2021 (9) TMI 644 - AT - Income Tax

Revision u/s 263 - Reply to SCN filed by the assessee at a later stage - income offered by the assessee firm during the course of survey on account of excess stock, cash and debtors was required to be assessed under the provisions of section 69/69A and 69B of the Act and to be taxed u/s. 115BBE @ 30% without allowing for any deduction in respect of any expenditure or any allowance - HELD THAT - The specific reply/defence put forth by the assessee before the ld. PCIT could not be considered at the time of pronouncement of order U/s. 263 of the Act. Therefore, considering the substantial justice, we restore the matter back to the file of ld. PCIT for fresh reconsideration of the entire matter after considering the reply/defence dated 30/3/2021 of the assessee's paper book or any other documents placed on record by the assessee. Needles to mention here that the ld. PCIT while reconsidering the entire matter and passing the order, appropriate opportunity of being heard be given to the assessee. Appeal of the assessee is allowed for statistical purposes only.

Issues:
1. Validity of order passed under section 263 of the Income Tax Act, 1961.
2. Consideration of reply submitted by the assessee prior to passing the order.
3. Relevance of surrendered income and its treatment under sections 69, 69A, and 69B of the IT Act.
4. Opportunity of being heard and consideration of defense by the Principal Commissioner of Income Tax (PCIT).

Issue 1: Validity of Order under Section 263:
The appeal was filed against the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961 for the assessment year 2016-17. The appellant raised grounds questioning the validity of the order on the basis that it was void ab initio and deserved to be quashed. The Tribunal noted discrepancies regarding the submission of a reply by the assessee before the PCIT and concluded that the reply was not considered during the passing of the order. Consequently, the Tribunal restored the matter back to the PCIT for fresh reconsideration after considering the reply submitted by the assessee.

Issue 2: Consideration of Assessee's Reply:
The Tribunal highlighted the importance of considering the reply submitted by the assessee before passing any order under section 263 of the IT Act. It was observed that although the assessee had filed a detailed reply, it was submitted after the due date, leading to the PCIT not considering it while passing the order. The Tribunal emphasized the need for the PCIT to reconsider the entire matter, taking into account the defense provided by the assessee, and ensuring that the assessee is given a proper opportunity to be heard.

Issue 3: Treatment of Surrendered Income under Sections 69, 69A, and 69B:
The case involved a partnership firm that had surrendered excess stock, cash, and debtors during a survey conducted at its business premises. The PCIT directed the assessment of surrendered income under sections 69, 69A, and 69B of the IT Act, taxing it at a specific rate without allowing any deductions. However, the Tribunal noted discrepancies in the treatment of surrendered income and directed the PCIT to reassess the matter, considering the nature of the surrendered income and its applicability under the relevant sections of the IT Act.

Issue 4: Opportunity of Being Heard and Defense Consideration:
The Tribunal emphasized the fundamental principle of natural justice, which requires that the assessee's defense and reply be duly considered before passing any order that may affect their tax liability. In this case, the Tribunal found that the PCIT did not consider the detailed reply submitted by the assessee, leading to the decision to remand the matter back to the PCIT for a fresh reconsideration. The Tribunal clarified that its decision to remand the matter did not reflect any opinion on the merits of the dispute, leaving it to be independently adjudicated by the PCIT in accordance with the law.

This detailed analysis of the judgment from the Appellate Tribunal ITAT Jaipur highlights the key issues raised in the appeal and the Tribunal's decision to remand the matter back to the Principal Commissioner of Income Tax for fresh consideration, emphasizing the importance of procedural fairness and proper consideration of the assessee's submissions.

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