2015 (8) TMI 1157 - AT - Income Tax

Revision u/s.263 - sufficient opportunity non granted - Held that - U/s.263 CIT is empowered to call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Therefore, the ld.CIT is empowered to call for the record and examine the record and make inquiry as he deems proper before passing the order thereon as the circumstances justify. It is expected from the ld.CIT in the event of invoking the provisions of section 263 of the Act he would afford sufficient opportunity to the assessee for representing and defending his case. In the case in hand, the assessee was given two opportunities of seven days each including the period taken for service of notice/letter. Under these facts, we are of the considered view that the assessee was not granted sufficient opportunity to defend his case. It is settled principle of law that revisionary power is required to be exercised with a great caution because it affects the taxpayer s rights and it is not expected that the concluding assessment proceedings be reopened on the whims and fancies of the authority who is bestowed with power to revise the order, but such exercise of power should be in accordance with settled principle of law and procedure prescribed by law. Thus we are of the considered view that the assessee was not given sufficient opportunity and the explanation with regard to the issues on the basis of which the provisions of section 263 of the Act were invoked requires re-consideration at the end of the ld.CIT. Therefore, the impugned order is hereby set aside and the ld.CIT is directed to consider the explanation of the assessee and decide the matter afresh in accordance with law. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Legality of the order passed under Section 263 of the Income Tax Act, 1961.
2. Adequacy of the opportunity of hearing provided to the Assessee.
3. Examination of whether the original assessment by the Assessing Officer (AO) was erroneous and prejudicial to the interests of the Revenue.

Issue-wise Detailed Analysis:

1. Legality of the Order Passed Under Section 263:
The Assessee contended that the order passed under Section 263 on 21-2-2013 for A.Y. 2008-09 by the Commissioner of Income Tax (CIT) was "wholly illegal, unlawful and against the principles of natural justice." The CIT had set aside the original assessment made under Section 143(3) and directed the AO to pass a fresh order on eight specific points. The Assessee argued that the CIT erred in invoking the provisions of Section 263, as the original assessment was neither erroneous nor prejudicial to the interests of the Revenue. The Assessee further submitted that the AO had examined various details during the original assessment, and thus, the invocation of Section 263 was unwarranted.

2. Adequacy of the Opportunity of Hearing Provided to the Assessee:
The Assessee argued that the CIT did not allow sufficient and specific opportunity of hearing before passing the impugned order. The CIT issued a show-cause notice on 01/12/2012, requiring compliance by 04/12/2012, giving only three days for the Assessee to respond. A second notice was issued on 22/01/2013 for a hearing on 29/01/2013, allowing only seven days for compliance. The Assessee contended that the short period given for compliance did not account for the time taken by postal authorities for delivery, thus violating the principles of natural justice. The Assessee requested the opportunity to produce additional evidence during the appeal proceedings.

3. Examination of Whether the Original Assessment by the AO Was Erroneous and Prejudicial to the Interests of the Revenue:
The CIT held that the original assessment was erroneous and prejudicial to the interests of the Revenue because the AO did not properly examine eight specific issues. These issues included cash deposits, income from the sale of immovable property, classification of income from the sale of land, rental income discrepancies, and agricultural income, among others. The Assessee provided evidence that the AO had issued notices and received replies on these matters during the original assessment. The Assessee submitted that the AO had verified the details and completed the assessment after making necessary inquiries, thus the order was not erroneous or prejudicial to the Revenue.

Tribunal's Findings:
The Tribunal found that the CIT had given only two opportunities of seven days each, including the time taken for service of notice, which was insufficient for the Assessee to defend his case. The Tribunal emphasized that the revisionary power under Section 263 should be exercised with caution and sufficient opportunity must be provided to the taxpayer. The Tribunal concluded that the Assessee was not granted sufficient opportunity and that the issues raised required reconsideration by the CIT. Therefore, the Tribunal set aside the impugned order and directed the CIT to reconsider the Assessee's explanations and decide the matter afresh in accordance with the law.

Conclusion:
The appeal of the Assessee was allowed for statistical purposes, and the matter was remanded back to the CIT for reconsideration, ensuring that sufficient opportunity is provided to the Assessee to present his case.

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