2024 (8) TMI 424

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....edings by issuing Notice on 24/03/2021 fixing the date of hearing on 26/03/2021, and thereafter passed the order on 31/03/2021, without any proper opportunity of being heard and thus the order passed is in gross violation of the principles of natural justice, and thus liable to be quashed. 3. Because the Ld. Pr. CIT erred in law and on facts in passing the order u/s 263 of the Act on 31/03/2021, without appreciating the facts of the case, without inquiring into the evidence on record, in an grossly arbitrary manner, without satisfying the mandatory jurisdictional conditions as per law, and therefore the order passed u/s 263 of the Act, setting aside the assessment order and directing the AO to assess the case afresh, is grossly illegal, arbitrary, without application of mind, without jurisdiction and bad in law, and thus liable to be quashed." 3. The assessee filed return of income on 30.03.2016 declaring Nil income and the assessment u/s 143(3) was completed on 09.08.2017 assessing the total income at Rs. 21,630/- after making disallowance u/s 14A of the Income Tax Act, 1961. Thereafter Ld. PCIT exercising its jurisdiction u/s 263 issued show cause notice on 24.03.2021....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... and source of investment in unlisted equities. The AO after duly considering replies and material on record including 133(6) replies, completed the assessment proceedings u/s 143(3) vide Assessment Order dated 09.08.2017 after making disallowance of Rs. 21,633/- u/s 14A of Act. 11. Before the ld. PCIT, the assessee filed its reply on 26.03.2021 including Valuation Certificate by Chartered Accountant along with duly verified balance sheet on the valuation date 28.02.2015 by him and audited/approved balances sheet as on 31.03.2015 in support of valuation of market rate in terms of Rule 11UA, whereby it was demonstrated that FMV of equity share as on date of valuation 28.02.2015 is Rs. 9.94 per share and as on 31.03.2015 is Rs. 9.79 per share. 12. The proceedings u/s 263 were completed on 31.03.2021 setting aside the original assessment order dated 09.08.2017 with the direction to examine two issues afresh: a. Value of investment u/s 56(2)(via) read with rule 11UA to ascertain income under that provision -Issue referred in SCN though with changed basis. b. Sources of long terms loans with income thereon. 13. From the record and the order of the ld. PCIT, we....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... were, as rightly noted by the IT A T, unconnected issues and the assessment order could not have been held to be "erroneous and prejudicial to the interest of Revenue" when the AO could not have travelled beyond the issues forming subject matter of the 'limited scrutiny.' ii) CIT vs. Smt. Padmavathi [2020] 120 taxmann.com 187 (Madras) "15. The substantial question nos. 1 and 2 are interconnected namely, the power of the PCIT under section 263 of Act and whether he could have set aside the assessment on the ground that the assessing officer did not invoke Section 56(2)(vii)b(ii). The reading of the assessment order shows that the case was selected for limited scrutiny only on this aspect regarding the sale consideration paid by the assessee for purchase of the immovable property and the source of funds. The assessing officer has noted that the sale consideration paid by the assessee was Rs. 41,50,000/- and she has paid stamp duty and other expenses of Rs. 5,75,000/-. The source of funds was verified and the assessing officer was satisfied with the same. The PCIT while invoking his power under section 263 of Act, faults the assessing officer on the ground t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....quired to conduct to come to a conclusion. The defect of not allowing opportunity cannot be cured by first reopening assessment and then granting an opportunity to respond to the issue before the Assessing Officer during the course of the fresh assessment proceedings. Having regard to the legal position emerging from various cases including Hon'ble Jurisdictional High Court case, we are of the view that lack of opportunity on some of the issues in the show cause notice, vitiates the proceedings u/s. 263 and consequently the order u/s. 263 passed by the learned PCIT is also rendered bad in law." Above case is affirmed in CIT vs. Krishak Bharati Cooperative Ltd. (2017) 80 taxmann.com 326(DEL HC) (ii) B.S. Sangwan vs. ITO [2015] 53 taxmann.com 402 (Delhi) "where specific addition sought to be made as per SCN but ultimately directed to conducted enquiries on the issue thus the basis is changed which is not allowable u/s 263." (iii) Electra Paper and Board Pvt. Ltd. vs. Income Tax Officer in ITA No. 222/Chd./2021 "8 In other words, the twin conditions mandated under Rule 11U(b) for a balance sheet on the basis of which valuation is to be made....