2017 (1) TMI 896 - AT - Income Tax

Revision u/s 263 - unsigned notice by the designated authority - notice was issued by DCIT - non reasons for treating the order of AO as erroneous and prejudicial to the interest of the revenue - Held that - From the facts of the case in hand, we find that notice u/s 263 of the Act was not signed by the Commissioner of Income Tax as required under the provisions of law. In the similar facts and circumstances in the case of Bardhman Co-operative Milk Producers Union Limited vs CIT 2014 (5) TMI 1132 - ITAT KOLKATA for A.Y.2003-04 and 2004-05 have decided the issue in favour of the assessee. We further find that there was no reason mentioned in the notice issued u/s 263 of the Act for treating the order of AO as erroneous and prejudicial to the interest of the revenue. In this case, we find that it is a mandatory requirement for the Ld.CIT to incorporate the reasons for treating the order of AO as erroneous and prejudicial to the interest of the revenue. In holding so, we rely upon the decision of the Hon ble Madhya Pradesh High Court in the case of CIT vs Sattandas Mohandas Sidhi 1997 (6) TMI 13 - MADHYA PRADESH High Court as held the notice should contain reasons as to how the order is prejudicial to the Revenue - Decided in favour of assessee

Summary

Issues:
Challenge to proceedings under section 263 of the Income Tax Act based on improper notice and lack of reasons mentioned in the notice.

Analysis:
The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax under section 263 of the Income Tax Act for the assessment year 2007-08. The grounds raised by the assessee included contentions regarding the proper application of mind by the Commissioner, lack of a legal notice, misinterpretation of provisions, and jurisdictional issues. The appellant challenged the proceedings under section 263, arguing that the notice was not issued by the proper authority and did not mention reasons for treating the Assessing Officer's order as erroneous and prejudicial to the revenue.

Upon hearing the contentions of both parties, the Tribunal analyzed the provisions of section 263 of the Act, emphasizing the requirement for the notice to be issued by the Commissioner. It was noted that the notice in this case was not signed by the Commissioner of Income Tax as mandated by law. Referring to a similar precedent, the Tribunal held that the assumption of jurisdiction under section 263 was not valid due to the improper issuance of the notice. Additionally, the Tribunal highlighted the necessity for the notice to mention reasons for considering the AO's order as erroneous and prejudicial to the revenue.

Citing a decision of the Madhya Pradesh High Court, the Tribunal reiterated the importance of providing detailed reasons in the notice under section 263. As the notice in the present case lacked such reasons, it was deemed invalid. Relying on the precedent and legal requirements, the Tribunal concluded that the assumption of jurisdiction under section 263 was not valid in this case. Consequently, the order under section 263 was quashed, and the appeal of the assessee was allowed. The other grounds raised by the assessee were considered academic and infructuous, leading to their dismissal.

In conclusion, the Tribunal found in favor of the assessee, highlighting the significance of proper notice issuance and the inclusion of reasons in notices under section 263 of the Income Tax Act. The judgment emphasized adherence to legal procedures and requirements for maintaining the validity of proceedings under section 263.