Case Law Details
Inject Care Parenterals Pvt. Ltd Vs PCIT (ITAT Surat)
ITAT Surat restored the matter back to the file of Pr. CIT as revisionary order under section 263 of the Income Tax Act cannot be passed without issuance of show cause notice on the subject matter. Such revisionary order is against the principal of natural justice.
Facts- The case of the assessee was selected for scrutiny and assessment was completed u/s 143(3) r.w.s. 143A/143(3)(b). Thereafter, revised the same by Pr.CIT by exercising jurisdiction u/s 263 with regard to the issue of employee’s contribution not deposited before due date.
Notably, Pr.CIT accepted the contention with regard to the issue of employee’s contribution but found that various other issues were not scrutinized by the assessee. Accordingly, Pr.CIT held that the assessment order passed on 22/03/2021 by the assessing Officer is erroneous in so far as prejudicial to the interest of revenue. The assessment order was set aside with the direction to the Assessing officer to frame the assessment de novo after making proper enquiries by giving reasonable opportunity to the assessee. Aggrieved by the order of ld. Pr.CIT, the assessee has filed present appeal before this Tribunal.
Conclusion- Held that no show cause notice on the two issues i.e. one related to addition on account of fixed assets and other on account of foreign exchange fluctuation gain was issued by the ld. Pr.CIT. Thus, the order of ld. Pr.CIT is not justifiable on such issue being in violation of principal of natural justice, otherwise it is a condition precedent in the language of section 263 itself. However, the ld. AR of assessee in all fairness made a prayer to restore the matter back on both the issues to the file of ld. Pr.CIT for granting them opportunity to explain both the issues. Therefore, considering such plea, we deem it appropriate to accept such contention and the matter is restored back to the file of ld. Pr.CIT to grant opportunity of hearing to the assessee on both the issues. It is made clear that no other issue was specifically touched by the ld. Pr.CIT, therefore, the ld. Pr.CIT shall restrict his jurisdiction only on issues of fixed asset as well as on foreign exchange fluctuation gain.
FULL TEXT OF THE ORDER OF ITAT SURAT
1. This appeal by the assessee is directed against the order of learned Principal Commissioner of Income Tax, Valsad [in short the ld. Pr.CIT] dated 30/03/2023 passed under Section 263 of the Income Tax Act, 1961 (in short, the Act) for the Assessment Year (AY) 2018-19. The assessee has raised following grounds of appeal:
“1. The Principal C.I.T erred in law and on fact in holding that assessment order passed u/s 143(3) dated 22/03/2021 is erroneous and prejudicial to the interest of revenue by invoking the provisions of Section 263 of the Act and thereby directing the Assessing Officer to carry out inquiries in terms of direction issued in his order passed u/s 263 of the Act.
2. The Principal C.I.T erred in law in directing the Assessing Officer to carry out inquiries in respect of other issues which may be noticed during the assessment proceedings in pursuance of order u/s 263 of the Act without appreciating the law that Assessing Officer’s jurisdiction in pursuance of order u/s 263 is limited to the issue specifically dealt with in the order passed u/s 263 which are considered by the Pr.CIT as erroneous and prejudicial to the interest of revenue.
2.1. The Principal C.I.T ought to appreciate that Assessing Officer cannot decide any new issue which ae not part of order u/s 263 in proceedings conducted in pursuance of the order passed u/s 263.
3. The Principal C.I.T erred in law and on fact in holding the order passed u/s 143(3) dated 22/03/2021 on the issue of addition to fixed assets and foreign exchange fluctuation gain as no opportunity of being heard was provided to the assessee on the above issues, which even does not form part of show cause notice issued u/s 263(1).
4. The appellant craves leave to add, amend or alter the aforesaid grounds of appeal at the time of hearing, if need arise.”
2. Brief facts of the case are that the assessee filed its return of income for A.Y. 2018-19 on 22/09/2018 declaring NIL income after claiming set off of current year and brought forward losses. The case was selected for scrutiny and assessment was completed under Section 143(3) r.w.s. 143A/143(3)(b) of the Act on 22/03/2021. The assessment order dated 22/03/2021 was revised by the ld. Pr.CIT by exercising his jurisdiction under Section 263 of the Act. Before revising the assessment order, the ld. Pr.CIT issued show cause notice dated 09/03/2023. In the show cause notice, the ld. Pr.CIT identified the issue of employees’ contribution not deposited before due date. Contents of show cause notice is extracted in para 3 at page No. 3 and 4 of order of ld. Pr.CIT. The assessee filed its reply vide reply dated 13/03/2023. The entire copy of reply is extracted/scanned on page NO. 5 to 7 of order of ld. Pr.CIT. In the reply, the assessee submitted that while processing the return of income, the disallowance of ESI and PF of Rs. 1,45,356/- and other disallowance under Section 37 of Rs. 57,022/- aggregating of Rs. 2,02,380/- was made in the order dated 04/11/2019. The assessee further submitted that thereafter case was selected for scrutiny and scrutiny assessment order was passed on 22/03/2021 assessing total income at Rs. 3.92 crores which is as per order under Section 143(1) dated 04/11/2019. The assessee specifically stated that there is no error of not making addition as appears (identified) in show cause notice under Section 263 and no income is left to be added. The ld. Pr.CIT accepted the contention of assessee as recorded in sub-para (i) on page No. 8 “In this case addition on account of provident fund has already been made.” However, the ld. Pr.CIT on perusal of accounts of assessee noted that there was addition to the fixed asset at Rs. 1,00,76,668/-, however, in the audit report, the asset is shown at Rs. 1,00,11,594/-. The ld. Pr.CIT further noted that in the Profit & Loss account foreign exchange fluctuation gain had been shown at NIL, however, in assessee’s account they have been shown at Rs. 10,12,685/-. Thus, the ld. Pr.CIT identified two more issues and noted that there is special example of long list which required further scrutiny on the part of Assessing Officer. The Assessing Officer did nothing and has accepted as such. The ld. Pr.CIT by referring certain decisions held that the assessment order passed on 22/03/2021 by the assessing Officer is erroneous in so far as prejudicial to the interest of revenue. The assessment order was set aside with the direction to the Assessing officer to frame the assessment de novo after making proper enquiries by giving reasonable opportunity to the assessee. Aggrieved by the order of ld. Pr.CIT dated 30/03/2023, the assessee has filed present appeal before this Tribunal.
3. We have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue. The ld. AR of the assessee submits that he has not filed any paper book, as the show cause notice as well as reply of assessee is referred by the ld. Pr.CIT in verbatim in his order. The ld. AR of the assessee submits that contents of show cause notice clearly specified that the ld. Pr.CIT identified the issue of allowance/disallowance of employees’ contribution of provident fund. On such issue, the assessee made its elaborate reply and stated that in assessment order passed under Section 143(1) dated 04/11/2019 has already made disallowance of such employees provident fund contribution and that no income is left to be added. The ld. Pr.CIT accepted such contention of assessee. However, the ld. Pr.CIT without issuing any show cause notice, revised the assessment order on two other issues i.e. one related to difference of addition of fixed asset during the year and another on account of foreign exchange fluctuation gain. Admittedly no show cause notice on such issues were issued by the ld. Pr.CIT, which is precondition for revising the assessment order under section 263. To support such contention, the ld. AR of the assessee relied upon the decision of Hon’ble Bombay High Court in Pr.CIT Vs M/s Universal Music India Pvt. Ltd in ITA No. 238 of 2018 dated 19/04/2022 and Calcutta High Court in Pr.CIT in Damodar Valley Corporation (2023) 146 taxmann.com 421 (Calcutta). The ld. AR of the assessee submits that to cut short the controversy, admittedly, no opportunity was given to the assessee to explain the facts on other two issue, or to allow to file their reply on such issues identified by ld. Pr.CIT, therefore, the matter may be remanded back to the file of ld. Pr.CIT with the direction to grant liberty to the assessee to file their reply. As no other issue was identified by the ld. Pr.CIT, therefore, remand may be restricted only to those issues which is the basis of revision order.
4. On the other hand, the ld. CIT-DR for the revenue after hearing the submission of ld. AR of the assessee submits that he has no objection if the matter is remanded back to the file of ld. Pr.CIT to grant opportunity to the assessee on such issues.
5. We have considered the submissions of both the parties and perused the order of ld. Pr.CIT carefully. On careful perusal of order, we find that no show cause notice on the two issues i.e. one related to addition on account of fixed assets and other on account of foreign exchange fluctuation gain was issued by the ld. Pr.CIT. Thus, the order of ld. Pr.CIT is not justifiable on such issue being in violation of principal of natural justice, otherwise it is a condition precedent in the language of section 263 itself. However, the ld. AR of assessee in all fairness made a prayer to restore the matter back on both the issues to the file of ld. Pr.CIT for granting them opportunity to explain both the issues. Therefore, considering such plea, we deem it appropriate to accept such contention and the matter is restored back to the file of ld. Pr.CIT to grant opportunity of hearing to the assessee on both the issues. It is made clear that no other issue was specifically touched by the ld. Pr.CIT, therefore, the ld. Pr.CIT shall restrict his jurisdiction only on issues of fixed asset as well as on foreign exchange fluctuation gain. Needless to direct that before passing the order, the ld. Pr. CIT shall grant reasonable opportunity of hearing to the assessee. In the result, ground of appeal raised by assessee are allowed for statistical purposes.
6. In the result, this appeal of assessee is allowed for statistical purposes. Order pronounced on 18/07/2023 in open court at the time of hearing.
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