VIKAS VAISHNAV,SURAT vs. PRINCIPAL COMMISSIONER OF INCOME TAX-1, SURAT, SURAT
Facts
The assessee's appeal stems from an order passed under Section 263 of the Income-tax Act, 1961, by the Principal Commissioner of Income-tax (PCIT). This order was passed after the Assessing Officer (AO) made an addition to the returned income. The PCIT invoked Section 263, finding the AO's order erroneous and prejudicial to the revenue's interest, particularly concerning the non-deduction of TDS on rent expenses.
Held
The Tribunal noted that the PCIT passed the order under Section 263 without providing the assessee with adequate notice and opportunity for hearing, which violates principles of natural justice. Although the PCIT observed non-compliance with show-cause notices, the fact of non-service of these notices was not contested by the revenue.
Key Issues
Whether the PCIT's order under Section 263 was passed without adhering to principles of natural justice due to lack of proper notice to the assessee, and whether the assessment order was indeed erroneous and prejudicial to the revenue.
Sections Cited
263, 147, 144B, 1941, 40(a)(ia)
AI-generated summary — verify with the full judgment below
Before: SHRI DINESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 263 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 20.01.2025, by the learned Principal Commissioner of Income-tax, Surat [in short Ld. PCIT’] for the assessment year (AY) 2018-19, which in turn arises from the assessment order passed by Assessing Officer u/s 147 r.w.s. 144B of the Act on 15.02.2023. 2. Grounds of appeal raised by the assessee are as under: “1. The Ld. PCIT erred in passing order u/s 263 of the Act without serving notices on the appellant.
ITA No.309/SRT/2025/AY.2018-19 Vikas Vaishnav 2. The Ld. PCIT erred in passing order u/s 263 without mentioning DIN number on order itself which is in violation of CBDT Circular No.19 of 2019 dated 14.08.2019. 3. The Ld. PCIT erred in passing the order under section 263 of the Act, inspite of the fact that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. 4. The Ld. PCIT failed to consider that the rent to individual parry is below threshold limit prescribed under section 194I. Hence, neither provision of Section 194I nor the provision of section 40(a)(ia) will apply, as appellant is not liable for deduction of TDS. 5. The appellant craves leave to add, alter amend, modify or delete any of the aforesaid grounds of appeal.”
Brief facts of the case are that assessment order in the above case was passed u/s 147 r.w.s 144B of the Act on 15.02.2023 by making addition of Rs.58,96,182/- to the returned income of Rs.1,98,550/-. Subsequently, Ld.PCIT called for the records and found that the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in terms of provision of Section 263 of the Act. The impugned issue which was non deduction of TDS on rent expenses of Rs.3,36,000/- u/s 194I of the Act. The Ld. PCIT issued show cause notices on 22.11.2024, however, it is clear that assessee did not comply with the show cause notice issued by the Ld.PCIT. Therefore, Ld.PCIT has passed order u/s 263 of the Act on20.01.2025 setting aside the order of AO and directing him to pass fresh assessment order as per the discussion made in the order u/s 263 of the Act. 4. Aggrieved by the order of Ld. PCIT, the assessee has filed present appeal before the Tribunal. The Ld. AR of the assessee, at the outset, submitted that
ITA No.309/SRT/2025/AY.2018-19 Vikas Vaishnav the Ld.PCIT did not serve any notice of hearing before passing the order u/s 263 of the Act. Therefore, the order was passed in violation of principles of natural justice and, hence, he requested that another opportunity may be given to assessee to plead his case on merit. 5. On the other hand, Ld. CIT-DR supported the order of ld. PCIT and submitted that it is procedurally correct. 6. We have heard both parties and perused the materials available on record. The Ld. AR submitted that the show cause notice issued by Ld. PCIT was never served on the assessee. We find that the order u/s 263 has been passed with observation of Ld. PCIT that the assessee did not furnish any explanation or submission to the show cause notices issued on 22.11.2024 and 28.12.2024. The impugned order u/s 263 of the Act was passed on 20.01.2025. The factum of non service of the show cause notice u/s 263 of the Act has not been contested by Ld. CIT-DR. In any case, the order has been passed without considering reply made by the assessee on merit. Therefore, in the interest of justice and fair play, we deem it proper to set aside the order of Ld. PCIT and restore the matter back to the file of Ld. PCIT to decide afresh after providing adequate and reasonable opportunity of hearing to the assessee. The assessee is also directed to be careful and diligent and furnish all details and explanation as may be required by the Ld.PCIT by not seeking adjournment without valid reason. Grounds of appeal raised by assessee are allowed for statistical purposes.
ITA No.309/SRT/2025/AY.2018-19 Vikas Vaishnav 7. In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 03/12/2025.
Sd/- Sd/- (DINESH MOHAN SINHA) (BIJAYANANDA PRUSETH) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ ACCOUNTANT MEMBER सूरत /Surat �दनांक/ Date: 03/12/2025 Dkp Outsourcing Sr.P.S* आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant ��यथ�/ The Respondent आयकर आयु�/ CIT आयकर आयु� (अपील)/ The CIT(A) िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT गाड� फाईल/ Guard File By order/आदेश से, // True Copy // सहायक पंजीकार आयकर अपील�य अ�धकरण, सूरत
