The Income Tax Appellate Tribunal (ITAT), Surat bench, quashed the revision order passed under Section 263 of the Income Tax Act, 1961, without following the principle of natural justice in respect of the addition of fixed assets.
The assessee, Hi-Shine Inks Pvt. Ltd., is a Private Limited Company and filed a revised return of income on the date 23/01/2019. Subsequently, the assessee’s return of income was selected for scrutiny, and the assessment was completed under Section 143(3), read with Section 143(3A) and 143(3B) of the Income Tax Act.
Thereafter, the PCIT issued a notice under Section 263 of the Income Tax Act after verifying the addition of fixed assets. However, in response to that notice, the assessee filed an adjournment application before the PCIT, asking for time to submit a reply.
However, the PCIT, without waiting for the reply from the assessee, framed the order on 31.03.2023, under Section 263 of the Income Tax Act.
Aggrieved by the order, the assessee filed an appeal before the Tribunal.
During the proceedings, Sujesh C. Suratwala, Counsel for the assessee, argued that the PCIT issued the notice to examine additions to the fixed assets during the financial year. However, without hearing the assessee and without giving an opportunity to the assessee to explain the transaction, the PCIT adjudicated the issue.
S. M. Keshkamat, Counsel for Revenue, supported the order of the PCIT.
The Tribunal, while considering the appeal, relied upon the decision of the Supreme Court in the case of Amitabh Bachchan, which held that the Principal Commissioner of Income Tax (PCIT) should provide an opportunity for a hearing to the assessee during revision proceedings. Therefore, failure to provide such an opportunity would render the revisional order legally fragile, not on the grounds of lack of jurisdiction, but on the grounds of the violation of the principles of natural justice.
After reviewing the facts and records, the two-member bench of Dr. A. L. Saini (Accountant Member) and Pawan Singh (Judicial Member) quashed the revision order passed under Section 263 of the Income Tax Act, holding that the PCIT passed the revision order without providing an opportunity to the assessee in respect of the addition of fixed assets.
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