AYYAPPA ROLLER FLOUR MILLS LTD. vs. INCOME TAX OFFICER

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WP(C)/5784/2021HC KeralaKLHC01015204202105 March 2021Author: HONOURABLE MR. JUSTICE A.M.BADAR6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the impugned order at Ext.P4 was merely a show-cause notice. While the petitioner argued that the DVO's report dated May 19, 2020, was not before the AO when the assessment order was passed on May 6, 2020, the Court noted that the PCIT could use such a report for exercising suo motu revisional jurisdiction. The Court found that the matter was at the show-cause notice stage, where the petitioner's objections were invited, and an opportunity of hearing was to be granted. The Court stated that it could not be said that the revisional authority was biased or bent on deciding adversely, as official acts are presumed to be done regularly. Therefore, the issuance of the show-cause notice did not reflect a biased attitude. The Court found no proper reason to interfere with the show-cause notice issued by the revisional authority, which possessed the power to revise the assessment order suo motu. The petition was dismissed.

What were the facts?

The petitioner, Ayyappa Roller Flour Mills Ltd., sold properties in Assessment Year 2012-2013. Due to a sale agreement indicating possession handover in the previous year, the assessment was preponed to AY 2011-2012. The Assessing Officer (AO) passed an assessment order, which was modified in appeal before the Commissioner of Income Tax. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT), which directed the AO to obtain a valuation report from the Departmental Valuation Officer (DVO) and decide afresh. The AO passed a revised assessment order (Ext.P2) on May 6, 2020, considering the DVO's report. Subsequently, the Principal Commissioner of Income Tax (PCIT) initiated suo motu revision proceedings under Section 263 of the Income Tax Act, 1961, issuing a show-cause notice (Ext.P4) alleging the AO's order was erroneous and prejudicial to the Revenue.

What were the issues?

1. Whether the show-cause notice issued by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961, for initiating suo motu revision is valid, given that the petitioner contends the AO's order was passed after due compliance with the ITAT's directions and considering the DVO's report. Assessee's Contention: The petitioner argued that the PCIT's notice was not in consonance with Section 263 powers. They contended that the AO's order was based on the ITAT's appellate order and the DVO's valuation report, and no enquiry or verification was omitted. Therefore, the PCIT was not justified in initiating revision proceedings. Revenue's Contention: The Revenue argued that the matter was at the show-cause notice stage, and no final order had been passed. The PCIT can use reports, even if not before the AO, for revisional jurisdiction.

Which sections of the Income-tax Act were involved?

Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, and the valuation report was called

Heard together (2 matters)

WP(C).No.5784 OF 2021
ITA NO.458/COCH/2018

Read from the judgment's own cause title. This page is filed under one of them.

NO.AACCA684OM/CORP WARD I(1) EKM/2019-20 DATED 06.05.2020 PASSED BY THE 1ST RESPONDENT. EXHIBIT P3OF THE RELEVANT EXTRACT OF ASSESSMENT ORDER DATED 27.03.2014. EXHIBIT P4OF THE NOTICE F NO.PCIT01/CHN/R/263/17/2020-21 DATED 08.02.2021 ISSUED BY THE 2ND RESPONDENT.

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