Facts of the Case

The assessee’s reassessment for Assessment Year 2010-11 was completed by the Assessing Officer under Sections 147 read with 143(3), wherein certain receipts were treated as business turnover and profit was estimated accordingly.

Subsequently, the Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263 on the ground that the Assessing Officer had failed to conduct proper inquiry and that the assessment order was erroneous and prejudicial to the interests of the Revenue.

A show-cause notice dated 18.03.2021 was issued to the assessee fixing hearing shortly thereafter. The revisionary order was passed on 23.03.2021 — within five days of issuance of the notice. 

Issues Involved

  1. Whether the PCIT validly exercised revisionary jurisdiction under Section 263.
  2. Whether passing the revision order within five days of issuing the show-cause notice constituted denial of reasonable opportunity of being heard.
  3. Whether the assessment order was truly erroneous and prejudicial to the interests of Revenue.

 Petitioner’s (Assessee’s) Arguments

  • The revision proceedings were conducted in violation of principles of natural justice.
  • Adequate and effective opportunity to respond was not provided.
  • The Assessing Officer had already examined the relevant facts during reassessment.
  • The order under Section 263 was passed in undue haste merely to meet limitation.

 Respondent’s (Revenue’s) Arguments

  • The Assessing Officer had failed to properly examine discrepancies between declared turnover and bank receipts.
  • The assessment order suffered from lack of inquiry, making it erroneous and prejudicial to Revenue.
  • Therefore, invocation of Section 263 was justified. 

Court Order / Findings (ITAT)

  • The revisionary order was passed within five days of issuing the show-cause notice.
  • Such a short period did not provide proper and effective opportunity of hearing.
  • Principles of natural justice require meaningful opportunity to present a case. 

Important Clarification by the Tribunal

  • Passing an order within an unreasonably short time after issuing notice defeats the purpose of hearing.
  • Revision under Section 263 must comply with principles of natural justice.

Link to download the order https://itat.gov.in/public/files/upload/1670406311-Anil%20Kumar%20Singh.pdf 

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