2019 (7) TMI 793 - AT - Income Tax

Revision u/s 263 - Notice not signed by CIT - Exemption u/s 11 denied - assessee was not eligible for exemption u/s 11 in view of the amended provisions of S.2(15) - HELD THAT - The initial issuance of notice which has not been signed by the competent authority as the finding has been recorded by Tribunal therein that notice was issued under the signature of Income Tax Officer (Technical) whereas in view of provisions of powers of s.263(1) it is only the CIT to issue notice. In the present assessee s case also show cause notice was issued by Income Tax Officer (Technical) and signed by the said Officer on behalf of the CIT. As per Sec. 263 the CIT cannot delegate his powers to the subordinate Officer or lower officer and therefore this defect is non-curable defect and the Show Cause Notice itself is bad in law. Besides this after going through the assessment order the AO has also taken cognizance of the material available and has arrived at a proper conclusion. There order u/s 263 is merely a second opinion which is not permissible under the provisions of the Income Tax Act 1961. Therefore order u/s 263 of the Act does not survive. - Decided in favour of assessee.

Summary

Issues:
- Jurisdiction of CIT under section 263 of the Income Tax Act, 1961
- Exemption eligibility under section 11 of the Act
- Defective show cause notice issued by the Income Tax Officer (Technical)
- Delegation of powers by the Commissioner of Income Tax
- Validity of the order passed under section 263

Jurisdiction of CIT under section 263 of the Income Tax Act, 1961:
The appeal was filed against the order passed under section 263 of the Income Tax Act, 1961. The CIT directed the Assessing Officer to re-compute the income of the assessee authority after considering the accrued interest on a loan advanced by HPBA. The Assessing Officer observed that the assessee was exempt under section 10(20A) until 1.4.2003, but the said section was omitted, bringing the assessee into the tax limit. The Assessing Officer also noted that the assessee was registered under section 12AA and claimed exemption under section 11 of the Act. The amended provisions of section 2(15) were brought to the notice of the assessee, leading to the recognition of the assessee as registered under section 12A. The assessment order was passed under section 143(3) on 30.12.2011.

Exemption eligibility under section 11 of the Act:
The CIT held that the assessee was not eligible for exemption under section 11 of the Act due to the amended provisions of section 2(15). The assessee argued that the show cause notice under section 263 dated 24.3.2014 was defective as it was issued by the Income Tax Officer (Technical) on behalf of the Commissioner of Income Tax. The Tribunal referred to a decision of the Hon'ble Allahabad High Court regarding defective service of notice and concluded that the notice issued in this case was not signed by the competent authority, rendering it bad in law. The Tribunal also emphasized that the Assessing Officer had considered all relevant material and arrived at a proper conclusion, making the order under section 263 impermissible as a second opinion.

Defective show cause notice issued by the Income Tax Officer (Technical):
The show cause notice issued under section 263 was contested by the assessee, claiming it was defective as it was not signed by the competent authority. The Tribunal agreed that the notice was issued by an officer who lacked the power to do so, making the notice non-curable and bad in law. Additionally, the Tribunal noted that the Assessing Officer had already considered all relevant material, rendering the order under section 263 unnecessary.

Delegation of powers by the Commissioner of Income Tax:
The Tribunal highlighted that the Commissioner of Income Tax cannot delegate powers to subordinate or lower officers under section 263. In this case, the show cause notice was issued by an officer who lacked the authority to do so, making the notice invalid. The Tribunal emphasized that the order under section 263 was merely a second opinion, which is not permissible under the Income Tax Act, leading to the conclusion that the order did not survive.

Validity of the order passed under section 263:
After considering all arguments and relevant material, the Tribunal concluded that the order passed under section 263 did not survive due to the defective show cause notice and the impermissible delegation of powers. Therefore, the appeal of the assessee was allowed, resulting in the order pronounced in favor of the assessee on 10th June 2019.