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TMI Blog2011 (6) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... ea about lack of shelf life of steam did not find mention in the revision order, but in the impugned revision order, learned Commissioner notes that that as the cost of production of steam equals the sales value, no profit can be attributed to the transaction and that thus the deduction under section 80IA resulted in the assessment being erroneous and prejudicial to the interest of the revenue . However, by the time, learned Commissioner reached the operative portion of the revision order, he entirely abandoned these grounds about inadmissibility of claim of deduction under section 80IA on merits, and set aside the assessment order on the ground that AO had not made proper enquiries in the present case, the Assessing Officer failed to make proper enquiries for making such deduction. It is thus clear that there has been a shift in the stand of the Commissioner on whether it was a fit case for revision on the ground that the assessee was not eligible for deduction under section 80IA in respect of notional sale of steam or whether it was a case for revision on the ground that the Assessing Officer did not make necessary verifications about the claim made by the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Pramod Kumar, Accountant Member And Shri V Durga Rao, Judicial Member For the Petitioner : Dinesh Vyas, Senior Advocate, along with S M Iyer and AT Suraiya For the Respondent : A P Singh ORDER PER PRAMOD KUMAR : 1. The short issue that we are required to adjudicate in this appeal is whether or not, on the facts and in the circumstances of this case, the learned Commissioner was justified in exercising revision powers under section 263 of the Income Tax Act, 1961. The assessment year involved is 2005-06, the impugned revision order was passed by the learned Commissioner on 18th March 2010, and the assessment order, so subjected to revision proceedings, was passed by the Assessing Officer under section 143(3) of the Act. 2. The issue in appeal lies in a rather narrow compass of material facts. The assessee is engaged in the business of manufacturing and dealing in various types of organic, inorganic and heavy chemicals. The assesse also has a power plant at Mithapur, Gujarat, and in respect of this power plant that the assesse claimed deduction under section 80IA of the Act, amounting to ₹ 45,55,08,392. While this claim was allowed in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice under section 263 was issued in the assessment year 2001-02 as well, but, having regard to the submissions made by the assesse in response thereof, the same was dropped; (d) that this is fifth year of claim and the same has been allowed in earlier years by way of speaking orders under section 143(3) particularly in the assessment year 2001-02; and (e) that the revision of assessment order, on these facts, will simply amount to substitution of opinion of the Assessing Officer by the opinion of the learned Commissioner. 4. None of these submissions, however, impressed the learned Commissioner. While learned Commissioner did not really reject the submissions so made by the assessee on merits, he exercised his revision powers on the ground that all these issues were not examined by the Assessing Officer in the course of the assessment. He rejected these arguments and observed as follows: ..On going through the written submissions, it is seen that the assessee has mainly objected to the setting aside of the assessment under section 263 on technical grounds rather than on merits. However, on going through various decisions cited by the assessee, it is seen that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the revision order, but at page 1 of the impugned revision order, learned Commissioner notes that that as the cost of production of steam equals the sales value, no profit can be attributed to the transaction and that thus the deduction under section 80IA resulted in the assessment being erroneous and prejudicial to the interest of the revenue . However, by the time, learned Commissioner reached the operative portion of the revision order, he entirely abandoned these grounds about inadmissibility of claim of deduction under section 80 IA on merits, and set aside the assessment order on the ground that in the present case, the Assessing Officer f ailed to make proper enquiries and accepted the claim of the assessee f or deduction under section 80IA on notional profits on production of steam . It is thus clear that there has been a shift in the stand of the Commissioner on whether it was a fit case for revision on the ground that the assessee was not eligible for deduction under section 80IA in respect of notional sale of steam or whether it was a case for revision on the ground that the Assessing Officer did not make necessary verifications about the claim made by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the hire charges as the ground for revising the assessment. This point had not been mentioned as a ground in the show-cause notice. The High Court held that inasmuch as the Commissioner had not chosen to show these two points as the errors in making the final order and the final order under section 263 refers only to the inference of hire charges being exigible to tax which was not mentioned at all in the show cause, obviously the assessee had no opportunity to meet that point. [Emphasis supplied] 10. The ratio of the decision, clear from the above observations, is that if a ground of revision is not mentioned in the show-cause notice issued under section 263, that ground cannot be made the basis of the order passed under the section, for the simple reason that the assessee would have had no opportunity to meet the point. 11. The other judgment which supports the case of the assessee is that of the Punjab and Haryana High Court in CIT v. Jagadhri Electric Supply and Industrial Co. Ltd. [1983] 140 ITR 490 The nature of the jurisdiction of the CIT under section 263 and the powers of the Tribunal while dealing with an appeal against the order passed under that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eunder in accordance with law. If the grounds which were available to him at the time of the passing of the order do not find a mention in his order appealed against, then it will be deemed that he rejected those grounds for the purpose of any action under section 263(1) of the Act. In this situation, the Tribunal, while hearing an appeal filed by the assessee, cannot substitute the grounds which the Commissioner himself did not think proper to form the basis of his order. We respectfully understand this judgment as holding, by necessary implication, that if the CIT has not mentioned the ground on which action is proposed to be taken under section 263 in the show-cause notice, it is deemed that he was not satisfied that it was a fit ground for taking action under the section, with the result that the final order, if based on the ground which he had earlier considered not fit for taking action under the section, will have to be set aside as not based on any ground which may justify his belief that the order passed by the Assessing Officer was erroneous insofar as it is prejudicial to the interests of the Revenue. . 9. In the case of Synergy Enterprises Solutions Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Colonizers Vs. ACIT (41 ITD SB 57), the violation of principles of justice, as has happened in this case, results in an order being rendered null and void. The Special Bench has, inter alia, observed as follows: As it has been discussed in the earlier paragraph there are plethora of cases holding that violation of principles of natural justice makes the decision void as in every other case ultra vires. The rules of natural justice operate as implied mandatory requirement, non-observance of which amounts to arbitrariness and discrimination. The principles of natural justice have been elevated to the status of fundamental rights guaranteed in the Constitution of India as is evident from the decision of the Full Bench of the Hon'ble Supreme Court in the case of Union of India vs. Tulsiram Patel Ors. reported in AIR 1985 SC 1416 at 1469, holding that the principle of natural justice have thus come to be recognised as being a part of the guarantee contained in Article 14 of the Constitution of India because of the new and dynamic interpretation given by the Supreme Court to the concept of equality which is the subject-matter of that Article and that violation of principl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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