Recently, in Shri Vinodbhai Naranbhai Vaghani v. ITO, the Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the first appellate authority, while enhancing assessment by exercising its power under section 251(2) of the Income Tax Act shall give a show cause notice to the assessee.
While allowing the appeal filed by the assessee against the order enhancing assessment by the Commissioner of Income Tax (Appeals), the bench said that “Section 251(2) provides that the Commissioner (Appeal) shall not embark on enhancement of an assessment unless the assessee has been granted a reasonable opportunity of showing cause against such enhancement”.
“We find no reference to the issuance of enhancement notice in the appellate order of the CIT(A). Ostensibly, powers conferred under section 251(1)(a) of the Income Tax Act has been exercised without following the due procedure mandated in the section itself. The action of enhancement by the CIT(A) is thus unsustainable in law and is therefore required to be set aside. The matter is therefore restored back to the file of the CIT(A) for fresh determination after giving proper opportunity to the assessee in terms of section 251(2) of the Income Tax Act.”
Read the full text of the order below.