Show cause notice u/s 263 at old address was not full opportunity afforded to the assessee to controvert the grounds of revision as mandated by the Supreme Court
ABCAUS Case Law Citation:
ABCAUS 2078 (2017) (09) HC
The Substantial Question of Law framed/urged for determination:
“(i) Did the notice dated 18th March 2013 issued by the Commissioner of Income Tax, Kolkata to the Assessee at the address shown therein satisfy the requirements of Section 263(1) of the Act as regards providing the Assessee an opportunity of being heard?
(ii) If the answer to questions (i) is in the affirmative, whether on merits the order dated 30th March 2013 passed by the Commissioner of Income Tax, Kolkata under Section 263 of the Act is sustainable in law.”
Assessment Year : 2008-09
Important Case Laws Cited/relied upon by the parties:
CIT vs. Chandra Agencies 10 Taxmann.com 176 (Del)
Rajesh Kumar vs. DCIT [2006] 287 ITR 91 (SC)
J.T. (India) Exports vs. Union of India [2003] 262 ITR 269 (Del)
CIT vs. Amitabh Bachchan [2016] 384 ITR 200
Brief Facts of the Case:
The Appellant company had filed its return of income for the relevant assessment year. Proceedings were initiated under Section 147 of the Act and the assessment order was passed under Section 143(3)/147 of the Act.
After filing of the said return, the appellant had shifted its registered office once within the State and thereafter to New State/UT. For AY 2012-13 the assessee had filed its return of income on 25th September, 2012, reflecting this new address.
On 18th March, 2013, the Commissioner of Income Tax (CIT) issued a show cause notice (‘SCN’) under Section 263 of the Income Tax Act, 1961 (‘Act’) proposing to revise the assessment order dated passed under Section 143 (3)/147 for AY 2008-09.
Pursuant to the said notice, an order was passed by the Commissioner of Income Tax (‘CIT’) holding that the assessment order passed by AO was erroneous and prejudicial to the interest of the Revenue. The CIT directed the AO to pass a fresh assessment order after conducting adequate inquiries and verification
Independently of the proceedings before the AO, the Assessee challenged the order passed by the CIT before the ITAT. The ITAT dismissed the said appeal upholding the notice under Section 263 and the order passed thereon.
Contention of the appellant Assessee:
The main plank of the submissions was that the show cause notice under Section 263 was sent to an incorrect address which resulted in the Appellant not being given an opportunity of being heard. The SCN was addressed to the Appellant at the old address whereas the ITO had sufficient knowledge of the shifting of the registered office of the Appellant, in view of the various returns filed for the AY 2009-10, 2010-11, 2011-12 and 2012-13.
It was submitted that the the proceedings under Section 263 were thus, void and the order passed pursuant to the said notice was contrary to law and unsustainable.
Contentions of the Respondent Revenue.
The Revenue produced the original file of the ITO to demonstrate that the notice when the first notice was issued and the server went to deliver it, he was informed of the correct/new address . Accordingly, the same notice was re-posted to the new address of the Appellant. It was submitted that even the notice to the new address was returned to the ITO who then proceeded ex-parte and passed the impugned order.
It was submitted that the ITO was left with no option under such circumstances as he had complied with the requirements under Section 263. It was also contended that no notice was needed to be issued under Section 263 as per the judgment of the Hon’ble Supreme Court.
Observations made by the High Court:
The High Court observed that as per the decision of the Hon’ble Supreme Court the assessee must be given a full opportunity to controvert the contents of the notice under Section 263 of the Act and explain the circumstances as may be considered to be relevant by the Assessee.
The High Court observed that records revealed that the ITO was well aware of the various addresses of the Appellant including the latest address at the time when the notice under Section 263 of the Act was to be issued. The Appellant had filed its return for AY 2012-13 a full five months prior to the issuance of the notice under Section 263 of the Act. Thus, the first error committed by the ITO was to issue the notice under Section 263 to the address of the Appellant which was changed as far back in AY 2010-11. There was no justification whatsoever to issue a notice of hearing under Section 263 of the Act to the Assessee at an address which was at least three years old. This showed that the ITO did not do the bare minimum of even perusing the various returns filed by the Assessee prior to the issuance of the notice.
Regarding the re-posting of notice to the new address of the assessee, it was observed that the time available between dispatch of the notice and the date of hearing fixed was only two days and this notice was also returned with an illegible endorsement at the back of the envelope.
The High Court opined that even if the re-dispatched notice had been served, the Assessee did not have adequate time to attend a hearing.
The High Court observed that the CIT who had passed the ex-parte order under Section 263 of the Act ought to have been fully satisfied that adequate opportunity was given to the Assessee to controvert the facts stated in the notice under Section 263 of the Act and to explain the circumstances surrounding such facts. The satisfaction of the CIT on these counts could not have been arrived as the process that commenced with the issuance of the notice under Section 263 and culminated in the order was completed hurriedly – in a matter of 10 days even if the date of posting of the notice was included. Thus, the satisfaction of the CIT was misplaced.
The High Court observed that the notice having been given initially at the wrong address and thereafter posted to the correct address just two days prior to the said hearing and the said notice also having been returned unserved due to the reasons which are not decipherable, the requirement under Section 263 (1) of the Act was not satisfied
The High Court also observed that in a case it had even held to the extent of holding that refusal by the Assessee’s son to receive the notice under Section 148 of the Act did not constitute good service.
Held:
The High Court answered question No.1 in the negative i.e. in favour of the Assessee and against the Revenue. The appeal was allowed and the notice and also the revisionary order was set aside.
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