• Mar
  • 16
  • 2013

S. 263 Revision order based on grounds not shown in show cause notice is not valid

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Objection raised by the CIT in the show-cause notice issued under s. 263 of the Act was in relation to non-deduction of tax at source out of certain payments made by the assessee and the invoking of provisions of s. 40(a)(ia) of the Act. However, in the ultimate analysis, the CIT has directed the AO to recompute the income in the hands of the assessee by applying suitable net profit rate. Such direction of the CIT in exercise of power under s. 263 of the Act is not warranted and the same is set aside. The second direction of the CIT under s. 263 of the Act for initiation of penalty proceedings is unwarranted as the AO in the order passed under s. 144 r/w s. 143(3) of the Act had already initiated penalty proceedings under various provisions of the Act for non-maintenance of books of account, non-appearance during the assessment proceedings and also for concealment of particulars of income. The aforesaid direction of the CIT in the present circumstances is also unwarranted. On this issue itself we find no merit in the exercise of jurisdiction by the CIT(A) under the provisions of s. 263 of the Act and the same is set aside.

Proceedings U/s. 263 on basis of audit objection is not valid – CIT in the present case had also initiated the proceedings under s. 263 of the Act on the basis of the audit objections. Show-cause notice was issued in the present case for non-deduction of tax at source, out of certain expenses incurred by the assessee and order passed by the CIT under s. 263 of the Act directing the AO to redetermine the income of the assessee by applying a rate other than the rate applied by the AO, being without jurisdiction, is not tenable in law. We find no merit in the plea of the learned Departmental Representative for the Revenue that the source of information in the present case was audit objection, but there was independent application of mind by the CIT. The provisions of s. 263 of the Act are clear and absolute that the power is to be exercised by the CIT from the examination of the records of the proceedings under the Act. The Explanation under s. 263 of the Act defines ‘records’ as all records relating to any proceedings under the Act available at the time of examination by the CIT. The audit objections under no circumstances can be called as record empowering the CIT to exercise jurisdiction under s. 263 of the Act. Further it is apparent that the CIT has initiated the revision proceedings only on the basis of audit objection. Such exercise of power under s. 263 of the Act is not tenable in law. Accordingly, we set aside the order passed by the CIT under s. 263 of the Act. The grounds of appeal raised by the assessee are thus allowed.

Source –  Jaswinder Singh Versus Commissioner of Income-tax (ITAT Chandigarh), IT Appeal NO. 690 (CHD.) OF 2010, Dated- 09.03.2012


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