2018 (3) TMI 155 - HC - Income Tax

Revision u/s 263 - Held that - In the present case the facts narrated in the subject order would disclose that the assessee was issued with notice with respect to the specific head i.e. the warranty claimed on the ground that the AO had not conducted proper enquiries. The assessee replied to the notice. In the course of the revisional proceedings, the CIT furnished a copy of a ledger extract to the assessee. The other documents indicated that ledger extract was based upon the existence of statement of one Mr. Praveen Aggarwal. Having regard to these materials the assessee demanded that the copy of the statement be provided to it. Concededly that statement was not provided. The order to that extent cannot be sustained. The matter is accordingly directed to be gone into afresh by the Commissioner who will in the remanded proceedings provide a copy of the statement of Mr. Praveen Aggarwal and any other material that he chooses to rely upon and after hearing the objections of the assessee, proceed to make the final order. It is clarified that if the statement (of Mr.Praveen Aggarwal or anyone else) is denied and a cross examination is demanded, that can be the appropriate subject matter of enquiry by the AO.

Summary

Issues:
1. Interpretation of Section 263 of the Income Tax Act regarding revisional orders.
2. Obligation of the Commissioner to provide material to the assessee for revisional proceedings.
3. Requirement of natural justice in revisional proceedings.

Analysis:
1. The High Court considered whether the ITAT erred in upholding the revisional order made by the Commissioner of Income Tax under Section 263 of the Income Tax Act. The case involved the Commissioner issuing a notice to the assessee for the AY 2007-08 under Section 263, questioning the deduction of a sum for warranty/promise obligation. The ITAT agreed with the Commissioner's decision, citing relevant legal precedents such as CIT Vs. Amitabh Bachchan and Cairn India Ltd. vs. Director of Income Tax.

2. The Court examined the obligation of the Commissioner to provide material to the assessee during revisional proceedings. It was noted that the Commissioner directed a fresh enquiry by the AO based on certain materials, including a statement by Mr. Praveen Aggarwal, which was not provided to the assessee. The Court held that failure to provide such crucial material violated the principles of natural justice, as highlighted in the judgment of the Supreme Court in Amitabh Bachchan's case.

3. Emphasizing the importance of natural justice in revisional proceedings, the Court directed the Commissioner to provide a copy of Mr. Praveen Aggarwal's statement and any other relevant material to the assessee. The Court clarified that if the statement is denied and cross-examination is demanded, it should be appropriately addressed in the enquiry by the AO. The matter was remanded for further proceedings before the Commissioner, ensuring the assessee's right to be heard and present their objections.

In conclusion, the High Court allowed the appeal, setting aside the order and directing the parties to appear before the Commissioner for further proceedings, emphasizing the significance of providing material to the assessee and upholding principles of natural justice in revisional proceedings.