ITO Vs Shilphy Steels Private Limited (Chhattisgarh High Court)
Chhattisgarh High Court has set aside a revisional order passed by the Principal Commissioner of Income Tax (PCIT) against Shilphy Steels Private Limited, ruling that the assessee was not provided a reasonable opportunity of hearing. This decision, under Section 260A of the Income Tax Act, 1961, reinforces the critical importance of natural justice principles in tax proceedings and underscores the limitations of the PCIT’s revisional powers under Section 263 of the Act.
The case originated from the assessment year 2015-16. Shilphy Steels, engaged in the manufacturing and selling of sponge iron and MS ingots, had filed its return on September 27, 2015, declaring a taxable income of ₹7,99,351/-. Initially processed under Section 143(1), resulting in a demand of ₹8,44,800/-, the assessment was subsequently completed under Section 143(3) on December 29, 2017. During this assessment, the Assessing Officer (AO) made a significant addition of ₹9,00,00,000/- under Section 68 of the Act, citing unexplained cash credit.
Subsequently, the PCIT initiated revisional proceedings under Section 263 of the Act. On March 26, 2021, the PCIT passed an order, concluding that the AO’s assessment order was “prejudicial to the interest of the revenue” and directed the AO to conduct a de novo assessment. Aggrieved by this revisional order, Shilphy Steels approached the Income Tax Appellate Tribunal (ITAT). The ITAT allowed the assessee’s appeal, setting aside the PCIT’s order. This led the Revenue to file the present appeal before the Chhattisgarh High Court, which admitted the case on the substantial question of law: “Whether the Income Tax Appellate Tribunal was justified in quashing the revisional order of the Principal Commissioner of Income Tax, passed under Section 263 of the Income Tax Act, 1961, holding that no reasonable opportunity of hearing was granted to the Assessee to set aside the order passed by the Assessing Officer while invoking Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961?”
