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2017 (11) TMI 588 - HC - Income TaxRevision order u/s 263 - scope of exercise of power under Section 263 - Held that - As far as the first aspect with respect to exercise of power under Section 263 is concerned, the issue stands concluded, in the light of the amendment with effect from 1989, by insertion of Explanation (c) to Section 263 (1). The non-consideration of the larger claim for ₹298.93 crores as depreciation and the consideration of only a part of it (₹644,81,091) by the assessing officer, who did not go into the issue with respect to the whole amount, was an error, that could be corrected under Section 263. Aruba (16. ) is decisive, in that the provision of Section 263 (1) Explanation (c) was introduced to cater to precisely this kind of mischief. On the aspect of show cause notice, i.e., the second and third questions framed, the court is of the opinion that the ruling in Amitabh Bachhan (2016 (5) TMI 493 - SUPREME COURT) is decisive; it upholds the power of the Commissioner to consider all aspects which were the subject matter of the AO s order, if in his opinion, they are erroneous, despite the assessee s appeal on that or some other aspect. This Court is of the opinion that the revisional order, to the extent that it did not provide any pre-decisional opportunity to address the issues it dealt with, could not be sustained; the ITAT has granted relief of a limited nature on that score. However, we do not agree that those issues were incapable of consideration as they were gone into by the AO. Accordingly, the CIT, in exercise of his power under Section 263 will proceed to consider the assessee s submissions only on those two aspects, before making his order. All questions framed are, therefore, answered in the negative, against the assessee.
Issues Involved:
1. Jurisdiction and legality of the order under Section 263 of the Act. 2. Adequacy of the Assessing Officer's (AO) inquiries during the original assessment. 3. Inclusion of issues not mentioned in the show cause notice in the order under Section 263 of the Act. Detailed Analysis: 1. Jurisdiction and Legality of the Order under Section 263: The appellant contended that the order dated 31.03.2016 under Section 263 was without jurisdiction, illegal, and bad in law. The Tribunal upheld the order, stating that the AO did not make adequate inquiries regarding the variation in the cost of fixed assets. The court referenced the case of Malabar Industrial Co. Ltd. vs Commissioner of Income Tax, emphasizing that an assessment order could not be considered prejudicial to the interests of the revenue if it was subject to scrutiny and the AO applied his mind. The court concluded that the non-consideration of the larger claim for ?298.93 crores as depreciation and the consideration of only a part of it by the AO was an error that could be corrected under Section 263, as per the ruling in Commissioner of Income Tax vs Aruba Mills. 2. Adequacy of the AO's Inquiries: The appellant argued that the AO had raised specific queries and applied his mind to the concerned issues during the original assessment, referencing the special auditor’s report and the scrutiny assessment under Section 143(3). The Tribunal, however, found that the AO did not make adequate inquiries regarding the variation in the cost of fixed assets. The court cited the case of Commissioner of Income Tax v Sunbeam Auto Ltd, which distinguishes between "lack of inquiry" and "inadequate inquiry." It held that if there was any inquiry, even inadequate, it would not justify the Commissioner passing orders under Section 263 merely because he had a different opinion. 3. Inclusion of Issues Not Mentioned in the Show Cause Notice: The appellant contended that the order under Section 263 included issues related to TDS provisions and related party transactions, which were not part of the show cause notice, and no opportunity of hearing was provided. The Tribunal set aside the CIT's order on these issues and directed a fresh order after providing a reasonable opportunity to the assessee. The court referenced Commissioner of Income tax v Amitabh Bacchan, which upheld the power of the Commissioner to consider all aspects that were the subject matter of the AO’s order, even if they were not part of the show cause notice, as long as the assessee was given an opportunity to be heard. The court ruled that the lack of pre-decisional opportunity was a curable defect and did not vitiate the entire order. Conclusion: The court answered all questions in the negative, against the assessee, and upheld the Tribunal's decision. The appeal was dismissed, with the court directing the CIT to reconsider the issues related to TDS provisions and related party transactions after providing the assessee an opportunity to be heard.
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