TaxTMI 
TaxTMI 
2017 (11) TMI 588
X X X X Extracts X X X X
X X X X Extracts X X X X
....in not quashing the order passed under section 263 of the Act in respect of issues pertaining to alleged violation in deduction of tax at source and related party transactions, which did not either form part of the show cause notice or confronted to the Appellant, instead in setting aside the same for de novo adjudication by the CIT? 2. The appellant/assessee filed its return for assessment year (AY) 2010-11, declaring Nil income, which was subsequently revised on 30.03.2012. The return was selected for scrutiny and the assessing officer (AO) initiated assessment proceedings and issued notice under Section 143(2) of the Act. During the course of assessment a special audit of the assesse's accounts was directed, under Section 142(2A) of the Act on 05.03.2013. The special auditor's report dated 30.08.2013 provided elaborate comments, inter alia, in connection with the terms of reference for special audit framed by the AO, concerning the following issues: (i) reconciliation of fixed assets and depreciation thereon, (ii) arm's length nature of transactions entered into with related parties, and (iii) compliance with provisions of Chapter XVIIB of the Act relating to tax ded....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctions with group companies under Section 40A (2). It was urged that this issue was not mentioned in the show cause notice nor was any opportunity of hearing allowed to the assessee. 5. The assessee's appeal to the ITAT was rejected by the impugned order. The Tribunal held that the assessment was concluded by the AO without making adequate enquiries with respect to variation in cost of fixed assets and accordingly, order passed by the Respondent under Section 263 of the Act was upheld. As regards issues concerning applicability of TDS provisions on expenditure claimed by the assessee and benchmarking of transactions with group concerns, the Tribunal set aside the order of the CIT, holding that no opportunity was provided to the assessee regarding those issues and accordingly, directed the Respondent to pass fresh order in respect thereof after providing reasonable opportunity to the assessee. 6. Relying on Malabar Industrial Co. Ltd. vs Commissioner of Income Tax 243 ITR 83 (SC) and Commissioner of Income Tax vs Max India Ltd 295 ITR 282 (SC) it was contended, by Mr. Ajay Vohra, learned senior counsel, that having regard to the fact that each of the issues which were sought t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble and allowable (Refer SA Builders case Supra). The expenditure on this count are held to be allowable, "including the amount disallowed by the AO of Rs. 38.58 crores." 9. As regards TDS too, it was argued that the issue had been gone into; the Commissioner could not legitimately have sought to re-open such matters, under Section 263 on a re-appreciation of the merits. Learned counsel relied on the decision of this Court in Commissioner of Income Tax v Sunbeam Auto Ltd 332 ITR 167 (Del) where it was observed that: "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Tax v. Vikas Polymers 341 ITR 537 (Del). It was argued that this would be the position for all three questions framed. 12. The revenue defends its position and urges this court not to interfere with the findings of the ITAT. According to its counsel, Mr. Zoheb Hossain, the provision of second explanation to Section 263 (1) empowers Commissioners to issue notices in precisely the kind of cases as the present one. The said provision reads as follows: "Explanation. - For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, - (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include - (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the B....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vs Printers House(1998) 233 ITR 666 was in accord with the law declared in Aruba (supra), holding that those issues that were not the subject matter of appeal were capable of revision. 13. As far as the question of dealing with issues that were not the subject matter of show cause notice is concerned, counsel points out that the previous judgments of this Court and several other High Court has now been overruled in Commissioner of Income tax v Amitabh Bacchan 2016 SCC Online SC 484. In that judgment, the Supreme Court held that the failure to issue notice on any particular issue does not vitiate the exercise of power under Section 263, as long as the assessee is heard and given opportunity. 14. Countering the assessee's arguments, it is submitted that the lack of opportunity at the revisional stage under Section 263 does not vitiate the entire order, or the proceedings; rather it is a curable defect. It was submitted that in the present case, however, even that situation did not arise. 15. As far as the first aspect with respect to exercise of power under Section 263 is concerned, the issue stands concluded, in the light of the amendment with effect from 1989, by insertio....