NARENDRA KUMAR ,AGRA vs. PR. CIT-1, AGRA

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA(DB) BENCH, AGRA BEFORE : MAHAVIR SINGH, VICE PRESIDENT (THIRD MEMBER) SUNIL KUMAR SINGH, JUDICIAL MEMBER MANISH AGARWAL, ACCOUNTANTMEMBER & BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.227/Agr/2024 Assessment Year: 2012-13 Shri Narendra Kumar, Vs. PCIT-I, Aayakar Bhawan, 25, Krishna Bagh, Heera Bagh, Sanjay Place, Agra-282002 Dayal Bagh, Agra – 282005 PAN :ADHPK4900H (Appellant) (Respondent) Assessee by Shri Rajesh Malhotra, CA Department by Smt Sangeeta Yadav, CIT (DR) Date of hearing 22.06.2026 Date of pronouncement 22.06.2026 ORDER PER:SUNIL KUMAR SINGH, JUDICIAL MEMBER

This is an appeal filed on behalf of the assessee against the impugned order dated 31.03.2022 passed by the Learned Principal Commissioner of Income Tax-1, Agra [hereinafter referred to as ‘PCIT’], u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) for Assessment Year 2012-13. 2. I have perused the opinion authored by my ld brother, Shri Manish Agarwal, Accountant Member. I respectfully dissent with the said opinion and express my reasons there for

ITA No.227/Agr/2024 3. Condonation of delay: At the very outset, it is noticed that this appeal was filed on 13.06.2024 against the impugned order dated 31.03.2022 by a delay of about 745 days. Assessee's delay condonation application speaks of assessee not having served with the impugned order due to the mobile number and email ID available on the Income Tax Portal pertains to assessee's former consultant. The assessee came to know in respect of the impugned order only when his banker intimated him about the recovery notice dated 19.04.2024. That made the assessee to file belated appeal. An affidavit on behalf of the assessee is also on record in support of the delay condonation application. Learned Accountant Member has straightway proceeded to record his opinion on merits giving an inference that the delay in filing the appeal has been condoned by implication. In the circumstances, I concur with the learned Accountant Member condoning the delay by implication. The appeal stood admitted accordingly. 4. Factual matrix: The appellant/assessee is proprietor of M/s. Kapil Electronics and engaged in the trading business of mobile handsets. According to the brief history, the appellant/assessee e-filed his original return of income on 31.03.2014, declaring total income of Rs.3,61,620/-. The original assessment was completed u/s. 143(3) of the Act on 26.03.2015. After 2 | P a g e

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making adhoc addition of Rs.1,12,000/-, the total &income was assessed at Rs.4,73,620/-.Subsequently, reassessment proceedings were initiated u/s. 147 by issuing notice u/s. 148 dated 31.03.2019 based on STR (Suspicious Transaction Report) information that assessee's bank account No. 0705035463 maintained with ICICI Bank, Cannaught Place, Delhi reflected the cash credit of Rs.39,04,32,377/-. In response to notice u/s. 148, the assessee filed return of income on 19.12.2019, declaring the same income of Rs.3,61,620/-, which stood accepted by the Assessing Officer, vide assessment order dated 30.12.2019 passed u/s. 147/143(3) of the Income-tax Act as under: Re-"(ASSESSMENT ORDER) "In this case, STR information was received that the bank account no. 0705035463 at ICICI Cannaught Place, Delhi was credited by Rs.39,04,32,277/-, during the year under consideration and after recording reasons, proceedings u/s 147 of the I.T. Act, 1961 has been initiated by issuing notice u/s 148 of the I.T. Act, 1961 dated 31-03-2019, which was served upon the assessee. Reasons recorded u/s 147/148 of the I.T. Act, 1961 is placed on file. Further, various notices u/s 142(1) containing the questionnaire issued and a show cause notice u/s 144 was also issued. In response to the said notices Shri Rajesh Malhotra, FCA/A.R. of the assessee appeared and filed authorization alongwith reply dated 19.12.2019 and ITR in compliance of notice u/s 148 showing total income of Rs. 3,61,620/-. Accordingly notice u/s 143(2) issued to the assessee. Replies, the details and the documents filed by the A.R. of the assessee were examined and the case was discussed with him. During the year under consideration assessee was engaged in the business of trading of mobile handsets in the name of Prop. Firm M/s Kapil Electronics. Considering the reply of the assessee, material available on record and after discussion with the CA/AR of the assessee, the assessment is completed on returned income as declared by the assessee. Assessed accordingly u/s 147/143(3). Issue notice of demand and necessary papers."

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4.1. Thereafter, on examination of assessment records, the Id. PCIT noticed several discrepancies and resorting to his revisionary jurisdiction, issued a notice u/s. 263 of the Act dated 27.03.2022, requiring the assessee to explain along with evidence/documents each and every discrepancy mentioned in the said notice, on or before 29.03.2022, which is reproduced as under: "Subject: Notice u/s 263 of the Income Tax Act, 1961 in the case of Shri Narendra Kumar (PAN: ADHPK4900H) for A.Y. 2012-13-Reg. Kindly refer to the above mentioned subject. 2. In your case, notice u/s 148 of the Income Tax Act, 1961 was issued on 31.03.2019 re-opening the Assessment in your case for A.Y. 2012-13 and the Assessment Order was passed u/s 143(3)/147 of the Income Tax Act, 1961 dated 30.12.2019 assessing the Total Income at Rs. 3,61,620/-. 3. I have examined the case record in your case for A.Y. 2012-13 and on examination of the case record several issues have emerged, which are discussed hereunder: A. It is seen from the STR(Suspicious Transaction Report) available on record that the Bank Account No. 31170200000138 maintained with Bank of Baroda, Dayalbagh was credited by an amount of Rs. 40,000/- and Bank Account No. 000705035463 maintained with ICICI Bank was credited by an amount of Rs. 39,04,72,777/-aggregating to an amount of Rs. 39,05,12,777/- as compared to Total Turnover of the Assessee's firm was Rs. 11,64,72,975/-. It is seen from the case record that during the course of assessment proceedings, Assessee submitted that the credit amount of Rs. 27,39,99,802/- (39,04,72,777/-less11,64,72,975/-) was on account of realization from debtors of earlier year and also from the debtors of current F.Y. vide Point 7 of his Reply. The same is reproduced as below: "That as regards nature and source of credit amount of Rs.27,39,99,802/-in Bank Account it is submitted that assessee was engaged in the business of trading of mobile handsets. His sale for the relevant financial year was Rs.11,64,72,75/- and there were sundry debtors of Rs. 31,86,87,238/- of preceding previous year l.e. 2010-11. The source of credit in Bank Account is due to realization from debtors of earlier year and also from the debtors of current financial year."

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As per schedule 6 of Balance Sheet of Prop. M/s Kapil Electronics as on 31.03.2012 and 31.03.2011 sundry debtors were as detailed below:-

Name of debtors As on 31.03.2012 As on 31.03.2011 Bhagya Sales 709226571.00 233066171.00 Corporation Tirupati Dyes & 21607.00 85621067.00 Chemicals In this regard, it is noticed that the AO called for certain information u/s 133(6) from M/s Bhagya Sales Corporation vide letter dated 11.02.2015 and Speed Post No. EU 207240156 IN at the address provided by the Assessee for 3d party verification. The said letter was returned back with Remark 'NO such firm on such address'. Thus, inquiry and verification regarding the same remained incomplete as no further inquiry was made by the Assessee as per case record. However, the A.O. completed the Assessment at the Income of Rs. 3,61,620/- on 30.12.2019 and recorded his satisfaction in the Office Note without completion of the inquiry regarding realization of amount from the debtors and without explanation with evidences from the Assessee regarding the source of credited amount in Bank accounts. The A.O. did not call for PAN, Bank Account Statement, Balance Sheet etc of the debtors for verification as well. B. Furthermore, as per schedule 6 of Balance Sheet of Prop. M/s Kapil Electronics as on 31.03.2012 following sundry creditors have been shown: S. No. Name of Sundry creditors Amount as on 31.03.2012 (Rs.) 1. Ekta Shoppy 38,75,000/- 2. Krishna Telecom 7,00,000/- 3. Laksmi Overseas 1,05,45,000/- 4. Narayani International 98,74,000/- 5. Nikita Electronic 26,17,000/- 6. Priya Communication 2,57,54,370/-

For verification of Creditors, the Assessing Officer sent letters for verification to the aforementioned parties from whom the Assessee has claimed Purchase on credit. In one instance, Shri Pradeep Kumar Motani Prop. M/s Nikita Electronic stated vide his reply dated 27.01.2015 that he did not know the party and he is not running electronic business during the year and there was no transaction made during the year under consideration. This is the sample of one creditor who had denied to confirm the balance. However, the A.O. took no action in this regard. Further vide reply dated 30.01.2015, the Assessee furnished present address in cases at 5. No. 1. 2. 3 and 6. Information u/s 133(6) was called for vide letter dated 30.01.2015 and this Ume 5 | P a g e

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confirmations were received. Sh. Pradeep Kumar Motani (Prop. M/s Nikita Electronic) confirmed closing balance. These shows that all these addresses were managed which needs proper Investigations. In this instance, the AO again did not verify the Assessee's claim of credit purchase from the aforesaid parties by their ITRs, Balance Sheets, Proof of transaction, Bank Account Statement etc. Thus, the Assessee's claim to have above Sundry Creditors as on 31.03.2017 remains unverified. Please explain as to why the difference between total credit entries and Gross Turnover declared by the Assessee of Rs. 27,39,99,802/- (39,04,72,777/- less11,64,72,975/-) be considered Undisclosed income of the Assessee being routed back in the accounting system or at the very least that the Assessee has suppressed the Turnover for the relevant previous year by an amount of Rs. Rs. 27,39,99,802/- 4. In view of the above observations, please explain as to why it should not be concluded that the Assessment Order u/s 143(3)/147 of the Income Tax Act, 1961 dated 30.12.2019 for A.Y. 2012-13 in your case is erroneous in so far as it is prejudicial to the interests of the revenue, and why it should not be revised u/s 263 of the Income Tax Act, 1961 by passing an order, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment 5. You are hereby being granted an opportunity to furnish your explanation on each of the above mentioned issue(s), along with evidence/documents in support of your claims, which you may submit in my office on or before 29.03.2022(which shall be a working day, and office shall be open on all days and including this date) or you may file e-reply to the email ID agra.pciti@incometax.gov.in or on e-filing portal. In case you wish to be heard personally, you or your duly authorized Representative may attend my office at Room No. 217, 2 Floor, Aaykar Bhawan, Sanjay Place, Agra on 29.03.2022 at 03. 20 P.M. (the office shall be open), in case of non- compliance, it will be presumed that you have nothing to say in the matter and the case will be decided on merits on the basis of documents available on record." 4.2. Since, the assessee did not file any reply in compliance of the said notice, learned PCIT, vide impugned order dated 31.03.2022, set aside reassessment order passed u/s. 147/143(3) dated 30.12.2019, finding it as erroneous in so far as it is prejudicial to the interests of the revenue and directed the Assessing Officer to pass a fresh order, de novo, after affording an opportunity of being heard to the assessee.

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ITA No.227/Agr/2024 passing the revisionary order dated 31.03.2022 in violation of the principles of natural justice without affording adequate and reasonable opportunity of hearing to the assessee, hence, bad in law. If yes, the effect thereof? 8. The principles of natural justice have many facets. In the instant case in hand, the first facet of the principles of natural justice is "audi alteram partem", i.e., as to whether reasonable opportunity of hearing was afforded to the assessee in compliance of section 263(1) of the Act. It is an admitted fact that the notice u/s. 263 of the Act was issued on 27.03.2022 and the assessee was required to respond before the Id. PCIT on or before 29.03.2022. It is 'factum valeat' that the limitation period was expiring on 31st of March, 2022. On this facet alone, it can be easily determined that the time of one or two days to file response against the detailed notice u/s. 263 of the Act cannot be said to be adequate and reasonable. Learned PCIT was expected to afford adequate and reasonable opportunity of hearing to the assessee to enable him to reasonably respond to such notice by ensuring the substantive compliance of section 263(1) of the Act. It is, admittedly clear that no reasonable and sufficient opportunity of hearing was granted to the assessee, violating the first facet of the principles of natural justice. This irregularity is, however, curable if an opportunity of

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ITA No.227/Agr/2024 hearing to the assessee is granted by remitting the case to Ld. PCIT for deciding afresh after hearing the appellant in substance. 9. Now, I proceed to express my reasons for the dissent. (i). The reassessment order dated 30.12.2019 placed at para-3 above, is non-speaking and un-reasoned. It appears to me that, while passing impugned order u/s. 263 of the Act, Id. PCIT has taken help of external aids available at his disposal and observed that the Assessing Officer called for certain information u/s. 133(6) from one of the debtors, M/s. Bhagya Sales Corporation vide letter dated 11.02.2015. However, the said letter was returned back with the remark" no such firm on such address". Assessing Officer does not appear to have made any further inquiry, regarding this factual aspect. This apart, Learned PCIT has further mentioned the details of another debtor, Tirupati Dyes & Chemicals. The assessment order also does not speak about any such inquiry made by the Assessing Officer from this debtor too. Hence, the fact that the impugned cash credits were made out of realization of sundry debtors, remains unanswered/un-inquired. Even the reasons recorded and notice u/s. 148 of the Act are neither part of reassessment order nor placed on record. Ld. PCIT is thus right in observing that no proper inquiry and investigation were made during the reassessment proceedings. 9 | P a g e

ITA No.227/Agr/2024 (ii). As far as observation of learned PCIT in respect of six creditors tabulated at para 6 of the impugned order is concerned, Hon'ble Supreme Court in CIT v. Amitabh Bachchan (2016) 384 ITR 200 (SC) has enhanced the power conferred on the Commissioner of Income Tax u/s. 263 of the Act by holding that CIT is free to exercise his jurisdiction on consideration of all relevant facts provided an opportunity of hearing is afforded to the assessee to contest the facts, on the basis of which he had exercised revisionary jurisdiction. (iii). No Reasoned reassessment order passed by the Assessing Officer. The Assessing Officer is not only an adjudicator but also an investigator. It is the duty of the Assessing Officer to ascertain the truth of the facts stated in the return of income. The Assessing Officer cannot remain passive in the face of the return, which is apparently in order but calls for further enquiry. The word "erroneous" in section 263 includes the failure to make such an inquiry. It is not necessary for CIT to make further inquiry. (Raj Lakshmi Mills Ltd. v. ITO (2009) 121 ITD-343 (SB) (Special Bench of Tribunal). (iv). The reason is the soul of an order passed even by a quasi judicial authority. The re-assessment order dated 30.12.2019 10 | P a g e

ITA No.227/Agr/2024 passed by the Assessing Officer is cryptic and perfunctory, non- speaking and un-reasoned. The order fails to delineate the nature or extent of any such inquiry. The reassessment order does not demonstrate any application of mind to the core issue involved. It is desirable that even administrative orders should be supported by reasons (State of Himanchal Pradesh v. Mustaq Ahmed, 2007 (58) ACC 382 (SC). The orders being supported by reason is a sign of good governance. Failure to give reasons amounts to denial of justice (State of Rajasthan vs. Rahitas & Ors, 2008 (61) ACC 678 (SC). The reason is the life of law. It is that filament that injects soul to the judgment. Absence of analysis not only evinces non-application of mind but mummifies the core spirit of the order. (U. Manjunath Rao v. U Chandrashekhar, 2017 (6) Supreme 19). In M/s. Kranti Associates Pvt. Ltd. & Anr. v. Masood Ahmed Khan & Ors., (2010) 9 SCC 496, Hon'ble Supreme Court while dealing with the requirement of passing a reasoned order by an authority whether administrative, quasi judicial or judicial, has vide para 51 laid down the following propositions: "a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions.

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c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. I. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or 'rubber-stamp reasons' is not to be equated with a valid decision making process. m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiroin Defence of Judicial Candor (1987) 100 Harward Law Review 731-737).

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n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part f Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions". o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process". In view of the settled legal position, the reassessment order dated 30.12.2019 passed by the Assessing Officer cannot at all be said to be an order passed by a quasi judicial authority in the eye of law. It does not speak even a single word about the extents and nature of inquiry to any degree, hence lacks proper inquiry. (v). Procedural fairness: The another aspect of the principles of natural justice involved in the instant case is procedural fairness. It is pertinent to mention that apart from the instant case in hand, we also passed an order in ITA No. 129/Agr/2023 on 24.06.2025. Both the cases were heard on the same date on 21.05.2025 and were also authored by Id. Accountant Member. The brief details of the two cases can be understood by the following tabulated description:

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ITA No. 129/Agr/2023- Anshul Jain vs. Pr. CIT-1, Agra (other case): Name of Dt. Of Date of Issue involved Result author hearing order Sh. 21.05.2025 24.06.2025 (1) Whether show Order u/s. 263 Manish cause notice dated set aside for Agarwal, 28.03.2022 issued u/s. passing fresh Α.Μ. 263 granting only two order after day's time for opportunity to compliance on the assessee. 30.03.2022 was in Appeal violation of the allowed for principles of natural statistical justice. purposes. 2).Whether unexplained cash credits of Rs.1,08,000/- in the bank account was accepted by AO without any/proper enquiry, leading to invocation of section 263.

ITA No. 227/Agr/2024-Narendra Kumar vs. Pr. CIT-1, Agra (Instant case): Name Date of Date of Issue involved Result of hearing order author Sh. 21.05.2025 Under (1) Whether show Appeal Manish reference cause notice dated allowed and Agarwal, 27.03.2022 issued u/s. order u/s. 263 Α.Μ. 263 granting only one quashed. day's time for compliance on 29.03.2022 was in violation of the principles of natural justice. (2). Whether unexplained cash credits of Rs.27,39,99,802/- in the bank account and unexplained Sundry creditors of 14 | P a g e

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Rs.6,58,93,151/- were acceptedby AO without any/proper enquiry, leading to invocation of section 263. In the instant case, the major grievance of the assessee is that he was not afforded adequate opportunity of hearing by the Id. PCIT. Therefore, I am of the definite view that the identical case (ITA No. 129/Agr/2023) was remanded back to the Id. PCIT for passing fresh order after affording the assessee an opportunity of hearing. The same order also desires to be passed in the instant case, being of identical facts and as a rule of prudence and maintaining judicial parity and judicial ethics, as it is settled law that a court should not typically issue conflicting orders on two cases with identical facts. The Tribunal should ideally reach the same conclusion in both cases. Remitting one case and allowing other would suggest a potential inconsistency. Such an inconsistent decision on identical facts can undermine the public trust in the Tribunal and may raise questions about fairness and impropriety. (vi). Judicial ethics: The another limb of the principles of natural justice is utmost exercise of judicial ethics in passing the orders. The rules of natural justice are required to be observed to ensure not only 15 | P a g e

ITA No.227/Agr/2024 that the justice is done, but is manifestly seen to be done. In rex v. Sussex (1924) 1 KB 256: 1923 All ER Rep 233, Lord Chief Justice Heward observed that justice must not only be done, but must also be seen to be done. A basic postulate of rule of Law is that, justice should not only be donebut must also be seen to be done". (PK Ghosh v. JG Rajput (1995) 6 SCC 745. (vii). Law of Precedent: In Siddharam Satlingappa Mhetre v. State of Maharasthra & Ors. AIR 2011 SC 312, three judges of Hon'ble Supreme Court has held that not only the judgment of a larger strength is binding on a judgment of smaller strength, but the judgment of a co-equal strength is also binding on a Bench of judges of co-equal strength. If the court doubts the correctness of the judgment by 2 or 3 judges, then the proper course would be to request the Hon'ble Chief Justice to refer the matter to a larger Bench of appropriate strength. In National Insurance Co. Ltd. v. Pranay Sethi, AIR 2017 SC 5157, five judges constitutional Bench of Hon'ble Supreme Court has held that a coordinate Bench of the same strength cannot take a contrary view than what has been held by another coordinate Bench. The only course open to the latter Bench is to refer the matter to a larger Bench if taking a

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ITA No.227/Agr/2024 different view than what has been stated by a prior Bench, a bench of equal strength. (viii). Case laws - distinguished: (a). Case laws referred by the assessee : The appellant/assessee has referred only one case law, i.e., Pr. Commissioner of Income-tax-1, Chandigarh v. M/s. V. Con Integrated Solutions Pvt. Ltd. order dated 04.04.2021 passed in SLP (Civil) Diary No. 13205/2025, wherein Hon'ble Apex Court has formulated following two eventualities to justify the decision on merits and remit of the case: (i). where proper investigation/enquiries have been conducted by the Assessing Officer, but no addition was made; and (ii) where the Assessing Officer undertakes a superficial and random investigation. Hon'ble Court in the former event propounded that wrong decision/conclusion can be corrected by the CIT with a decision on merits, whereas in the later event, has justified the remit of the case. In the case in hand, the reassessment order passed by the Assessing Officer has been held to be no order in the eye of law being unreasoned, lacking any inquiry, hence, superficial, which would justify to remit the same back to the Id. PCIT. Hence, the

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ITA No.227/Agr/2024 facts of the case referred by the assessee are easily distinguishable. (b). Case laws referred by Id. Accountant Member: (b)(i). Pr. CIT vs. Shreeji Prints (P) Ltd. (2021) 130 taxmann.com 294 (SC): In this case, Hon'ble Supreme Court dismissed SLP against the order dated 03.02.2020 passed by Hon'ble Gujrat High Court, wherein Hon'ble Gujrat High Court found that the Assessing Officer has made detailed enquiries and accepted the genuineness of two loans received by assessee from GTPL and from PAFL, whereas in the instant case in hand, there is highest degree of lack of enquiry on the part of the Assessing Officer. Hence, the facts are easily distinguishable. (b)(ii). PCIT vs. NYA International [SLP (Civil) Diary No. 1845/2025] order dated 17.02.2025: Hon'ble Supreme Court in this case upheld the order of Hon'ble High Court and dismissed the Special Leave Petition, finding the exercise of jurisdiction by CIT u/s. 263 of the Act, not being on the anvil of law by observing that the case was of "no enquiry and verification". However, the instant case in hand is of extreme degree of lack of enquiry as discussed above. Hence, the facts of the referred case are easily distinguishable.

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ITA No.227/Agr/2024 (b)(iii).PCIT vs. Clix Finance India Ltd. (Delhi HC): order dt. 01.03.2024 passed in ITA No. 1428/2018. The Hon'ble Delhi High Court has observed that the revisional authority can resort to section 263 of the Act only when there is a lack of enquiry. According to the facts of the instant case in hand, it has already been held that no enquiry has been conducted by the Assessing Officer in respect of the two said debtors to substantiate the stand of the assessee that the impugned cash credit in the bank account was out of the realization of debts from such sundry debtors. Hence, the facts of the referred case are easily distinguishable. (b)(iv)-Yashoda Shivappa Nagangoudar (2022) 138 taxmann.com 296 (Bombay); Jet Airways (1) Ltd. (2011) 331 ITR 236 (Bombay); and Krishna Diagnostic Pvt. Ltd. (2023) 151 taxmann.com 499 (Delhi) In these three decisions, Hon'ble High Courts have decided the issues pertaining to jurisdiction of the Assessing Officer u/s. 147, 148 and 148A of the Income-tax Act and in none of the cases, issue regarding jurisdiction of the Id. PCIT/CIT u/s. 263 is involved. Hence, the facts of these cases are also distinguishable. 10. The functioning of every Tribunal in the country is based on multifarious limbs and facets of the principles of natural justice, including the principles of "Audi alteram partem", procedural fairness, 19 | P a g e

ITA No.227/Agr/2024 passing speaking order with reasons ensuring the parity in passing orders in various cases on identical facts situation and following the judicial ethics for arriving at rationale and logical ends. In Lesson vs. General Council of Medical Association (1889) 42 Ch. D 366, Justice Bowen stated that "judges like Caesar's wife should be above suspicion". Judicial ethics emphasize that judicial process must be impartial and that the perception of bias or impropriety must be avoided to maintain public confidence in the judicial system. The divergent approach in the above referred two identical cases would create uncertainty and affect the Revenue's ability to rely on a consistent legal framework, more so when no opportunity to the revenue was provided in suo moto reference of case laws which is also contrary to the principles of natural justice. In my view, the irregularity committed by Id. PCIT, not adhering to the principle of "Audi alteram partem" cannot vitiate the whole proceedings but can be cured by remitting the case to the Id. PCIT for deciding the matter afresh after affording a reasonable opportunity of hearing to the assessee. I propose to pass order accordingly. The aforesaid point in dispute is determined accordingly. PER: MANISH AGARWAL, ACCOUNTANT MEMBER 11. The assessee has taken the following grounds of appeal :- "1. BECAUSE upon the facts and under the circumstances of the case, the impugned order passed by the ld. PCIT is illegal and bad in law as section 263 of the Act statutorily mandates the procedure to be followed by the Principal Commissioner of Income Tax while doing revision of orders 20 | P a g e

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prejudicial to revenue. Sub section (1) thereto clearly provides the procedure to be followed while passing order under section 263 of the Act. The same has not been followed by the Ld. PCIT before passing impugned order. 2. BECAUSE the hasty initiation of revision proceedings has resulted in taking away the vested legal right of the Appellant to properly respond the show cause notice. 3. BECAUSE the Ld. PCIT completed the revision proceedings in gross violation of the principles of natural justice. Notice dated 27/03/2022 was dispatched on 28/03/2022 and no proper opportunity of being heard was given to the Assessee (Notice was not served on the Assessee). 4. BECAUSE the action of Ld. PCIT has resulted in grave and serious prejudice to the Appellant in as much as the original order dated 30.12.2019 passed under section 147 was modified without providing the Appellant adequate opportunity to put forth submissions and documents in rebuttal to the modification of original order. 5. BECAUSE In the present case nothing has been brought on records as to which document was perused by the Ld PCIT before arriving at the conclusion that the order passed by the Assessing officer was erroneous, thus violating the provisions of section 263 of the Act. 6. BECAUSE upon the facts and under the circumstances of the case, the impugned order passed by the ld. PCIT is illegal and bad in law as section 263 of the Act statutorily mandates that the PCIT must examine the record and make inquiry before passing order under section 263 of the Act. Nothing has been brought on record as to which records were examined by the Ld. PCIT and what inquiry was done by him before passing impugned order. 7. The appellant craves leave to add or alter one or more ground(s) during the course of hearing of appeal.” 12. Brief facts of the case are that assessee is an individual and the case of the assessee was reopened on the basis of ITR information that a sum of Rs.39,04,32,277/- were deposited in the bank account of the assessee with ICICI, Connaught Place, Delhi. In response to notice u/s 148 of the Act, the assessee filed return of income declaring total income of Rs.3,61,621/-. The assessee is engaged in the business of Trading of mobile handsets in the name of style of M/s Kapil

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ITA No.227/Agr/2024 Electronics during the year under consideration. After considering the submissions, the income declared by the assessee was accepted in terms of the order passed by the AO u/s 147/143 dated 30.12.2019. Thereafter, the Ld. PCIT in terms of the impugned order dated 31.03.2022 held the said order as erroneous and prejudicial to the interest of Revenue for the reason that Assessing Officer has failed to examine the creditors and cancel the assessment order with the direction to pass the reassessment order denovo afresh. 13. Against such order, the assessee is in appeal before us. In support to the grounds of appeal Nos. 1 to 3, the Ld. AR submitted that in the instant case, the assessment was completed u/s 147 r.w.s 143/(3) on 30.12.2019 and after expiry of more than two years when the proceedings were almost got time barred, on 27.03.2022 a notice show cause notice regarding initiation of proceedings u/s 263 was issued which was sent only on 29.03.2022 asking the assessee to file the necessary reply. As the said notice was never reached to the assessee in time, since the date of hearing was fixed for 29.03.2022, the ld. PCIT passed the order u/s 263 on 31st March, 2022 cancelling the re-assessment order by holding the same as erroneous and prejudicial to the interest of Revenue. Ld. AR further submitted that PCIT has only provided one day time to explain the allegations made in the show cause notice and it is a clear violation of principle of natural 22 | P a g e

ITA No.227/Agr/2024 justice. He further submitted that during the course of assessment proceedings, the Ld. AO made all the necessary enquiries with respect to the credits in the bank account of the assessee for which reasons was recorded at the time of reopening of assessment u/s 147 of the Act and, therefore, there was no error in the order of the Assessing Officer. The Ld. AR further submits that the Assessing Officer has made adequate enquiry and ld. CIT(A) has failed to point out as to how the reassessment order was passed by making no enquiry and inadequate inquiry. For this proposition he placed reliance on the judgment of the Hon'ble Supreme Court in the case of PCIT vs. V. Con Integrated Solutions Private Ltd. 13205/2025 wherein the Hon'ble Supreme Court has dismissed the SLP filed by the Revenue and confirmed the order of the Hon'ble High Court holding the order passed u/s 263 as bad in law being without bringing on record failure on the part of the Assessing Officer to conduct the investigation. He, therefore, prayed that the order u/s 263 deserves to be quashed on legal aspects as well as on merits. 14. We have heard the rival submissions and perused the materials available on record. From the perusal of the order, the Ld. PCIT, it is seen that Ld. PCIT has initiated the proceedings by way of issue of notice u/s 263 dated 27.03.2022, copy of the said notice is reproduced in the impugned order at pages 1 to 4. As per the said notice the assessee was asked to furnish evidence/documents in support of the 23 | P a g e

ITA No.227/Agr/2024 claim on or before 29th March, 2022. Thus, only one day was provided to the assessee for making compliance failing which the order was passed u/s 263 on 31.03.2022. Further, from the perusal of the record, it is seen that the Ld. PCIT has directed the Assessing Officer to make enquiries with respect to the creditors (in particular six parties as tabulated at page 5 in para 6 of the order). From the perusal of the assessment order, it is seen that the case of the assessee was reopened for the reason that there was credits in the bank account of the assessee of Rs.39,04,32,272/- which were claimed by the assessee as realization of sales proceeds. The AO after making necessary inquiries from the debtors and after due verification of the facts, the AO reached the conclusion that the credits were business receipts and returned income was accepted. Further, it is evident from the order of Ld. PCIT that no inquiry whatsoever was carried out at the end of the Ld. PCIT before concluding that there were inadequate inquiries or lack of inquiries as provided in Explanation-2 to section 263 of the Act so as to hold the assessment order as erroneous and prejudicial to the interest of Revenue. 15. The Hon'ble supreme Court in the case of Pr. CIT vs Shreeji Prints (P.) Ltd. reported in [2021] 130 taxmann.com 294 (SC) has held as under:-

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"Section 69, read with section 263, of the Income-tax Act, 1961 Unexplained investments (Unsecured loans) - Assessment year 2013-14 - Assessee- company had received unsecured loans from two different companies Commissioner noting that said loans were shown as investment in assessee's name in balance sheet of respective companies. exercised revisionary powers and passed an order without giving an opportunity to assessee of being heard, invoking Explanation 2 to section 263 High court by impugned order held that since Assessing Officer has made inquires in details and accepted genuineness of loans receive by assessee, such view of Assessing Officer was a plausible view and same cannot to be considered erroneous or prejudicial to interest of revenue Whether SLP against said impugned order was to be dismissed-Held, Yes" 15.1 Further recently Hon'ble Supreme Court in the case of PCIT vs NYA International, while dismissing the SLP filed by the Revenue in Special Leave Petition (civil) Diary No.1845/2025 the hon'ble court vide order dated 17.02.2025 has observed as under:- "Delay condoned. This special leave petition is misconceived and is completely contrary to the law pertaining to Section 263 of the Income Tax Act, 1961. The notice under Section 148 of the 1961 Act referred to two reasons. The first reason was with regard to non-declaration of the account in ING Vysya Bank with a credit of Rs. 70, 13,43,319/- (Rupees seventy crores thirteen lakhs forty three thousand three hundred and nineteen only). The second reason was with regard to the claim of deduction under Section 10AA of the 1961 Act. It is accepted that a reassessment order under Section 148 read with Section 143(3) of the 1961 Act was passed. Addition was not made for the first reason. In the given facts, the assertion by the Revenue that inquiry and verification in re the bank account was not made is ex-facie incorrect. This being the position, this is not a case of failure to investigate, but as no addition was made, the Revenue can argue that it is a case of wrong conclusion and decision in the re-assessment proceedings. Therefore, to exercise jurisdiction under Section 263 of the 1961 Act, the Commissioner of Income Tax should have examined the merits and only on reaching a finding that the re-assessment order was erroneous and prejudicial to the interest of the Revenue made an addition.

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This is not a case of 'no inquiry and verification', but as made out by the Revenue, a case of wrong conclusion. The difference between the two situations is clear and has different consequences. This being the position, the High Court was right in dismissing the appeal preferred by the Revenue. The special leave petition is dismissed in the above terms. Pending application(s), if any, shall stand disposed of." 15.2 The Hon'ble Delhi High court in the case of PCIT Vs. Clix Finance India Ltd. while concurring to the findings of the Tribunal has observed as under: "27. Considering the aforesaid judicial pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained both the claims in question in Paragraph 8.2 of its order, which reads as under:- "8.2 In the Impugned Order, the Ld. Commissioner of Income Tax- IV, Delhi held that the AO had not examined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. As regards the first issue is concerned, we note that out of total provision of Rs. 1114.68 lacs, a sum of Rs. 7,60,76,105/ was suo moto added back in the computation of income and a further sum of Rs. 73,46,160- was disallowed by the AO in the original assessment order dated 30.3.2005. Therefore, out of Rs. 1114.68 lacs, Rs. 834.22 lacs already stood disallowed in the original assessment order. The balance amount represented actual write off which was palpably clear from page 2 of the impugned order itself. No deduction on account of any such provision was, therefore, allowed to the assessee. Hence, there is no error or prejudice to the interest of revenue. As regards second issue it was noted that interest rate swap was an actual loss and only the net loss of Rs. 114.05 lacs after setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper 26 | P a g e

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Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Book-1) were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. Even the Ld. CIT has not pointed out the definite and specific error in the original assessment order and observed that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugned order is beyond jurisdiction, bad in law and void-ab-initio. 29. It is discernible from the aforenoted findings of the ITAT that both the claims were duly examined during the original assessment proceedings itself and neither there was any error nor the same was prejudicial to the interests of the Revenue. Thus, the findings of fact arrived at by the ITAT do not warrant any interference of this Court. 30. So far as the reliance placed by the CIT on Umashankar Rice Mill is concerned, the same is misplaced, particularly in light of the insertion of Explanation 2 to Section 263 of the Act, brought in place by the Finance Act, 2015. The said amendment markedly specifies various conditions to exercise the authority vested in the Commissioner under Section 263 of the Act, leaving no ambiguity in the interpretation of the said provision. 31. In view of the aforesaid, the appeal preferred by the Revenue is dismissed alongwith the pending application(s), if any." 15.3 Further the Hon'ble Supreme Court in the case of PCIT vs. V. Con Integrated Solutions Private Ltd. (supra) while dismissing the SLP of the assessee observed as under:- "In our opinion, the order passed by the High Court, which upheld the decision of the Tribunal, is correct on facts and in law. This case does not involve a failure by the assessee officer to conduct any investigation. Instead, according to the Revenue, it is a case where the assessing officer having made inquiries erred by not making additions. The assessee does not have control over the pen of the Assessing Officer. Once the Assessing Office carries out the investigation but does not make any addition, it can be taken that he accepts the plea and stand of the assessee. In such cases, it would be wrong to say that the Revenue is remediless. The power under Section 263 of the Income Tax Act, 1961, can be exercised by the Commissioner of Income Tax, but by going into the merits and making an addition, and not by way of a remand, recording that there was failure to investigate. There is a distinction between the failure or absence of and a wrong decision/conclusion. A wrong investigation decision/conclusion can 27 | P a g e

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be corrected by the Commissioner of Income Tax with a decision on merits and by making an addition or disallowance There may be cases where the Assessing Officer undertakes a superficial and random investigation that may justify a remit, albeit the Commissioner of Income Tax rust record the abject failure and lapse on the part of the Assessing Officer to establish both the error and the prejudice caused to the Revenue." 15.4 Further the ld. PCIT observed that the AO had not made any enquiry from the creditors however, since the reasons recorded are for examination of the source of credits in bank account, which have been carried out by the AO, the jurisdiction of the AO cannot be enlarged to visit those issues which are not the subject matter of the reasons for re- opening. This view is supported by the following judgements: (i) Yashoda Shivappa Nagangoudar [(2022) 138 taxmann.com 296 (Bombay); (ii) Jet Airways (1) Ltd [(2011) 331 ITR 236 (Bombay); (iii) Krishna Diagonistic Pvt Ltd. [(2023) 151 taxmann.com 499 (Delhi)) 15.5 In view of the above discussion and by respectfully following the judgments of Hon'ble Supreme Court in the case of Shreeji Prints (supra), V Con Integrated Solution (supra) and also in the case of NYA International (supra) and of the hon'ble Delhi high court in the case of Clix Finance (supra), we are of the considered view that in the instant case, AO had made proper and adequate inquiry and it is not a case of no inquiry or lack of inquiry. The PCIT had failed to point out any specific and definite error in the reassessment order and on the other hand the AO had taken a plausible view as a result concrete and definite inquiry, which was in the exclusive domain of the AQ and it is 28 | P a g e

ITA No.227/Agr/2024 not open for revisional authority to arrive at a conclusion merely on the basis of subjective exercise. This being so, we quashed the order passed u/s 263 of the Act. PER: MAHAVIR SINGH, VICE PRESIDENT By the order of President, ITAT vide U.O. No.F.28- Cent.Jd(AT)/2025 dated 25th July, 2025, the undersigned has been nominated to adjudicate the difference of opinion between the learned Judicial Member and learned Accountant Member on the following question:- "Whether, in the given facts and circumstances of the case, the revision order passed by the PCIT under Section 263 is liable to be quashed, or is to be set aside and remanded back to the PCIT for passing fresh revision order." 2. The facts giving rise to the aforesaid question in brief are that the assessee is a proprietor of M/s Kapil Electronics and engaged in the trading business of mobile handsets. The assessee filed his return for the assessment year 2012-13 on 31 March, 2014 originally. The original assessment was completed under Section 143(3) of the Income-tax Act,1961 (hereinafter referred to as 'the Act') on 26th March, 2015. Subsequently, reassessment proceedings were initiated under Section 147 of the Act by issuing notice under Section 148 of the Act dated 31 March, 2019 based on Suspicious Transaction Report (STR) that assessee's bank account No.0705035463 maintained with ICICI Bank, Connaught Place, New Delhi reflected the cash credit of 29 | P a g e

ITA No.227/Agr/2024 ₹39,04,32,377/-. In response to notice under Section 148 of the Act, the assessee filed his return of income on 19th December, 2019, which stood accepted by the Assessing Officer without making any addition. The relevant reassessment order passed by the Assessing Officer under Section 147 read with Section 143(3) of the Act dated 30th December, 2019 is reproduced in the order of learned Judicial Member and hence, for the sake of duplicity and brevity, the same is not being reproduced. 3. Thereafter, the PCIT issued show cause notice under Section 263 of the Act dated 27th March, 2022 requiring the assessee to explain the cash deposits along with evidences/documents by 29th March, 2022 and the relevant show cause notice is also reproduced by the learned Judicial Member in his dissenting order. The PCIT passed impugned order i.e., the revision order under Section 263 of the Act on 31st March, 2022 setting aside the reassessment order passed by the Assessing Officer under Section 147 read with Section 143(3) of the Act dated 30th December, 2019 finding it as erroneous insofar as prejudicial to the interests of the Revenue and directing the Assessing Officer to frame fresh assessment order de-novo after allowing opportunity of being heard to the assessee. The PCIT's order is ex- parte, which was challenged by the assessee before the Tribunal. In the grounds of appeal, the assessee has challenged the revision order 30 | P a g e

ITA No.227/Agr/2024 on the issue of violation of principles of natural justice stating that the notice dated 27th March, 2022 was dispatched on 28th March, 2022 and show cause notice had never reached to the assessee in time. As per grounds, the revision order under Section 263 of the Act was passed on 31st March, 2022 cancelling the reassessment order holding that the same is erroneous as well as prejudicial to the interest of the Revenue and set aside the reassessment to the file of the Assessing Officer for framing de-novo assessment on the issues raised. The PCIT noted that during the financial year 2011-12 relevant to assessment year 2012-13, there were credits in the bank account of the assessee maintained with ICICI Bank at ₹39,04,72,777/-. The assessee submitted that the assessee received this amount from the debtors of the earlier years and also of current financial year. The assessee submitted the details of sundry creditors as on 31st March, 2011 and 31 March, 2012. But, the PCIT was of the view that the genuineness of the sundry creditors remained unverified during the assessment proceedings and the Assessing Officer has not taken any cognizance of the same and completed the assessment without enquiry regarding these sundry creditors and hence, the amount credited in the bank account remained unverified. According to the PCIT, no proper enquiry or investigation was made by the Assessing Officer during assessment proceedings regarding genuineness and 31 | P a g e

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creditworthiness of the sundry creditors and hence, the reassessment order framed dated 30th December, 2019 is erroneous insofar as it is prejudicial to the interest of the Revenue on the issue of sundry creditors. Therefore, the PCIT directed the Assessing Officer to pass fresh assessment order de-novo after affording reasonable opportunity of being heard to the assessee. 4. The grounds raised by the assessee before the Tribunal are reproduced in the order of learned Judicial Member but, for the sake of clarity, ground Nos.1 to 4 regarding violation of principles of natural justice are being reproduced as under:- "1. BECAUSE upon the facts and under the circumstances of the case, the impugned order passed by the Id PCIT is illegal and bad in law as section 263 of the Act statutorily mandates the procedure to be followed by the Principal Commissioner of Income Tax while doing revision of orders prejudicial to revenue. Sub section (1) thereto clearly provides the procedure to be followed while passing order under section 263 of the Act. The same has not been followed by the Id PCIT before passing impugned order. 2. BECAUSE the hasty initiation of revision proceedings has resulted in taking away the vested legal right of the Appellant to properly respond the show cause notice. 3. BECAUSE the Ld PCIT completed the revision proceedings in gross violation of the principles of natural justice. Notice dated 27/03/2022 was dispatched on 28/03/2022 and no proper opportunity of being heard was given to the Assessee (Notice was not served on the Assessee). 4. BECAUSE the action of Ld PCIT has resulted in grave and serious prejudice to the Appellant in as much as the original order dated 30.12.2019 passed under section 147 was modified without providing the Appellant adequate opportunity to put forth submissions and documents in rebuttal to the modification of original order." 5. The question referred to me is also emanating from the above discussed facts as well as grounds of appeal and also from the orders 32 | P a g e

ITA No.227/Agr/2024 passed by the learned Judicial Member and learned Accountant Member whether the revision order passed by the PCIT under Section 263 of the Act is to be quashed or is to be set aside and remanded back to the PCIT for passing fresh revision order in the given set of facts. 6. I have heard the learned CIT-DR as well as the learned Counsel for the assessee in detail. Admittedly, the facts are that the PCIT initiated the revision proceedings under Section 263 of the Act by issuing show cause notice dated 27th March, 2022, which was sent from the office of Income Tax on 28th March, 2022 fixing the case for 29th March, 2022. Finally, the revision order was passed under Section 263 of the Act on 31st March, 2022. Admittedly, this show cause notice dated 27th March, 2022, is served on the assessee or not is doubtful but, during the course of hearing either before the Bench or now before me, the issue of non-service of notice under Section 263 of the Act was not contested. The contest is limited to the violation of principles of natural justice. Learned Counsel for the assessee only made submissions that the revision order under Section 263 of the Act cannot be remanded back for allowing fresh opportunity to the PCIT and he supported the order of learned Accountant Member. On this proposition, I noted that Hon'ble Supreme Court has answered this while dealing with the provisions of Section 33B of the Indian Income 33 | P a g e

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Tax Act, 1922 which are corresponding to the provisions of Section 263 of the Income Tax Act, 1961. Hon'ble Supreme Court in the case of Commissioner of Income-tax, Central, Calcutta Vs. National Taj Traders [1980] 121 ITR 535 (SC) has considered exactly identical issue and held as under:- "In our view such literal construction would lead to a manifest y absurd result, because in a given case, like the present one, where the appellate authority (Tribunal) has found (a) the Income Tax Officer's order to be clearly erroneous as being prejudicial to the interests of the revenue and (b) the Commissioner's order unsustainable as being in violation of principles of natural justice how should the appellate authority exercise its appellate powers? obviously it could not withhold its hands and refuse to interfere with Commissioner's order altogether for, that would amount to perpetuating the Commissioner's erroneous order, nor could it merely cancel or set aside the Commissioner's wrong order without doing anything about the Income Tax Officer's order, for that would result in perpetuating the Income Tax Officer's order which had been found to be manifestly erroneous as being prejudicial to the revenue. But such result would flow from the view taken by the High Court which has held that the Tribunal acted properly in vacating the Commissioner's order but did not act properly in directing him to dispose of the proceedings afresh after giving opportunity to the assesses. Such manifestly absurd result could never have been intended by the Legislature. Moreover, it was fairly conceded by the counsel for the assesses before us that in exercise of its appellate powers it was open to the Tribunal itself to call for a remand report from either the Commissioner or the Income Tax Officer and rectify the Income Tax Officer's erroneous order after giving opportunity to the assesses and in doing so no question of limitation would arise. It was also not disputed by him that it was equally open to the Tribunal to set aside the Commissioner's order and remand the case directly to the Income Tax Officer giving the requisite direction to rectify his erroneous order and thereupon the Income Tax Officer could carry out the Tribunal's direction. for, admittedly, the bar of limitation under 1) sub-s. (2) (b) was only on the Commissioner's paver to make an assessment afresh and not on the Income Tax Officer. If this be the correct position then it is gravely anomalous that the Tribunal should not be in a position to set aside the Commissioner's order and remand the case back to the Commissioner for making a fresh assessment because in the meantime two years' period of limitation has expired, for, it would mean that the Tribunal was prevented from achieving the desired effect directly through the Commissioner but it could do so indirectly through the Income Tax Officer. A literal construction placed on subs. (2) (b) would lead to such manifestly absurd and anomalous results, which, we do not think, were intended by the Legislature. These considerations compel us to construe the words of sub-s.. (2) (b) as being applicable to suo motu orders of the Commissioner in revision and not to 34 | P a g e

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orders made by him pursuant to a direction or order passed by the Appellate Tribunal under sub-s. (4) or by any other higher authority. Such construction will be in consonance with the principle that all parts of the section should be construed together and every clause thereof should be construed with reference to the context and other clauses thereof so that the construction put on that particular provision makes a consistent enactment of the whole statute. Having regard to the above discussion we are clearly of opinion that the view taken by the Bombay High Court in Solanki's case (supra) on the construction of sub-s. (2) (b) of s. 33B is correct and we approve of it. In Sabitri Devi Agrawalla's case (supra) the Assam High Court took a contrary view and held that under s. 33B(4) of the Act the Tribunal would not be justified in remanding the case to the Commissioner after the two years had expired from the date of the order sought to be revised. The decision seems to rest on three aspects: (a) it being fiscal statute the same must be strictly construed, (b) the bar of limitation contained in sub-s. (2)(b) was absolute and unqualified and covered all types of orders and (c) that unlike the second proviso to s. 34(3) there was no provision for removing or relaxing the bar of limitation on the power of the Commissioner under s. 338 (2) (b) and that since s. 33B as well as s. 34(3) with second proviso had been introduced in the Act by the same Amending Act of 1948 there was a deliberate omission to make a provision removing of relaxing the 'bar of limitation in s. 33B and for such an omission the remedy lay with the Legislature and not with the Court. The Assam High Court also alluded to the fact that under the 1961 Act the Legislature had made a provision removing or relaxing the bar of limitation in s. 263(3). ……………………………………………………………………….. In the result, we are of opinion that the answer given by the High Court to the second aspect of the second question referred to it was clearly wrong and, in our view, the Tribunal's order vacating the Commissioner's order and directing the Commissioner to make assessment afresh after giving due opportunity to the respondent-assessee was proper. The appeal is accordingly allowed but in the circumstances, there will be no order as to costs." 7. Similar proposition was laid down by the Hon'ble Supreme Court in the case of Commissioner of Income-tax Vs. Amitabh Bachchan [2016] 384 ITR 200 (SC) that the assessee must be given opportunity of being heard, as under:-

"10. Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre-condition for exercise of jurisdiction under Section 263 of the Act. Both 35 | P a g e

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are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice." 8. In the present case before us, admittedly, show cause notice under Section 263 of the Act for revising the reassessment order was dated 27th March, 2022, which was ultimately issued by the Department only on 28th March, 2022 and the assessee was required to appear before the PCIT on or before 29th March, 2022 and explain with documentary evidences as required in the show cause notice. The revision order under Section 263 of the Act was finally passed, in absence of assessee, on 31st March, 2022. It means that, to respond to a show cause notice for revision of proceedings under Section 263 of the Act, only one day's time was allowed to the assessee. I agree with the view expressed by the learned Judicial Member in paragraph Nos.6 and 7 of his order that no reasonable or sufficient opportunity of hearing was granted to the assessee and principles of natural justice were violated by the Revenue. However, admittedly, this is an

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ITA No.227/Agr/2024 irregularity, curable, if an opportunity of hearing to the assessee is granted by remitting the matter to the PCIT, because non-observance of principles of natural justice does not vitiate the jurisdiction of the Officer. Whenever an order is struck down being in violation of principles of natural justice, there is no final decision of the cause and fresh proceedings are left open. All that is done is that the order assailed by virtue of its inherent defect is vacated, but proceedings are not terminated. This view is supported by the decision of Hon'ble Supreme Court in the case of Superintendent, Central Excise Vs. Pratap Rai [1978] 114 ITR 231 (SC). 9. However, I do not agree with the findings recorded by the learned Judicial Member in paragraph No.8 wherein merits seem to have been adjudicated without going into the factual aspect. Needless to say that the authorities below will not be influenced by the findings recorded by learned Judicial Member as well as learned Accountant Member in regard to the merits of the case, while adjudicating the issue on merits or on the legal issues while deciding afresh the entire matter relating to revision proceedings under Section 263 of the Act. 10. In the given facts and circumstances of the case, I am of the view that the revision order passed by the PCIT is flawed in non- observance of certain procedure and in not giving effect to the maxim audi alteram partem. In such a situation, the revision order passed by 37 | P a g e

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the PCIT is set aside and the matter restored back to the PCIT to start the procedure once again with a view to follow the rules of procedure and principles of natural justice. 11. Now, in view of the above discussion and legal position, I answer the question referred to me as under:- Question Answer to the Question Whether, in the given facts and I agree with the view expressed by the circumstances of the case, the learned Judicial Member, and the revision order passed by the PCIT question is answered that the revision under Section 263 is liable to be order passed by the PCIT under Section quashed, or is to be set aside and 263 of the Act is liable to be set aside remanded back to the PCIT for and remanded back to the PCIT for passing fresh revision order. passing a fresh revision order.

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made herein above on merit and shall give his independent findings. The appeal is liable to be allowed for statistical purposes. 2. In the result, the assessee’s appeal is allowed for statistical purposes. The impugned order dated 31.03.2022 is set aside.

Order pronounced in the Open Court on- 22.06.2026 Sd/- Sd/- (BRAJESH KUMAR SINGH) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 22.06.2026 *Aamir Siddiqui, PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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