Revisional Assessment u/s 263 not valid without hearing Contentions of Assesse: ITAT Delhi [Read Order]

Recently, the Income Tax Appellate Tribunal (ITAT) Delhi passed an order which will ensure in future that the Principal Commissioners of income tax do not miss use the provisions of revision of assessment provided under Section 263 of the Income Tax Act 1961 without complying with the provisions of natural justice.

The ‘A’ Bench consisting of Judicial Member B.P. Jain and Accountant Member Sudhanshu Srivastava was hearing an appeal filed by M/s Amira Pure Foods Pvt. Ltd. against the attempt of the Principal Commissioner of Income Tax to revise the assessment order passed by the Assessing officer for the year 2014-15. The assessee had furnished all necessary documents before the assessing officer during the assessment. The Principal Commissioner was of the opinion that the assessment order was passed without making proper inquiries/ verifications/ investigations which should have been made before accepting the trading results and therefore, the order is erroneous and prejudicial to the interest of revenue.

According to section 263 of the Income Tax Act, 1961, “The commissioner may call for and examine the record of any proceeding under this act, and if he considers that any order passed therein by the assessing officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assesse an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying or cancelling the assessment and directing the fresh assessment.”

In the case, the assesse pleaded that they were not given an opportunity provide their contentions.

While quashing the order, the bench also observed that, “if the Explanation is interpreted to have overridden the law as laid down by various High Courts, then the same would empower the Pr. CIT to find fault with each and every assessment order and also to force the AO to conduct enquiries in the manner preferred by the Pr. CIT, thus prejudicing the mind of the AO, however, the intention of the legislature behind the explanation could not have been so as the same would lead to unending litigation and no finality in the legal proceedings.”