BSES RAJDHANI POWER LTD.,,NEW DELHI vs. PR.CIT, NEW DELHI

Per ANADI N MISHRA, A.M.

(A). This appeal filed by the assessee is directed against the order of

Ld.CIT (Appeals) New Delhi dt. 31.3.2016 for the Assessment Year 2010-11 on

the following grounds :-

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

(B) Assessment order was passed by the Assessing Officer u/s 143(3) of Income

Tax Act on 29.10.2013. The assessee filed appeal before Ld. CIT(A) which was

disposed off vide order dated 3.5.2014 of the Ld. CIT(A). Ld. Pr. CIT issued a show

cause notice dated 16.3.2016 relevant portion of the show cause notice is

reproduced as under :-

“On an examination and review of the assessment order along with the data submitted by the company in the course of the assessment, proceedings there are certain omissions in the body of the assessment order, which has a cascading effect on the total assessable income for the year under consideration. The company had claimed depreciation on fixed assets amounting to Rs. 299 crores approximately. The depreciation on these assets was allowed as claimed except for a sum of Rs. 13,02,778/- was held as inadmissible under the head addition on account of recapitalise assets. In the questionnaire issued by the A.O requisite details on the issues were called for, the company vide its letter dated 28.10.2013 the company has admitted as under :- “The company has admitted that there is a variation in cost. The cost of repairs is being charged to revenue even though it should be capitalized.” The examination of the record further reveal that the variation is not limited to Transformers only but it also include Panels’, Cables, Capacitators, Circuit Breaker and Feeder Pillars etc. The company had submitted that :- “It will take a substantial time to prepare the exhaustive details as required in the questionnaire. All these aspects of the matter pertaining to cost of the fixed assets actually installed by the company , which were wholly, and exclusively for the

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

purpose of its day to day running of the business had remained unverified. In view of the above facts, I have reason to believe that the assessment order passed u/s 143(3) dated 29.10.2013 for the year under consideration needs a review u/s 263 of the I.T. Act, 1961. In accordance with the section 263 of the Income Tax Act , 1961. I hereby require you to appear before the undersigned in Room No. 394, 3rd Floor, C.R. Building at 11 A.M. on 22.3.2016 and to submit your reply on the issue on or before the said date.”

(B.1) The assessee filed written submissions before the Ld. Pr. CIT vide reply dated

29.3.2016 and vide supplementary submissions dated 30.3.2016. Ld. Pr. CIT passed

order dated 31.3.2016 u/s 263 of I.T. Act whereby he set aside the order of the AO

with a direction to the AO to pass an order afresh after making due inquiries and

verifications. The operative portion of the order dated 31.3.2016 u/s 263 passed by

the Ld. CIT is reproduced as under for ready reference :-

“I have carefully perused the assessment records and considered the assessee's submissions. The assessee has emphasized upon -a legal point that the CIT(A) had already considered the issue of depreciation of Rs. 66,27,782/- disallowed by the AO and, therefore, the assessment order merges with the order of the CIT(A) and proceedings u/s 263- could not be initiated. Facts are actually not so. The AO considered depreciation in respect of total assets of Rs. 6,44,81,091/- only while the same should have been considered with reference to total fixed assets amounting to Rs. 2,98,93,99,552/- which is clear from a perusal of the Tax Audit Report. The present proceedings, therefore, are validly initiated because these relate to an omission on the part of the AO which was not there before the CIT(A). The reply of the assessee vide letter dated 28.10.2013 before the AO during the assessment proceedings was that there was a variation is cost. The statement of the assessee called for extensive examination which was not done by the AO. Besides Transformers, there was variation in cost in respect of Panels, Cables, Capacitor, Circuit Breakers, Feeder Pillar etc. which has not at all been looked into by the AO. It 4

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

has been assessee's own admission before the AO that it was going to take substantial time for them to prepare the exhaustive details called for by the AO. Obviously, the details called for were neither furnished nor examined. It is also seen that the applicability of TDS provisions u/s 194 r.w. 40(a)(ia) in respect of Lease rentals was not examined by the AO. The AO further ought to have verified whether security expenses of Rs. 4.88 Crores, satellite call centre expenses of Rs 1.30 crores & advertising expenses of Rs. 0.70 crores were subject to TDS or not. The Auditor has given a break-ip of expenses debited to P & L account w.r.t transactions with group concerns. The AO has not considered and examined these transactions with group concerns for determining whether the dealings with group companies were at Arms Length Price. In view of the points as discussed above, the order of the AO is clearly erroneous in so far as it is prejudicial to the interest of revenue in terms of Explanation 2 below section 263(1). The order of the AO, is therefore, set aside with a direction to pass an order afresh after making due inquiries and verifications. He shall give an opportunity of being heard to the assessee while doing so.”

(C) At the time of hearing before us the Ld. Counsel for assessee explained to us

that Ld. Pr. CIT has exercised powers u/s 263 of I.T. Act on the following three

issues

I. Depreciation on fixed assets as far as variation in cost of fixed assets is concerned. II. Applicability of TDS provisions u/s 194 r.w.s 40 (a) (ia) of I.T. Act in respect of lease rentals, security expenses, satellite call center expenses and advertising expenses. III. Examination of arms length nature of the transactions undertaken by the assessee with group concerns.

(C.1) As far as the first issue is concerned, the Ld. Counsel for assessee submitted

that this issue had already been considered by the AO before he passed the

assessment order and drew our attention to the fact that an amount of Rs.

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

66,27,782/- was even disallowed by the AO out of depreciation claimed by the

assessee on the ground that the assessee failed to furnish evidence regarding cost

of the capitalised assets. He also informed that this disallowance was contested by

the assessee in appeal before Ld. CIT(A) and the Ld. CIT(A) had decided the issue

vide order dated 31.3.2016. . Ld. Counsel further drew our attention to the fact that

before the assessment order was passed the AO already had the benefit of special

audit conducted u/s 142 (2A) of I.T. Act. While admitting that all the details called

for by the Assessing Officer as required in the questionnaire during the assessment

proceedings had not been submitted because, in the words of the assessee, “it will

take a substantial time to prepare the exhaustive details as required in the

questionnaire.”; the ld counsel for the assessee, however, emphasized with the help

of paper book filed in appellate proceedings in ITAT, that substantial volume of

details had in any case been submitted to the Assessing Officer. Ld. Counsel

contended that the impugned order dated 31.3.2016 u/s 263 of I.T. act is

unsustainable because of the following reasons :-

i) Proceedings u/s 263 of I.T. Act were initiated and order passed by Ld. Pr. CIT on a mere change of opinion as regards the allowability of depreciation as the AO had passed assessment order after due and adequate inquiries / investigations and application of mind. ii) The assessment order of the AO had merged with the order of the Ld. CIT(A) and consequently revisionary jurisdiction u/s 263 of I.T. Act stood ousted. iii) Reasonable opportunity of being heard was not provided to the assessee during proceedings u/s 263 of I.T. Act iv) The impugned order dated 31.3.2016 u/s 263 of I.T. Act does not clearly bring out how the order of the AO was erroneous and prejudicial to interests of revenue. 6

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

(C.2) As far as the second and third issues mentioned in aforesaid paragraph (C) is

concerned the Ld. Counsel for the assessee submitted that the impugned order

dated 31.3.2016 u/s 263 of I.T. Act is unsustainable especially because these issues

were not included in show cause notice dated 16.3.2016 issued to the assessee; and

secondly because reasonable opportunity of being heard was not provided by the ld

Pr. CIT to the assessee on these issues in the course of proceedings u/s 263 of I.T.

Act.

(C.3) Ld. Counsel for the assessee relied on the following case laws :

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

(D) Ld. CIT (DR) appearing for Revenue strongly supported the impugned order

u/s 263 of the Act and relied on it heavily. He also drew our attention to order of

apex court in the case of CIT vs. Amitabh Bachchan 384 ITR 200 (SC) to support the

impugned order u/s 263 of I.T. Act.

(E) We have heard both sides and we have also perused the materials on record

carefully. As far as first issue, numbered (I) in foregoing paragraph C of this order is

concerned, we find that it is not in dispute that the details as required by the

Assessing Officer in the questionnaire during the assessment proceedings were not

submitted by the assessee either during the assessment proceedings or during

proceedings u/s 263 of IT Act before ld Pr. CIT; although as claimed by the ld

Counsel for the assessee, substantial volume of details had been submitted to the

Assessing Officer. It is also not the case of the assessee that inquiries / verification

proposed to be done by the Assessing Officer should not have been made. The case

of the assessee before the Assessing Officer , and before Ld. Pr. CIT was that it will

take a substantial time to prepare the exhaustive details as required in the 8

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

questionnaire. The Assessing officer completed assessment without obtaining

details asked for by him through the questionnaire. Therefore, it can be said that the

Assessing Officer concluded the assessment and allowed depreciation without

making inquiries / verification which should have been made and which he himself

had initiated through questionnaire issued by him; and allowed relief (depreciation)

without completing inquiries / verification into the claim of depreciation initiated by

himself. In that view of the matter, explanations 2(a) and 2(b) to section 263 (1) of

the IT Act are applicable and the reliance by ld Pr. CIT , in his impugned order u/s

263 of I.T. Act , on explanation 2 below section 263(1) of IT Act is, therefore,

acceptable. Relevant part of explanation 2 to section 263(1) of IT Act is reproduced

below for ready reference:-

“Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if , in the opinion of the Principal Commissioner or Commissioner- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; “

(E.1) Also, as the Ld. Pr.CIT specifically referred to explanation 2 below s.263 (1) of

I.T.Act in his impugned order dated 31.3.2016 u/s 263 of I.T. Act ; it cannot be

said, in the facts and circumstances of this case, that the impugned order does not

clearly bring out how the order of the AO was erroneous and prejudicial to interests

of revenue.

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

(E.2) Also the ld Pr. CIT, in his order dated 31.03.2016 u/s 263 of IT Act has

explained why doctrine of merger will not apply, and his jurisdiction u/s 263 of IT

Act does not get ousted despite the order of ld CIT(A), relevant portion of his order

is reproduced as under:-

“I have carefully perused the assessment records and considered the assessee’s submission. The assessee has emphasized upon a legal point that the CIT(A) had already considered the issue of depreciation of Rs. 66,27,782/- disallowed by the AO and, therefore, the assessment order merges with the order of the CIT(A) and proceedings u/s 263 could not be initiated. Facts are actually not so. The AO considered depreciation in respect of total assets of Rs. 6,44,81,091/- only while the same should have been considered with reference to total fixed assets amounting to Rs. 2,98,93,99,552/- which is clear from a perusal of the Tax Audit Report. The present proceedings, therefore, are validly initiated because these relate to an omission on the part of the AO which was not there before the CIT(A).”

(E.2.1) Further, legal position regarding the doctrine of merger and the related

legal issue regarding jurisdiction u/s 263 of IT Act is stated in explanation 1(c) of

Section 263(1) of IT Act, wherein, it is explicitly stated that powers of the Pr.

Commissioner/ Commissioner shall extend and shall be deemed always to have

extended to such matters as had not been considered and decided in appeal.

Explanation 1(c) of Section 263(1) of IT Act is reproduced as under for ready

reference:-

“(Explanation.1.) For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) ......................... (b) ........................

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal (filed on or before or after the 1st day of June, 1988), the powers of the (Principal Commissioner or) Commissioner under this sub-section shall be deemed always to have extended) to such matters as had not been considered and decided in such appeal.”

(E.2.2) As the Assessing Officer considered disallowance of depreciation in

respect of total assets of Rs. 6,44,81,091/- only and not in respect of total fixed

assets amounting to Rs. 2,98,93,99,552/- ; the subject matter of appeal before the

learned CIT(A) was limited to depreciation in respect of total assets of Rs.

6,44,81,091/- only and not in respect of claim of depreciation in respect of total

fixed assets amounting to Rs. 2,98,93,99,552/- . Thus, in respect of those assets

which were not part of the assets amounting to aforesaid Rs. 6,44,81,091/-,

allowability of depreciation had not been the subject matter of appeal before the

learned CIT(A), and had not been considered or decided by him. A perusal of

grounds of appeal filed by the assessee in appeal before Ld.CIT(A) and a further

perusal of appellate order of Ld. CIT(A) also shows that neither was allowability of

depreciation in respect of those assets which were not part of the assets amounting

to aforesaid Rs. 6,44,81,091/- a subject matter of appeal before the Ld. CIT(A), nor

had the matter been considered or decided by him. Thus, the jurisdiction of Ld.

Pr.CIT u/s 263 of I.T.Act, in the specific facts and circumstances of this case, was

not ousted in respect of those assets which were not part of the assets amounting

to aforesaid Rs. 6,44,81,091/- . In view of the foregoing discussion, including

foregoing paragraphs (E .2) and (E.2.1) of this order, we are of the view that the

exercise of jurisdiction by ld Pr. CIT u/s 263 of IT Act was correct and valid in law in 11

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

respect of those assets which were not part of the assets amounting to aforesaid

Rs. 6,44,81,091/- .

(E.3) We find that ld Pr. CIT has not directed the Assessing Officer, in his

impugned order u/s 263 of IT Act, to make any addition, or to disallow the claim

of depreciation partly or wholly. The ld Pr. CIT has merely set aside the assessment

order with a direction to the Assessing Officer to pass an order afresh after making

due inquiries and verifications. A direction of ld Pr. CIT to pass a fresh assessment

order after due inquiries and verifications does not amount to a direction to disallow

depreciation partly or wholly or to make any addition and therefore, it cannot be

said that order passed by the ld Pr. CIT amounted to a change of opinion as regards

allowability of depreciation.

(E.4) As far as reasonable opportunity of being heard during proceedings u/s 263

of IT Act is concerned, we find that notice u/s 263 of IT Act was issued on

16.03.2016. The assessee submitted written submissions vide letter dated

29.03.2016 (pages 109 to 121) of Paper Book filed during appellate proceedings

before ITAT and supplementary submission dated 30.03.2016 were also filed by the

assessee before ld Pr CIT (pages 122 to 349) of paper book filed during appellate

proceedings before ITAT. Thus, we find that the assessee made detailed

submissions before the ld Pr. CIT for which the assessee got reasonable opportunity.

The order u/s 263 of IT Act was eventually passed by ld Pr. CIT on 31.03.2016, the

last day of limitation period, and it was not possible for him to provide any further

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

opportunity. In any case, as we have mentioned already, the assessee did get

reasonable opportunity.

(E.5) It is of no relevance whether or not the Assessing Officer had the benefit of

audit report u/s 142(2A) of I.T.Act. There are numerous provisions under Income

Tax Act,1961 and Income Tax Rules, 1962 under which audit report is made

available to the Assessing Officer. That, however, does not preclude inquiries and

verifications by the Assessing Officer himself. It is explicitly provided in Explanation

2(a) to s.263(1) of I.T.Act that order passed without making inquiries or verification

which should have been made shall be (emphasis added) deemed to be erroneous in

so far as it is prejudicial to the interests of the revenue. There is nothing in the

scheme of s.263 of I.T.Act to lead to an inference that jurisdiction of Pr. CIT u/s 263

of I.T.Act to revise order of Assessing Officer is barred if the Assessing Officer had

the benefit of audit report u/s 142(2A) of I.T.Act. What is of relevance is whether

the assessment order was passed without making inquiries or verification which

should have been made. In the instant case, as we have noted earlier, it is not in

dispute that the details as required by the Assessing Officer in the questionnaire

during the assessment proceedings were not submitted by the assessee either

during the assessment proceedings or during proceedings u/s 263 of IT Act before ld

Pr. CIT; although as claimed by the ld Counsel for the assessee, substantial volume

of details had been submitted to the Assessing Officer. It is also not the case of the

assessee that inquiries / verification proposed to be done by the Assessing Officer

should not have been made. The case of the assessee before the Assessing Officer ,

and before Ld. Pr. CIT was that it will take a substantial time to prepare the 13

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

exhaustive details as required in the questionnaire. The Assessing officer completed

assessment without obtaining details asked for by him through the questionnaire.

Therefore, it can be said that the Assessing Officer concluded the assessment and

allowed depreciation without making inquiries / verification which should have been

made and which he himself had initiated through questionnaire issued by him; and

allowed relief (depreciation) without completing inquiries / verification into the claim

of depreciation initiated by himself. Accordingly , in the facts and circumstances of

this case, we are of the view that even though the Assessing Officer had the benefit

of audit report u/s 142(2A) of I.T.Act, he passed assessment order without making

inquiries / verification which should have been made and which he himself had

initiated.

(E.6) We have considered the various case laws relied upon by the ld counsel for the

assessee. However, we are of the view; considering specific facts and circumstances

of this case noted by us earlier at relevant places in this order; and also considering

the legal position as reproduced earlier at relevant places in this order ; that these

case laws do not advance the cause of the assessee. Moreover, stronger judicial

precedents by Hon’ble Apex Court in the cases of CIT Vs. Amitabh Bhachan 384 ITR

200 (SC) and Malabar Industrial Co. Ltd. Vs. CIT 343 ITR 83 (SC), are against the

assessee and in favour of revenue. In the case of CIT Vs. Amitabh Bhachan (supra)

the Hon’ble Apex Court upheld the order passed by the CIT u/s 263 of IT Act on the

ground that there was necessity of further inquiry in the interest of revenue.

Similarly, in the case of Malabar Industrial Co. Ltd. Vs. CIT (supra), Hon’ble Supreme

Court upheld the order passed u/s 263 of IT Act on the ground that the claim of the 14

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

assessee was accepted by the Assessing Officer in absence of any supporting

material and without making any inquiry.

(E.7) In view of the foregoing paragraphs No. E to E.6, as far as first issue,

numbered as (I) in foregoing paragraph C is concerned; we are of the view that

the impugned order dated 31.03.2016 u/s 263 of IT Act is to be sustained to the

extent of directions issued by the Ld. Pr.CIT pertaining to claim of depreciation in

respect of those assets which were not part of the assets amounting to aforesaid in

respect of those assets which were not part of the assets amounting to aforesaid

Rs. 6,44,81,091/- but were part of assets amounting to aforesaid

Rs. 2,98,93,99,552/- . However, we find that in his impugned order u/s 263 of

I.T.Act , the learned Pr. CIT has not specifically identified those assets ( which were

not part of the assets amounting to aforesaid Rs. 6,44,81,091/- but were part of

assets amounting to aforesaid Rs. 2,98,93,99,552/- ) in respect of which claim of

depreciation was neither a subject matter of appeal before the Ld. CIT(A), nor had

the matter been considered or decided by Ld. CIT(A). Therefore, impugned order of

Ld. Pr.CIT u/s 263 of I.T.Act is set aside with a direction to pass a fresh order as per

law; after identifying those assets ( which were not part of the assets amounting to

aforesaid Rs. 6,44,81,091/- but were part of assets amounting to aforesaid Rs.

2,98,93,99,552/-) in respect of which claim of depreciation was neither a subject

matter of appeal before the Ld. CIT(A), nor had the matter been considered or

decided by Ld. CIT(A); and restricting his order u/s 263 of I.T.Act to claim of

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

depreciation in respect of assets so identified. Before passing the fresh order u/s 263

of I.T.Act, ld. Pr.CIT is free to ascertain facts from Ld. CIT(Appeals) and from the

Assessing Officer. Also, Ld. Pr. CIT is directed to provide reasonable opportunity to

the assessee, before he passes fresh order u/s263 of I.T.Act, to provide any further

materials. Ld. Pr.CIT is directed that before he passes the fresh order, he is to

consider all materials that the assessee may furnish and also the materials that the

assessee has already furnished during assessment proceedings and during revision

proceedings u/s 263 of I.T.Act .

(F) As far as the second and third issues numbered as II and III in foregoing

paragraph C are concerned; it is not in dispute that these issues were not mentioned

in show-cause notice dated 16.03.2016 issued by the ld Pr. CIT to the assessee.

However, on perusal of section 263 of IT Act it is seen that there is no requirement

to issue any specific show-cause notice to the assessee. Rather, what is required is

an opportunity of hearing to the assessee. This issue was considered by the Hon’ble

Supreme Court in the case of CIT Vs. Amitabh Bhachan (supra) and it was held that

there was nothing in section 263 of IT Act to raise the said notice to the status of a

mandatory show-cause notice affecting the initiation of the exercise in the absence

thereof or to require the CIT to confine himself to the term of the notice and

foreclosing consideration of any other issue or question of fact. For ready reference

the following portion of the order of Hon’ble Apex Court in the case of CIT Vs.

Amithabh Bhachan is reproduced:-

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

“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 precondition for exercise of jurisdiction under Section 263 of the Act. Both 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. Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal vs. Commissioner of Income Tax, West Bengal and others and in The C.I.T., West Bengal, II, Calcutta vs. M/s Electro House. Paragraph 4 of the decision in The C.I.T., West Bengal, II, Calcutta vs. M/s Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder:

“This section unlike Section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice. It is unfortunate that the High Court failed to notice the difference in language between Sections 33-B and 34. For the assumption of jurisdiction to proceed under Section 34, the notice as prescribed in that section is a condition precedent. But no such notice is contemplated by Section 33-B. The jurisdiction of the Commissioner to proceed under Section 33-B is not dependent on the fulfilment of any condition precedent. All that he is required to do before reaching his decision and not before commencing the enquiry, he must give the assessee an opportunity of being heard and make or cause to make such enquiry as he deems necessary. Those requirements have nothing to do with the jurisdiction of the Commissioner. They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner. At present we are not called upon to consider whether the order made by the Commissioner is vitiated because of the contravention of any of the principles of 17

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

natural justice. The scope of these appeals is very narrow. All that we have to see is whether before assuming jurisdiction the Commissioner was required to issue a notice and if he was so required what that notice should have contained? Our answer to that question has already been made clear. In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under Section 33-B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. CIT, West Bengal ruled that Section 33-B does not in express terms require a notice to be served on the assessee as in the case of Section 34. Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33-B.” (Page 827-828). [Note: Section 33-B and Section 34 of the Income Tax Act, 1922 corresponds to Section 263 and Section 147 of the Income Tax Act, 1961] 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263. Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision.”

Therefore, we reject the contention of the ld counsel for the assessee that the order

u/s 263 of IT Act was unsustainable on the points numbered as II and III in

foregoing paragraphs C on the ground that these issues were not mentioned were

not mentioned in the show-cause notice dated 16.03.2016. However, what also

needs to be seen is whether ld Pr. CIT provided an opportunity to the assessee on 18

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016

these issues before passing order u/s 263 of IT Act. The ld CIT DR appearing for

Revenue failed to show from records that the ld Pr CIT had provided an opportunity

to the assessee on these issues. The perusal of order dated 31.03.2016 u/d 263 of

IT Act does not mention when and how the assessee was confronted by him on

these issues. Further, in impugned order u/s 263 of I.T.Act, there is no discussion of

whether the assessee was provided an opportunity by Ld. Pr.CIT on these issues

before the Ld. Pr.CIT passed impugned order u/s 263 of I.T.Act. Therefore, we infer

that the ld Pr. CIT did not provide an opportunity to the assessee on these issues

before passing order u/s 263 of IT Act. Therefore, in the interest of justice we set

aside the impugned order dated 31.03.2016 of ld Pr. CIT passed u/s 263 of IT Act

on these issues; with the direction to the ld Pr. CIT to pass fresh order as per law on

these issues after providing reasonable opportunity to the assessee.

G. In the result, impugned order dated 31.03.2016 of ld. Pr. CIT u/s 263 of

I.T.Act is set aside and restored back to the file of Ld. Pr. CIT with direction to pass

a fresh order, after providing reasonable opportunity to the assessee, in accordance

with directions issued earlier in this order at relevant places. This appeal is treated

as partly allowed for statistical purposes.

Order pronounced in the open court on 16/12/2016.

Sd/- sd/- (C.M. GARG) (ANADI N MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 16/12/2016

FIT For PUBLICATION Sd/- Sd/- (AM) (JM) ITA No. 2193/Del/2016