TaxTMI 
TaxTMI 
2026 (6) TMI 1277
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....e's delay condonation application speaks of assessee not having served with the impugned order due to the mobile number and email ID available on the Income Tax Portal pertains to assessee's former consultant. The assessee came to know in respect of the impugned order only when his banker intimated him about the recovery notice dated 19.04.2024. That made the assessee to file belated appeal. An affidavit on behalf of the assessee is also on record in support of the delay condonation application. Learned Accountant Member has straightway proceeded to record his opinion on merits giving an inference that the delay in filing the appeal has been condoned by implication. In the circumstances, I concur with the learned Accountant Member condoning the delay by implication. The appeal stood admitted accordingly. 4. Factual matrix: The appellant/assessee is proprietor of M/s. Kapil Electronics and engaged in the trading business of mobile handsets. According to the brief history, the appellant/assessee e-filed his original return of income on 31.03.2014, declaring total income of Rs. 3,61,620/-. The original assessment was completed u/s. 143(3) of the Act on 26.03.2015. After ....
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....d every discrepancy mentioned in the said notice, on or before 29.03.2022, which is reproduced as under: "Subject: Notice u/s 263 of the Income Tax Act, 1961 in the case of Shri Narendra Kumar (PAN: ADHPK4900H) for A.Y. 2012-13-Reg. Kindly refer to the above mentioned subject. 2. In your case, notice u/s 148 of the Income Tax Act, 1961 was issued on 31.03.2019 re-opening the Assessment in your case for A.Y. 2012-13 and the Assessment Order was passed u/s 143(3)/147 of the Income Tax Act, 1961 dated 30.12.2019 assessing the Total Income at Rs. 3,61,620/-. 3. I have examined the case record in your case for A.Y. 2012-13 and on examination of the case record several issues have emerged, which are discussed hereunder: A. It is seen from the STR(Suspicious Transaction Report) available on record that the Bank Account No. 31170200000138 maintained with Bank of Baroda, Dayalbagh was credited by an amount of Rs. 40,000/- and Bank Account No. 000705035463 maintained with ICICI Bank was credited by an amount of Rs. 39,04,72,777/-aggregating to an amount of Rs. 39,05,12,777/- as compared to Total Turnover of the Assessee's firm was Rs. 11,64,72....
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....0/- 3. Laksmi Overseas 1,05,45,000/- 4. Narayani International 98,74,000/- 5. Nikita Electronic 26,17,000/- 6. Priya Communication 2,57,54,370/- For verification of Creditors, the Assessing Officer sent letters for verification to the aforementioned parties from whom the Assessee has claimed Purchase on credit. In one instance, Shri Pradeep Kumar Motani Prop. M/s Nikita Electronic stated vide his reply dated 27.01.2015 that he did not know the party and he is not running electronic business during the year and there was no transaction made during the year under consideration. This is the sample of one creditor who had denied to confirm the balance. However, the A.O. took no action in this regard. Further vide reply dated 30.01.2015, the Assessee furnished present address in cases at 5. No. 1. 2. 3 and 6. Information u/s 133(6) was called for vide letter dated 30.01.2015 and this Ume confirmations were received. Sh. Pradeep Kumar Motani (Prop. M/s Nikita Electronic) confirmed closing balance. These shows that all these addresses were managed which needs proper Investigations. In this instance, the AO again did not verify....
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.... 5. Following grounds have been raised by the appellant/assessee in this second appeal before the tribunal: "1. BECAUSE upon the facts and under the circumstances of the case, the impugned order passed by the Id PCIT is illegal and bad in law as section 263 of the Act statutorily mandates the procedure to be followed by the Principal Commissioner of Income Tax while doing revision of orders prejudicial to revenue. Sub section (1) thereto clearly provides the procedure to be followed while passing order under section 263 of the Act. The same has not been followed by the Id PCIT before passing impugned order. 2. BECAUSE the hasty initiation of revision proceedings has resulted in taking away the vested legal right of the Appellant to properly respond the show cause notice. 3. BECAUSE the Ld PCIT completed the revision proceedings in gross violation of the principles of natural justice. Notice dated 27/03/2022 was dispatched on 28/03/2022 and no proper opportunity of being heard was given to the Assessee (Notice was not served on the Assessee). 4. BECAUSE the action of Ld PCIT has resulted in grave and serious prejudice to the Appellant in as much....
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....easonable and sufficient opportunity of hearing was granted to the assessee, violating the first facet of the principles of natural justice. This irregularity is, however, curable if an opportunity of hearing to the assessee is granted by remitting the case to Ld. PCIT for deciding afresh after hearing the appellant in substance. 9. Now, I proceed to express my reasons for the dissent. (i). The reassessment order dated 30.12.2019 placed at para-3 above, is non-speaking and un-reasoned. It appears to me that, while passing impugned order u/s. 263 of the Act, Id. PCIT has taken help of external aids available at his disposal and observed that the Assessing Officer called for certain information u/s. 133(6) from one of the debtors, M/s. Bhagya Sales Corporation vide letter dated 11.02.2015. However, the said letter was returned back with the remark" no such firm on such address". Assessing Officer does not appear to have made any further inquiry, regarding this factual aspect. This apart, Learned PCIT has further mentioned the details of another debtor, Tirupati Dyes & Chemicals. The assessment order also does not speak about any such inquiry made by the Assessing Officer ....
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....ces non-application of mind but mummifies the core spirit of the order. (U. Manjunath Rao v. U Chandrashekhar, 2017 (6) Supreme 19). In M/s. Kranti Associates Pvt. Ltd. & Anr. v. Masood Ahmed Khan & Ors., (2010) 9 SCC 496, Hon'ble Supreme Court while dealing with the requirement of passing a reasoned order by an authority whether administrative, quasi judicial or judicial, has vide para 51 laid down the following propositions: "a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtu....
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.... the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process". In view of the settled legal position, the reassessment order dated 30.12.2019 passed by the Assessing Officer cannot at all be said to be an order passed by a quasi judicial authority in the eye of law. It does not speak even a single word about the extents and nature of inquiry to any degree, hence lacks proper inquiry. (v). Procedural fairness: The another aspect of the principles of natural justice involved in the instant case is procedural fairness. It is pertinent to mention that apart from the instant case in hand, we also passed an order in ITA No. 129/Agr/2023 on 24.06.2025. Both the cases were heard on the same date on 21.05.2025 and were also authored by Id. Accountant Member. The brief details of the two cases can be understood by the following tabulated description: ITA No. 129/Agr/2023- Anshul Jain vs. Pr. CIT-1, Agra (other case): Name of author Dt. Of hearing Date of order Issue involved Result Sh. Manish Agarwal, Α.Μ. 21.05.2025 24.06.2025 (1) Whet....
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.... ER Rep 233, Lord Chief Justice Heward observed that justice must not only be done, but must also be seen to be done. A basic postulate of rule of Law is that, justice should not only be donebut must also be seen to be done". (PK Ghosh v. JG Rajput (1995) 6 SCC 745. (vii). Law of Precedent: In Siddharam Satlingappa Mhetre v. State of Maharasthra & Ors. AIR 2011 SC 312, three judges of Hon'ble Supreme Court has held that not only the judgment of a larger strength is binding on a judgment of smaller strength, but the judgment of a co-equal strength is also binding on a Bench of judges of co-equal strength. If the court doubts the correctness of the judgment by 2 or 3 judges, then the proper course would be to request the Hon'ble Chief Justice to refer the matter to a larger Bench of appropriate strength. In National Insurance Co. Ltd. v. Pranay Sethi, AIR 2017 SC 5157, five judges constitutional Bench of Hon'ble Supreme Court has held that a coordinate Bench of the same strength cannot take a contrary view than what has been held by another coordinate Bench. The only course open to the latter Bench is to refer the matter to a larger Bench if taking a dif....
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....cussed above. Hence, the facts of the referred case are easily distinguishable. (b)(iii).PCIT vs. Clix Finance India Ltd. (Delhi HC): order dt. 01.03.2024 passed in ITA No. 1428/2018. The Hon'ble Delhi High Court has observed that the revisional authority can resort to section 263 of the Act only when there is a lack of enquiry. According to the facts of the instant case in hand, it has already been held that no enquiry has been conducted by the Assessing Officer in respect of the two said debtors to substantiate the stand of the assessee that the impugned cash credit in the bank account was out of the realization of debts from such sundry debtors. Hence, the facts of the referred case are easily distinguishable. (b)(iv)-Yashoda Shivappa Nagangoudar (2022) 138 taxmann.com 296 (Bombay); Jet Airways (1) Ltd. (2011) 331 ITR 236 (Bombay); and Krishna Diagnostic Pvt. Ltd. (2023) 151 taxmann.com 499 (Delhi) In these three decisions, Hon'ble High Courts have decided the issues pertaining to jurisdiction of the Assessing Officer u/s. 147, 148 and 148A of the Income-tax Act and in none of the cases, issue regarding jurisdiction of the Id. PCIT/CIT....
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....proceedings in gross violation of the principles of natural justice. Notice dated 27/03/2022 was dispatched on 28/03/2022 and no proper opportunity of being heard was given to the Assessee (Notice was not served on the Assessee). 4. BECAUSE the action of Ld. PCIT has resulted in grave and serious prejudice to the Appellant in as much as the original order dated 30.12.2019 passed under section 147 was modified without providing the Appellant adequate opportunity to put forth submissions and documents in rebuttal to the modification of original order. 5. BECAUSE In the present case nothing has been brought on records as to which document was perused by the Ld PCIT before arriving at the conclusion that the order passed by the Assessing officer was erroneous, thus violating the provisions of section 263 of the Act. 6. BECAUSE upon the facts and under the circumstances of the case, the impugned order passed by the ld. PCIT is illegal and bad in law as section 263 of the Act statutorily mandates that the PCIT must examine the record and make inquiry before passing order under section 263 of the Act. Nothing has been brought on record as to which records were e....
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....eopening of assessment u/s 147 of the Act and, therefore, there was no error in the order of the Assessing Officer. The Ld. AR further submits that the Assessing Officer has made adequate enquiry and ld. CIT(A) has failed to point out as to how the reassessment order was passed by making no enquiry and inadequate inquiry. For this proposition he placed reliance on the judgment of the Hon'ble Supreme Court in the case of PCIT vs. V. Con Integrated Solutions Private Ltd. 13205/2025 wherein the Hon'ble Supreme Court has dismissed the SLP filed by the Revenue and confirmed the order of the Hon'ble High Court holding the order passed u/s 263 as bad in law being without bringing on record failure on the part of the Assessing Officer to conduct the investigation. He, therefore, prayed that the order u/s 263 deserves to be quashed on legal aspects as well as on merits. 14. We have heard the rival submissions and perused the materials available on record. From the perusal of the order, the Ld. PCIT, it is seen that Ld. PCIT has initiated the proceedings by way of issue of notice u/s 263 dated 27.03.2022, copy of the said notice is reproduced in the impugned order at pages 1 t....
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....the SLP filed by the Revenue in Special Leave Petition (civil) Diary No.1845/2025 the hon'ble court vide order dated 17.02.2025 has observed as under:- "Delay condoned. This special leave petition is misconceived and is completely contrary to the law pertaining to Section 263 of the Income Tax Act, 1961. The notice under Section 148 of the 1961 Act referred to two reasons. The first reason was with regard to non-declaration of the account in ING Vysya Bank with a credit of Rs. 70, 13,43,319/- (Rupees seventy crores thirteen lakhs forty three thousand three hundred and nineteen only). The second reason was with regard to the claim of deduction under Section 10AA of the 1961 Act. It is accepted that a reassessment order under Section 148 read with Section 143(3) of the 1961 Act was passed. Addition was not made for the first reason. In the given facts, the assertion by the Revenue that inquiry and verification in re the bank account was not made is ex-facie incorrect. This being the position, this is not a case of failure to investigate, but as no addition was made, the Revenue can argue that it is a case of wrong conclusion and decisi....
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.... The balance amount represented actual write off which was palpably clear from page 2 of the impugned order itself. No deduction on account of any such provision was, therefore, allowed to the assessee. Hence, there is no error or prejudice to the interest of revenue. As regards second issue it was noted that interest rate swap was an actual loss and only the net loss of Rs. 114.05 lacs after setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Book-1) were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. Even the Ld. CIT has not pointed out the definite and specific error in the original assessment order and observed that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugne....
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.... undertakes a superficial and random investigation that may justify a remit, albeit the Commissioner of Income Tax rust record the abject failure and lapse on the part of the Assessing Officer to establish both the error and the prejudice caused to the Revenue." 15.4 Further the ld. PCIT observed that the AO had not made any enquiry from the creditors however, since the reasons recorded are for examination of the source of credits in bank account, which have been carried out by the AO, the jurisdiction of the AO cannot be enlarged to visit those issues which are not the subject matter of the reasons for reopening. This view is supported by the following judgements: (i) Yashoda Shivappa Nagangoudar [(2022) 138 taxmann.com 296 (Bombay); (ii) Jet Airways (1) Ltd [(2011) 331 ITR 236 (Bombay); (iii) Krishna Diagonistic Pvt Ltd. [(2023) 151 taxmann.com 499 (Delhi)) 15.5 In view of the above discussion and by respectfully following the judgments of Hon'ble Supreme Court in the case of Shreeji Prints (supra), V Con Integrated Solution (supra) and also in the case of NYA International (supra) and of the hon'ble Delhi high court in the case of Clix Fi....
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.... cause notice under Section 263 of the Act dated 27th March, 2022 requiring the assessee to explain the cash deposits along with evidences/documents by 29th March, 2022 and the relevant show cause notice is also reproduced by the learned Judicial Member in his dissenting order. The PCIT passed impugned order i.e., the revision order under Section 263 of the Act on 31st March, 2022 setting aside the reassessment order passed by the Assessing Officer under Section 147 read with Section 143(3) of the Act dated 30th December, 2019 finding it as erroneous insofar as prejudicial to the interests of the Revenue and directing the Assessing Officer to frame fresh assessment order de-novo after allowing opportunity of being heard to the assessee. The PCIT's order is ex-parte, which was challenged by the assessee before the Tribunal. In the grounds of appeal, the assessee has challenged the revision order on the issue of violation of principles of natural justice stating that the notice dated 27th March, 2022 was dispatched on 28th March, 2022 and show cause notice had never reached to the assessee in time. As per grounds, the revision order under Section 263 of the Act was passed on 31st....
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....n taking away the vested legal right of the Appellant to properly respond the show cause notice. 3. BECAUSE the Ld PCIT completed the revision proceedings in gross violation of the principles of natural justice. Notice dated 27/03/2022 was dispatched on 28/03/2022 and no proper opportunity of being heard was given to the Assessee (Notice was not served on the Assessee). 4. BECAUSE the action of Ld PCIT has resulted in grave and serious prejudice to the Appellant in as much as the original order dated 30.12.2019 passed under section 147 was modified without providing the Appellant adequate opportunity to put forth submissions and documents in rebuttal to the modification of original order." 5. The question referred to me is also emanating from the above discussed facts as well as grounds of appeal and also from the orders passed by the learned Judicial Member and learned Accountant Member whether the revision order passed by the PCIT under Section 263 of the Act is to be quashed or is to be set aside and remanded back to the PCIT for passing fresh revision order in the given set of facts. 6. I have heard the learned CIT-DR as well as the learned Counsel for t....
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....gh Court which has held that the Tribunal acted properly in vacating the Commissioner's order but did not act properly in directing him to dispose of the proceedings afresh after giving opportunity to the assesses. Such manifestly absurd result could never have been intended by the Legislature. Moreover, it was fairly conceded by the counsel for the assesses before us that in exercise of its appellate powers it was open to the Tribunal itself to call for a remand report from either the Commissioner or the Income Tax Officer and rectify the Income Tax Officer's erroneous order after giving opportunity to the assesses and in doing so no question of limitation would arise. It was also not disputed by him that it was equally open to the Tribunal to set aside the Commissioner's order and remand the case directly to the Income Tax Officer giving the requisite direction to rectify his erroneous order and thereupon the Income Tax Officer could carry out the Tribunal's direction. for, admittedly, the bar of limitation under 1) sub-s. (2) (b) was only on the Commissioner's paver to make an assessment afresh and not on the Income Tax Officer. If this be the correct positio....
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....ission the remedy lay with the Legislature and not with the Court. The Assam High Court also alluded to the fact that under the 1961 Act the Legislature had made a provision removing or relaxing the bar of limitation in s. 263(3). ................................................................................... In the result, we are of opinion that the answer given by the High Court to the second aspect of the second question referred to it was clearly wrong and, in our view, the Tribunal's order vacating the Commissioner's order and directing the Commissioner to make assessment afresh after giving due opportunity to the respondent-assessee was proper. The appeal is accordingly allowed but in the circumstances, there will be no order as to costs." 7. Similar proposition was laid down by the Hon'ble Supreme Court in the case of Commissioner of Income-tax Vs. Amitabh Bachchan [2016] 384 ITR 200 (SC) that the assessee must be given opportunity of being heard, as under:- "10. Reverting 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 erroneou....
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....f an opportunity of hearing to the assessee is granted by remitting the matter to the PCIT, because non-observance of principles of natural justice does not vitiate the jurisdiction of the Officer. Whenever an order is struck down being in violation of principles of natural justice, there is no final decision of the cause and fresh proceedings are left open. All that is done is that the order assailed by virtue of its inherent defect is vacated, but proceedings are not terminated. This view is supported by the decision of Hon'ble Supreme Court in the case of Superintendent, Central Excise Vs. Pratap Rai [1978] 114 ITR 231 (SC). 9. However, I do not agree with the findings recorded by the learned Judicial Member in paragraph No.8 wherein merits seem to have been adjudicated without going into the factual aspect. Needless to say that the authorities below will not be influenced by the findings recorded by learned Judicial Member as well as learned Accountant Member in regard to the merits of the case, while adjudicating the issue on merits or on the legal issues while deciding afresh the entire matter relating to revision proceedings under Section 263 of the Act. 10. In the....