2014 (6) TMI 465 - AT - Income Tax

Jurisdiction of the CIT(A) to enhance the income - Show cause notice not served u/s 251(2) of the Act opportunity of being heard Held that - Though the CIT(A) has noted about the issuance of notice u/s 251(2) on 20/1/2011, but it does reflect from the first appellate order as to whether this notice was served upon the assessee or not - The very object of the provision for issuance of show cause notice before the proposed enhancement is to afford opportunity of being heard to the assessee - the mandatory part of the requirement of the provisions laid down u/s 251(2) has remained to be complied thus, the matter is to be remitted back to the CIT(A) for fresh adjudication as to ensure that the show cause notice for the enhancement has been duly served upon the assessee Decided in favour of Assessee.

Summary

Issues:
1. Jurisdiction of CIT(A) to enhance income without notice under Section 251(2) of the IT Act 1961.

Analysis:
The appellant raised additional grounds challenging the jurisdiction of the CIT(A) to enhance income without serving a show cause notice under Section 251(2) of the IT Act 1961. The AR argued that this issue is legal in nature and does not require consideration of fresh material. The DR, however, opposed the application, citing a notice dated 20/1/2011 proposing enhancement that was allegedly issued but not responded to by the assessee.

The tribunal found that the issue raised by the appellant goes to the root of the matter and does not necessitate fresh material for adjudication. Relying on the decision of the Delhi High Court in Gidore Tools Pvt. Ltd. Vs. CIT, the tribunal emphasized the mandatory nature of providing a reasonable opportunity to the assessee before enhancing an assessment, as outlined in Section 251(2) of the Act.

The tribunal noted that although the CIT(A) mentioned the issuance of a notice under Section 251(2) in the first appellate order, it was unclear whether the notice was served on the assessee. Emphasizing the importance of affording the assessee an opportunity to be heard before enhancement, the tribunal set aside the matter to the file of the CIT(A) for a fresh disposal, ensuring proper service of the show cause notice for the proposed enhancement.

Consequently, the additional grounds challenging the jurisdiction of the CIT(A) were allowed for statistical purposes. Additionally, other consequential grounds were also remanded to the CIT(A) for reconsideration after providing the assessee with an opportunity to be heard. The appeal was allowed for statistical purposes, and the order was pronounced on 29th May 2014.