2022 (4) TMI 1081 - HC - Income Tax

Validity of Revision u/s 263 by CIT - payments made to persons specified under Section 40A(2)(b) allowed in assessment order - ITAT gave a finding of fact that no such issue was ever raised by CIT in the notice served upon the assessee and the assessee was not even confronted by the CIT before passing the Order - HELD THAT - It is true that the Apex Court in Amitabh Bacchan 2016 (5) TMI 493 - SUPREME COURT has held, all that CIT is required to do before reaching his decision and not before commencing the enquiry, CIT must give the assesseean opportunity of being heard. It is true that the Judgment also says no notice is required to be issued. But in the case at hand, there is a finding of fact by the ITAT that no show cause notice was issued and no issue was ever raised by the CIT regarding payments made to persons specified under Section 40A(2)(b) of the Act before reaching his decision in the Order dated 20th March, 2013. If that was not correct certainly the order of the CIT would have mentioned that an opportunity was given and in any case, if there were any minutes or notings in the file, revenue would have produced those details before the ITAT. In Amitabh Bachchan (supra), the Apex Court came to a finding that ITAT had not even recorded any findings that in the course of the suo motu revisional proceedings opportunity of hearing was not offered to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which the CIT had come to its conclusions as recorded in his order under Section 263. In the case at hand, there is a finding by the Tribunal, as noted earlier, that no issue was raised by the CIT in respect of particulars of payment made to persons specified under Section 40A(2)(b) of the Act and even the show cause notice is silent about that. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

Summary

Issues:
1. Interpretation of the power of revision under Section 263 of the Income Tax Act.
2. Requirement of issuing a notice before exercising revisional jurisdiction.
3. Compliance with principles of natural justice in revision proceedings.

Analysis:

Issue 1: Interpretation of the power of revision under Section 263 of the Income Tax Act.
The appellant raised concerns regarding the Hon'ble ITAT's interpretation of the revision proceedings under Section 263 of the Income Tax Act. The key contention was whether the CIT could go beyond the reasons stated in the show-cause notice for revision. The appellant argued that the power of revision is not contingent on issuing a notice to show cause. The ITAT's decision to set aside the CIT's order was primarily based on the absence of certain issues raised by the CIT in the notice served on the assessee. The ITAT concluded that such grounds could not be the basis for revising the assessment order under Section 263. However, the appellant cited a judgment by the Apex Court to support the argument that the CIT is only required to provide the assessee with an opportunity to be heard before reaching a decision, not necessarily before commencing the enquiry.

Issue 2: Requirement of issuing a notice before exercising revisional jurisdiction.
The High Court referred to the judgment in Commissioner of Income-Tax v. Amitabh Bachchan, where the Apex Court emphasized that Section 263 does not mandate the issuance of a specific show-cause notice detailing the grounds for revision. Instead, it requires providing the assessee with an opportunity to be heard. The Court noted that the absence of a show-cause notice or raised issues in the CIT's order could raise concerns about the violation of principles of natural justice. The Court highlighted the importance of offering the assessee a chance to contest relevant facts and circumstances before finalizing a decision under Section 263.

Issue 3: Compliance with principles of natural justice in revision proceedings.
The Court analyzed the findings of the ITAT, which indicated that certain issues were not raised by the CIT in the revision proceedings. It was observed that the show-cause notice did not mention these specific issues, leading to doubts about whether the assessee had a fair opportunity to address those matters. The Court emphasized the need for the CIT to provide a full opportunity for the assessee to controvert relevant facts and explain circumstances before concluding the revision process. Ultimately, the Court concluded that the ITAT did not err in its decision, as no substantial question of law was raised when the facts and circumstances were properly analyzed.

In conclusion, the appeal was dismissed as devoid of merits, with no order as to costs.