TaxTMI 
TaxTMI 
2017 (2) TMI 686
X X X X Extracts X X X X
X X X X Extracts X X X X
....xamine those preliminary objections before the merit of the matter which has been put up for our consideration. 3. The first preliminary objection raised by the Ld. AR is that the action u/s 263 of the Act has not been taken by the Ld. CIT suo moto but based on the proposal of the AO which is invalid in law and liable to be quashed. 3.1 In this regard, the ld. AR submitted that the assessment order for the year under consideration has been passed u/s 143(3) on 24.03.2014 after detailed enquiry by the ACIT Circle-2 Kota. Thereafter the succeeding ACIT Circle -2 Kota himself send the Proposal u/s 263 dt. 02.11.2015 to the ld. Pr. CIT Kota on all the points as mentioned in notice u/s 263 of the Act. Thereafter the ld. AO has issued the notice u/s 133(6) to the assessee on 14.03.2016 calling the information on the various points. In response thereto, the assessee has filed the detailed reply with details on 18.03.2016. After that, the ld. AO has send its report to the Pr. CIT on 21.03.2016 on all the points and stated that "in my opinion no further action warranted in this case". Thereafter the office of ld. Pr.CIT has again sought report from the AO on 28.03.2016. Thereafter the ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... preliminary objection raised by the ld. AR is that the order has been passed by the ld. Pr. CIT u/s 263 in undue haste on the very last day of limitation period and it was passed without providing the assessee an adequate opportunity of being heard which is against the principal of natural justice. 4.1 In this regard, the ld. AR took us through the sequence of events right from the issuance of notice u/s 263 which was issued on 31.03.2016, the last day of two years limitation period and the passing of the order u/s 263 of the Act on the same day. The Ld. AR submitted that in this case, first and last notice u/s 263 has been issued by the Pr. CIT Kota on 31.03.0216. The Pr. CIT Kota was also having additional charge of Pr. CIT Jodhpur on that day i.e 31.03.2016. On 31.03.2016, the Pr. CIT was not available at the Kota office, he was at Jodhpur on 31.03.2016. The Pr. CIT has faxed the notice u/s 263 from Jodhpur to Kota office on 1.19 PM. Thereafter the ITO (Technical) called the A/R of the assessee and served the fax notice on him at 2.00 PM on 31.03.2016 and asked to file the reply of show cause notice u/s 263 at 4.00 PM on 31.03.2016 itself. In response thereto, the A/R of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o have exercised it in a proper and judicious manner." The ld AR finally submitted that the order passed u/s 263 in undue haste is bad in law and not providing an adequate opportunity to be heard is against the principal of natural justice and the same is liable to be quashed. 5. The ld. CIT DR is heard who has vehemently argued the matter and supported the order of the ld. Pr. CIT in initiating and taking action u/s 263 of the Act. Regarding contentions of the ld. AR that the action has been taken by the Ld. CIT on the proposal of the AO, it was submitted that the ld. Pr CIT has duly reviewed the assessment records and after taking into consideration the proposal and report of the AO has issued the show cause notice u/s 263 of the Act which is in due compliance with the provisions of law. Regarding the second contention of the assessee, the ld. CIT DR has drawn our reference to para 2 of Pr. CIT order and submitted that a show cause was issued to the assesesee and after taking into consideration the submission of the assessee and the explanation offered by the assessee, the order has been passed u/s 263 of the Act. Therefore, it cannot be said that the assessee has not been gran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment records have raised certain points on which report of the AO was called, the AO has submitted two reports dated 21.03.2016 and thereafter, another report dated 30.03.2016 and thereafter after considering the reports of the AO, a show cause issued to the assessee on 31.03.2016. In the order passed u/s 263 of the Act, in para 2 of its order the ld. CIT has stated that while reviewing the case my predecessor reviewing authority for the cases assessed by the ACIT observed certain matters which were listed down and thereafter in para 3 of its order, the ld. Pr. CIT states that the undersigned also took note of the matter and found the above observations correct in view of the facts of the case, and thereafter a show cause notice u/s 263 vide its office letter dated 31.03.2016 was issued fixing the case for hearing on 31.03.2016 itself. The above factual matrix makes it clear that even though the proposal has been initially received by the Pr. CIT for initiating action u/s 263 of the Act, the Pr. CIT has himself gone through the assessment records and thereafter has called for the report of the AO on two occasions and thereafter has issued the show-cause and passed the order u/s 263....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... call for all relevant papers and documents, examine them and then issue the notice if he is satisfied that the interests of the revenue have suffered. Going through the records of the tax authorities in this reference we have no doubt that the Commissioner had complied with these provisions and, as such, his order ought to be sustained." 6.4 Further, the Hon'ble Allahabad High Court in case of Commissioner of Income-tax vs Bhagat Shyam & Co [1991] 188 ITR 608 (All) has held as under: "5. We agree with Mr. Katju to this extent that merely because the ITO placed certain information or material before the Commissioner and the Commissioner invoked the power under section 263, it cannot be said that the Commissioner has initiated the proceeding without applying his mind or that he has abdicated his function. After all someone has to place the relevant material or information before the Commissioner. There is no bar to the ITO bringing that material to the notice of the Commissioner. What cannot, however, be denied is that the Commissioner must apply his mind to the material placed before him and satisfy himself that it is a case where he ought to exercise his revisional power. Then ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre-condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d under Section 33-B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. CIT, West Bengal ruled that Section 33-B does not in express terms require a notice to be served on the assessee as in the case of Section 34. Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33-B." (Page 827-828). [Note: Section 33-B and Section 34 of the Income Tax Act, 1922 corresponds to Section 263 and Section 147 of the Income Tax Act, 1961] 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. While the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full and adequate opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to the assessee by the C.I.T. prior to the finalization of the decision. Affording any further opportunity after setting aside the order of the AO would not amount to an opportunity of meeting and satisfying the requirements as enshrined in section 263 of the Act. 7.4 In the context of above legal position, what has to be examined in the instant case is whether the assessee has been afforded a reasonable and fair opportunity of being heard before the ld Pr. CIT passed the order under section 263 of the Act. As we have noted above, the assessment order in this case was passed on 24.03.20143 and....