In revision proceedings CIT cannot travel beyond the reasons given in the show-cause notice u/s 263 – Supreme Court dismisses SLP of the Department
ABCAUS Case Law Citation:
ABCAUS 3809 (2023) (09) SC
Important Case Laws relied upon by parties:
CIT vs. Amitabh Bachchan (384 ITR 200) (2016)
In the instant case, the Commissioner of Income Tax (CIT) had challenged the order passed by the Hon’ble High Court on the issue of revision u/s 263 of the Income Tax Act, 1961 (the Act).
The respondent assessee was a Private Limited Company. It filed its return of income declaring Nil income. Subsequently, assessment was completed under Section 143(3) of the Act.
Thereafter, notice under Section 263 was issued by CIT on two issues, namely, disallowance of Fringe Benefit Tax (FBT) paid included in miscellaneous expenses and not allowed by the Assessing Officer and provision in respect of slow moving and absolete inventories.
Finally, by order, the CIT directed Assessing Officer to make enquiry and examine the two issues and a third issue being particulars of payments made to persons specified under Section 40A(2)(b) of the Act. The assessment order was set aside on this issue and to be examined afresh
Aggrieved by the order passed by CIT, the assessee filed an Appeal before the ITAT which allowed the Appeal of the assessee.
On the issue of payments made to persons specified under Section 40A(2)(b) of the Act, the ITAT gave a finding of fact that no such issue was ever raised by CIT in the notice served upon the assessee and the assessee was not even confronted by the CIT before passing the Order.
The ITAT concluded that the said ground therefore cannot form the basis for revision of assessment order under Section 263 of the Act. On the other two points, ITAT concluded that the Order under Section 263 was not warranted.
The Revenue, though accepted the findings of ITAT on other two points that the revision was not warranted, challenged the finding of the ITAT that that in the revision proceedings the CIT cannot travel beyond the reasons given by him for revision in the show-cause notice.
Before the Hon’ble High Court, the Revenue primarily relied upon the judgment of the Apex Court delivered after the order was pronounced by ITAT. The Hon’ble Supreme Court had held that the provisions of Section 263 does not warrant any notice to be issued and what is required is only to give the assessee an opportunity of being heard before reaching his decision and not before commencing the enquiry.
The Hon’ble High Court observed that the Hon’ble Supreme Court had held all that CIT is required to do before reaching his decision and not before commencing the enquiry, CIT must give the assessee an opportunity of being heard.
The Hon’ble High Court further observed that no doubt the Judgment also says no notice is required to be issued but also noted that in the present case, there was a finding of fact by the ITAT that no show cause notice was issued and no issue was ever raised by the CIT regarding payments made to persons specified under Section 40A(2)(b) of the Act before reaching his decision. If that was not correct certainly the order of the CIT would have mentioned that an opportunity was given and in any case, if there were any minutes or notings in the file, revenue would have produced those details before the ITAT.
The Hon’ble High Court distinguished the case relied upon by the Revenue in that the Apex Court came to a finding that ITAT had not even recorded any findings that in the course of the suo motu revisional proceedings opportunity of hearing was not offered to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which the CIT had come to its conclusions as recorded in his order under Section 263 of the Act.
The Hon’ble High Court pointed out that in the instant case, there was a clear finding by the Tribunal, that no issue was raised by the CIT in respect of particulars of payment made to persons specified under Section 40A(2)(b) of the Act and even the show cause notice is silent about that.
The Hon’ble High Court held that the Tribunal had not committed any perversity or applied incorrect principles to the given facts.
As a result, the Hon’ble High Court dismissed the appeal of the Revenue holding that question as pressed do not raises any substantial question of law.
Not satisfied with the judgment of the Hon’ble High Court, the Revenue approached the Hon’ble Supreme Court by way of filing a Special Leave Petition (SLP).
However, the Hon’ble Supreme Court stated that there was no merit in the petition. As a result, the special leave petition was dismissed both on the ground of delay as well as on merits.
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