The Income Tax Appellate Tribunal (ITAT), Surat Bench, has set aside a revision order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961.
The ITAT found that the PCIT failed to provide the assessee, Railesh Naik, with a reasonable opportunity of being heard before passing the order.
The case relates to the assessment year 2018-19. The assessee had purchased two immovable properties for Rs. 30,00,000 and Rs. 22,00,000. The Stamp Valuation Authority determined the market values of these properties as Rs. 53,06,122 and Rs. 40,40,816, respectively. The PCIT claimed that the difference of Rs. 41,46,938 between the purchase price and market value was taxable under Section 56(2)(vii)(b) of the Income Tax Act.
The Assessing Officer (AO) initially accepted the assessee’s returned income of Rs. 72,590. The AO found that the assessee had explained the transactions and had sold agricultural land located outside municipal limits, which was not subject to capital gains tax. However, the PCIT invoked Section 263, arguing that the AO’s order was erroneous and prejudicial to the interests of the revenue.
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The ITAT noted that the PCIT issued show-cause notices on February 5, 2024, and February 14, 2024, but these were not properly served on the assessee. The PCIT passed the revision order on March 4, 2024, without allowing the assessee sufficient time to respond. The ITAT observed that the order violated the principles of natural justice, as the assessee was not given a fair opportunity to present his case.
The Tribunal referred to Section 263 of the Act, which mandates that the assessee must be given an opportunity of being heard before any revision order is passed. It concluded that the failure to serve the notice and the hurried nature of the proceedings rendered the revision order invalid.
Two Member Bench Comprised of Pawan Singh (Judicial Member) and Bijayananda Pruseth(Accountant Member) quashed the PCIT’s order and directed the PCIT to pass a fresh order after giving the assessee a reasonable opportunity to present his case. It emphasized that procedural fairness is a mandatory requirement under the law.
In Conclusion,the appeal was allowed.
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