ITAT quashed revision order u/s 263 passed without providing information to assessee and not considering submissions & evidences furnished.
In a recent judgment, ITAT Raipur has quashed the revision order passed u/s 263 holding that the PCIT grossly erred in not providing the information or documents used against the assessee and even not considering the submissions of assessee along with corroborative evidences.
ABCAUS Case Law Citation:
4801 (2025) (10) abcaus.in ITAT
Important Case Laws relied upon by Parties:
CIT Vs Amitabh Bachchan
Kamlesh Jain & Sons HUF Vs ITO
In the instant case, the assessee had challenged the order passed by the PCIT in revisionary proceedings u/s 263 of the Income Tax Act, 1961 (the Act).
In present case, the assessment of the appellant assessee was completed u/s 143(3) r.w.s. 144B of the Act. Subsequently, the case record of the assessee are examined by the PCIT who observed that during the relevant period the assessee company made purchases which was a shell company as per list circulated by SEBI.
It was alleged that the transaction of the said company was only in paper, as no documentary evidence pertaining to receipt of goods or payment details were found in the assessment records to substantiate that the transaction was actually made. Therefore the assessment order was erroneous in so far as prejudicial to the interest of revenue in terms of section 263 of the Act.
The PCIT issued a show cause and considered the submissions of the assessee but had not found it tenable. The PCIT observed that as per MCA website, the work profile of the company does not match with the nature of trading claimed by the assessee.
The PCIT further noted that the license of trading of the said company were suspended one year prior to the impugned period, therefore, the veracity of purchase transaction was not properly verified by AO during the course of assessment proceedings.
The PCIT set aside the order passed by AO with the direction to pass a fresh assessment order after making necessary inquiries required and after providing due and adequate opportunity of being heard to the assessee.Â
Before the Tribunal, the assessee inter alia contended that while drawing negative inference against the assessee by the PCIT while issuing the notice u/s 263 certain information was referred by him and produced in the order for drawing such inference, however, such information or material was never provided to the assessee even after the specific requirement made by the assessee as per the written submission.
It was submitted that the revisional revised order was passed on material or information kept by PCIT with himself only, the same was never confronted to the assessee. The assessee had no occasion to look into such information and evidence used against it, so as to observe such information / documents to rebut to the same, whereas sufficient information and material has been furnished by the assessee, which were not even look into by the revisionary authority, if the PCIT would have considered the evidences furnished by the assessee, the allegation made regarding genuineness of transactions would have been clarified and the genuineness would have established.
It was submitted that the revisionary proceedings initiated by PCIT were not in accordance with the mandate of law, there was a clear violation of Principal of Natural justice and therefore the interpretations, observations and inference drawn without confronting the assessee were in contradiction to the settled principle of laws.
It was submitted that the validity of license during the relevant period was very much in existence, however such facts was never enquired about by the PCIT from the assessee and PCIT had formed a belief based on the list of SEBI.
The assessee submitted that all the relevant evidence i.e., ledger account, bank statement showing transactions, Master data from MCA, copy of tax invoice, purchase vouchers, transit pass issued by State Government were not at all not referred by PCIT and concluded under preconceived notion that once the information is received from SEBI there is no need to refer the evidences which were furnished by the assessee before him, even for examining the veracity of such documents or to dislodge the genuineness of such documents.
The Tribunal opined that the provision of Section 263 contemplates opportunity of being heard to be afforded to the assessee, failure to such opportunity would render the revisionary proceedings illegal. Reliance place on the decision of Hon’ble Apex Court wherein it was held that what is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice.
The ITAT further noted that Hon’ble Jurisdictional High Court of Chhattisgarh had categorically held that ‘withholding of certain documents which is used against the assessee by the PCIT defeats the rules of natural justice of doctrine of Audi alteram partem.Â
The Tribunal held that PCIT had grossly erred in not providing the information or documents used against the assessee and furthermore have not even considered the submissions of assessee along with corroborative evidences to justify that the information available with the PCIT was not sacrosanct and if the evidences furnished by the assessee are looked into the genuineness of transactions would undoubtedly explained and established.
The Tribunal held that the PCIT failed to adhere to the legal principles as per provisions of Act, as well as analogies drawn by Hon’ble Apex Court and Hon’ble Jurisdictional High Court. The PCIT also failed in his conclusions on merits as well, as the relevant evidences regarding the place of alleged company, proof of payments i.e., bank statements, transportation of goods and availability of license of the alleged company which were very much before him but have brushed aside or had ignored. Consequently, the order u/s 263 was passed by the PCIT on the foundation of external information without examining the facts on record furnished by the assessee, under violation of legal principles, therefore, was bad in law, unsustainable and liable to be quashed.
Accordingly, the order passed under section 263 was quashed.
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