No Revision Order can be passed u/s 263 of Income Tax Act without issuing Show Cause Notice regarding issues in Assessment Order: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Surat bench held that no revision order could be passed under Section 263 of Income Tax Act ,1961 without issuing show cause notice regarding issues in the assessment order.

Assessee, Inject Care Parenterals Pvt. Ltd. filed its return of income for the assessment year 2018-19 declaring NIL income after claiming set off of current year and brought forward losses.Therefore the case was selected for scrutiny accordingly passed assessment order.

The assessment order was revised by the Pr.CIT by exercising his jurisdiction under Section 263 of the Act. Before revising the assessment order, then Pr.CIT issued a show cause notice .  In the show cause notice, the  Pr.CIT identified the issue of employees’ contribution not deposited before the due date.

 The assessee filed its reply submitted that while processing the return of income,the AO disallowance of ESI and PF and other disallowance under Section 37 of Income Tax Act.

 The. Pr.CIT accepted the contention of assessee . However the Pr.CIT identified two more issues and noted that there is a special example of a long list which required further scrutiny on the part of the Assessing Officer.

Thereafter the Pr.CIT by referring certain decisions held that the assessment order passed by the assessing Officer is erroneous in so far as prejudicial to the interest of revenue.

Aggrieved by the order, the assessee filed an appeal before the tribunal.

Before the bench Manish J. Shah,  counsel for the assessee submitted that contents of show cause notice clearly specified that the  Pr.CIT identified the issue of allowance/disallowance of employees’ contribution to the provident fund.On such issue, the assessee made its elaborate reply.

 Further the Pr.CIT without issuing any show cause notice, revised the assessment order on two other issues i.e. one related to difference of addition of fixed assets during the year and another on account of foreign exchange fluctuation gain.

 Thus no opportunity was given to the assessee to  explain the facts on other two issues, or to file their reply on such issues identified by. Pr.CIT, therefore, the matter may be remanded  back to the file of Pr.CIT with the direction to grant liberty to the  assessee to file their reply.

Ashok B. Koli, Counsel for the revenue, supported the decision of lower authorities .

It was observed by the tribunal that no show cause notice on the two issues i.e. one related to addition on account of fixed assets and other on account of foreign exchange fluctuation gain was issued by the Pr.CIT. Thus, the order of Pr.CIT is not justifiable on such issue being in violation of principle of natural  justice,

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Dr. Arjun Lal Saini ,(Accountant Member ) and Pawan Singh,(Judicial Member) restored back the matter to the file of Pr.CIT to grant opportunity of hearing to the assessee on both the issues.

To Read the full text of the Order CLICK HERE

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