Citron Infraprojects Ltd. Vs PCIT (ITAT Mumbai)
Introduction: In a recent judgment dated 27th July 2023, the Income Tax Appellate Tribunal (ITAT) Mumbai set aside an order passed by the Principal Commissioner of Income Tax (PCIT) concerning Citron Infraprojects Ltd. This decision raises crucial questions about the principles of natural justice, revision orders, and assessment proceedings in income tax cases.
Non-Adherence to Principles of Natural Justice: One of the key issues raised in the appeal by Citron Infraprojects Ltd. was that the PCIT did not adhere to the principles of natural justice while passing the ex-parte order. The ITAT Mumbai emphasized the importance of providing an adequate opportunity for the assessee to be heard.
Revisionary Power of PCIT: The ITAT Mumbai set aside the PCIT’s use of revisionary powers under section 263 of the Income Tax Act, stating that the show cause notice was not complied with and the assessee did not receive a fair chance to present their case.
The Issue of Assessment Order: The appellant disputed the assessment order passed by the Assessing Officer (AO) under section 144 and 153A, claiming that it was erroneous and prejudicial to the interest of the revenue. ITAT Mumbai ruled that the assessment should be revisited.
Evaluation of Share Valuation: The assessee also argued that the AO failed to examine the correctness of share valuation. The ITAT Mumbai took note of this and decided to remit the case back for a fresh assessment.
Notice Issuance and Serving: The ITAT questioned whether the notice issued under section 263 of the Act was properly served to the assessee, as this is fundamental for upholding the principles of natural justice.
Conclusion: The ITAT Mumbai’s decision in Citron Infraprojects Ltd. Vs PCIT is crucial for interpreting various provisions of the Income Tax Act, particularly regarding the principles of natural justice and revision orders. It brings to light the importance of adhering to procedural rules and laws. Importantly, the case sets a precedent for ensuring that due processes are followed, thereby safeguarding the interest of both the revenue and the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee by filing the present appeal, sought to set aside the impugned order dated 23.03.2023 passed by the Principal Commissioner of Income Tax (hereinafter referred to as PCIT] qua the assessment year 2014-15 on the grounds inter-alia that :-
“1. On the facts and in the circumstances of the case and in law, the Hon’ble Principal Commissioner of Income Tax (Central)-4 erred in passing ex-parte order, not considering the submission filed by the appellant on 23.03.2023, thereby not following the principles of natural justice. The appellant, thus, prays that the said action of Hon’ble Principal CIT may kindly be quashed.
2. Without prejudice to Ground No. 1, the Hon’ble Principal Commissioner of Income Tax (Central)-4 erred in holding that the assessment order passed by the learned A.O. u/s. 144 r.w.s. 153A of the Act dated 26.02.2021 is erroneous and prejudicial to the interest of the revenue. The appellant prays that the order of the Principal CIT u/s. 263 may kindly be quashed and the assessment order of the Ld. A.O dated 26.02.2021 may be restored.
3. Without prejudice to Ground No. 1, the Hon’ble Principal Commissioner of Income Tax (Central)-4 erred in law and on facts in directing the Ld. A.O. to make addition in the assessment order passed u/s. 153A r.w.s. 144 of the Act which is not based on any incriminating material found in the search.
4. Without prejudice to Ground No. 1, the Hon’ble Principal Commissioner of Income Tax (Central)-4 erred in revising the approval of the Ld. Addl. CIT, Central Range 6 obtained u/s. 153D of the – Income Tax Act, 1961. The appellant prays that the said action of Hon’ble Principal CIT may kindly be quashed.
5. Without prejudice to Ground No. 1, the Hon’ble Principal Commissioner of Income Tax (Central)-4 erred in holding that the Ld. A.O. has failed to examine the correctness of valuation of shares and setting aside the appellant’s case back to the Ld. A.O. for making a fresh assessment of such issue. The appellant prays that the said action of Hon’ble Principal CIT may kindly be quashed.
6. The appellant craves leave add/withdraw or amend any ground of appeal at the time of hearing or before hearing.”
2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : on the basis of search and seizure operation carried out at the premises of assessee “incriminating material” was seized on the basis of which notice under section 153A of the Income Tax Act, 1961 (for short ‘the Act’) was issued. During the course of assessment proceedings the assessee filed submissions in response to the notice issued under section 142(1) of the Act. Assessing Officer (AO) noticed that during the year under consideration the assessee company had issued 31,00,000 shares at premium of Rs.190/- per share (issue price Rs.200/-) to the different applicants detailed as under:
