The Income Tax Appellate Tribunal (ITAT), Cuttack bench Shri Chandra Mohan Garg, JM and Arun Khodpia, AM has held that the order passed u/s 263 of Income Tax Act,1961 in violation of natural justice principle can’t sustain.
The appellant assessee was a charitable trust that filed its return of income on 20.9.2016 showing income at Nil after claiming exemption u/s.11 of the Income-tax Act.CIT (Exemption) issued notice u/s 263 on analysis of the assessment order passed by the AO u/s.143(3) of the Act showing total income at Rs.Nil as erroneous and prejudicial to the interest of the revenue. CIT(E)passed the order u/s.263 of the Act directing the Assessing Officer to examine the above issues and redo the assessment after verification and in accordance with the law by ignoring the assessee’srequest for adjournment of the case for 15 days for compliance.
The appellant argued that the CIT(E) revised the assessment order only on the issue of claim of depreciation, its allowably and details of the amount set apart within the meaning of section 11(2) of the Act, to which, the assessee has furnished all the details and after satisfying the reply, the Assessing Officer completed the assessment u/s.143(3) of the Act. CIT (E) without giving any opportunity passed the order, which is in clear violation of the principles of natural justice.
The respondent contended that since the cost of asset has already been allowed u/s.11, the assessee cannot claim depreciation as the application of trust income for charitable purposes and the AO failed to enquire the same while passing the assessment order u/s.143(3.
It was observed that the Commissioner may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass an order enhancing or modifying the assessment or cancelling the assessment of the ITO and directing a fresh assessment. The principles of natural justice had been embedded as a statutory procedure to be followed by the Commissioner before passing an order in his revisional jurisdiction.
The Tribunal observed that the order of the Commissioner in the present case violates principles of natural justice and quashes the impugned revisionary order by CIT(e) as it was notsustainable.The appeal of the assesseewas allowed.The assessee was represented by Shri D Parida and the revenue was represented by Shri M K Goutam.
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