be heard, thereby violating the principles of natural justice.

3. Procedural Compliance by the Principal Commissioner of Income Tax (Pr. CIT):
The Tribunal scrutinized the procedural compliance by the Pr. CIT, particularly in the context of serving notice to an individual in judicial custody. It was held that the Pr. CIT had adequate time to serve the notice through the proper channel but failed to do so. The Tribunal pointed out that the Pr. CIT's knowledge of the assessee's judicial custody should have prompted a different approach to ensure the notice was properly served. The Tribunal found that the procedural lapses in serving the notice and not granting a proper hearing opportunity invalidated the order under Section 263.

Conclusion:
The Tribunal concluded that the order under Section 263 was vitiated due to non-service of notice on the assessee, who was in judicial custody, and the failure to provide the assessee an opportunity of being heard. Consequently, the order passed under Section 263 was quashed, and the appeals of the assessee were allowed.

Order:
The appeals filed by the assessee were allowed, and the orders passed under Section 263 were quashed. The decision was pronounced in the open court on 15/6/2022.

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