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Facts
The assessee's appeal is against the PCIT's order under Section 263 of the Income Tax Act, 1961, which set aside the assessment order for AY 2017-18. The PCIT believed the Assessing Officer (AO) had not conducted proper inquiries.
Held
The Tribunal held that the PCIT failed to consider the assessee's submissions and the records available with the AO, which is a violation of natural justice and Section 263 provisions. The PCIT should have either accepted or rejected the submissions with a speaking order.
Key Issues
Whether the PCIT erred in setting aside the assessment order under Section 263 without properly considering the assessee's submissions and the AO's investigation, thereby violating principles of natural justice?
Sections Cited
263, 143(3), 147, 148
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
PER KUL BHARAT, VICE PRESIDENT.: This appeal, by the assessee, is directed against the order of the learned Principal Commissioner of Income-Tax (PCIT)- Bareilly, dated 14.03.2022, passed u/s 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to the assessment year 2017-18. 2. The assessee has raised the following grounds of appeal: -
1. That this order is arbitrary and is against the facts of the case and is also against the principal of natural justice and against the provision of section 263 itself.
1. 2. That the Ld. PCIT is not correct in concluding that the LD. ACIT did not made the proper enquiry. In fact the Ld. ACIT made full investigation in the case in details. All the jnformation, documents, explanations, confirmations Page 2 of 5 were obtained by the Ld. ACIT and scrutinized in details. All these facts are stated in the file and kept in record by the Ld. ACIT before concluding the order following all the instructions and protocols and procedures as prescribed by the CBDT and as he deemed fit in the case of the assessee. The Ld. PCIT disregarded and ignored all this facts and arbitrary set aside the order of the Ld. ACIT which is against the provisions of the act and is also against the principal of natural justice. In a recent decision by the Hon’ble Madras High Court, in the case of Virtusa Consulting Services (P) Ltd. Vs. Dy. CIT(2022) CTR 326 (Mad) 59 it was held that the where AO did conduct an enquiry, called for documents from the assessee, which were submitted by the assessee and after considering the documents and records and discussing the case with the assessee,the assessment was completed-Revision by CIT was not sustainable. The above decision is fully applies with the case of the assessee. So your highness is respectfully requested kindly to set aside the order of the Ld. PCIT and re-store the order of the Ld. ACIT. 3.During the course of proceedings u/s 263, the PCIT asked the assessee to furnish all the records, documents etc. in support of his income which were duly submitted by the assessee instead of that these documents were already submitted to the Ld. ACIT during the assessment proceedings. In his order, The Ld. PCIT has himself has stated that all the information’s called for from the assessee were duly furnished. Instead of furnishing all the information’s/documents furnished by the assessee, the Ld. PCIT did not consider the submissions furnished by the assessee and also he did not consider the fact and records kept by the Ld. ACIT and recorded by the Ld. ACIT in his file and arbitrary set aside the order of the ACIT which is against the Provisions of section 263 which clearly cast an obligation on the CIT to afford a reasonable Opportunity to the assessee of being heard. As the Ld. PCIT had not considered the submissions made by the assessee at all, the very necessary and mandatory requirement of the section was not Complied with by the LD. PCIT.So this order is not maintainable and is against the principal of natural justice. Merely issue of notice u/s 263 and not considering the documents submitted by the assessee and the records available with file of the Ld. AO is not proper comply with the requirement of section 263.The Ld. PCIT is duty bound u/s 263 to consider all the submissions made by the assessee and either to accept or reject the submissions made the by the assessee by making a speaking order which was not done by the Ld. PCIT. Hence this order is not sustainable under the law and is liable to be quashed ab initio. In a recent case of PCIT vs. Suprbha Industries Ltd. (2022) CTR 325(Cal)757 that where all the records are available with the file of the AO and the Ld. AO rightly applied the legal position, the tribunal was therefore justified in setting aside the order of CIT passed u/s 263. The above decision is fully applicable to the case of the assesee.
4. As the Ld. PCIT did not discharge his obligation cast upon him by section 263 by not considering the submission of the assessee and not considering the records available with the file of the AO, the order of the Ld. PCIT is illegal, invalid and is against the principal of natural justice. In the light of the facts of the case and above discussion, your highness is requested kindly to either restore the order of the ACIT or set aside the and remand back the order to the PCIT to frame his order afresh in the lights of the facts submitted by the assessee and facts recorded by the Ld. ACIT.”
Page 3 of 5 3. The present appeal is barred by 109 days. The assessee has filed application seeking condonation of delay. The reason for delay in the application was stated to be illness of the mother of the assessee. The Ld. DR opposed contents of the application and submitted that the assessee has not given specific details about the illness of the mother of the assessee. However, looking to the submissions made by the assessee and considering the medical exigency, the delay in filing the appeal is condoned, and the appeal is admitted for hearing.
It is seen from the record that none appeared on behalf of the assessee. However, the assessee has filed written submissions dated 06.10.2022. Further, similar submissions were also filed on 06.03.2023, 26.06.2024, and 31.03.2025. In sum and substance, the contention of the assessee is that the Ld. PCIT did not duly consider the submissions made by the assessee before setting aside the assessment order. Such act has caused grave injustice to the assessee.
On the other hand, the Ld. Departmental Representative opposed the submissions and supported the impugned order of the Ld. PCIT. The basis for issuing notice u/s 263 of the Act stated to be large increase in unsecured loan during the year and large cash deposit during the demonetization period. The Ld. PCIT, after considering the submissions of the assessee, revised the assessment order on the ground that the Assessing Officer had not made any specific inquiries or sought any specific information on the issues under consideration. Therefore, he restored the matter to the file of the Assessing Officer to frame de novo assessment in accordance with law. Vide written “In the lights of the above discussions, following the decisions of the Hon’ble High Courts looking the facts of the case, your honour is requested to please restore the order of the Ld. AO or set aside the order the Ld. PCIT with instructions that a fresh order be framed in light of the submissions made by the assessee before the Ld. AO or before the Ld. PCIT himself to make justice to the assessee. We have already furnished all the facts of the case and orders of assessing authorities and the submissions made by the assessee.”
It is mandated by law that while exercising jurisdiction u/s 263 of the Act, Ld. PCIT is required to give opportunity of being heard before passing any order. The opportunity being heard is provided to the tax payer for making effective representation. The grievance of the appellant in this case is that the Ld. PCIT failed to consider the submission and evidence placed before him. It was stated before the Ld. PCIT that the sales normally increase during the festival season and this is regular feature of the business. In the relevant year, the festival season began a little early, therefore, there was increase in the sales. In our considered view, the Ld. PCIT under the facts and circumstances of the present case ought to have verified the correctness of the submission made by the assessee. Non-consideration of submissions tantamount to violation of principles natural justice. Looking to the facts, we deem it expedient to restore the matter to file of Ld. PCIT for his re-consideration. We, therefore, set aside the impugned order and hereby direct the Ld. PCIT to decide the matter afresh. Needless to say, the Ld. PCIT would consider the submissions of the assessee and if deem it necessary may, make or cause such inquiry for verification of the evidences referred to Page 5 of 5 by the assessee in his submissions. The grounds raised
in this appeal are allowed for statistical purposes.
7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 16/10/2025.