2004 (6) TMI 30 - HC - Income Tax

Show cause notices issued by Commissioner u/s 263 jurisdiction to issue notice on the basis of the contents of the notices that the orders passed by the Assessing Officer which the Commissioner of Income-tax seeks now to revise u/s 263 are erroneous as well as they are prejudicial to the interests of the Revenue. That being the case, therefore, it cannot be said that the impugned show cause notices are without jurisdiction or suffer from any error of jurisdiction. - The recitals in the impugned show cause notices undoubtedly cannot be the influencing factors in passing the final orders. The final orders u/s 263 have to be passed after affording effective and adequate opportunity of hearing to the petitioners and on the basis of the merits of the cases and in accordance with law.

Summary

Issues:
Challenge to show cause notices under section 263 of the Income-tax Act, 1961 on grounds of jurisdiction.

Analysis:
The judgment of the High Court of HIMACHAL PRADESH dealt with the challenge to show cause notices issued under section 263 of the Income-tax Act, 1961. The petitioners contended that the notices were without jurisdiction, while the respondents argued that they were issued as a prelude to the exercise of revisional jurisdiction. The court emphasized that for the Commissioner of Income-tax to exercise jurisdiction under section 263, two conditions must be satisfied: firstly, that the order of the Assessing Officer is erroneous, and secondly, that it is prejudicial to the interests of the Revenue. If either condition is absent, recourse to section 263 cannot be taken by the Commissioner.

Upon careful examination of the show cause notices, the court found that the Commissioner had formed a prima facie opinion that the orders of the Assessing Officer were both erroneous and prejudicial to the Revenue. Therefore, the court concluded that the notices were not without jurisdiction or suffering from any error of jurisdiction. The court highlighted that the show cause notices contained recitals forming a tentative opinion, which should not influence the final orders to be passed under section 263. The final orders must be based on merits, principles of law, and after providing adequate opportunity of hearing to the petitioners.

The court declined to interfere in the proceedings at that stage, stating that if adverse orders were passed against the petitioners, they could avail the remedy of filing statutory appeals before the appellate forum. Consequently, the writ petitions were dismissed, along with all related applications, and interim orders were vacated.