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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Hon’ble Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:- This appeal has been filed by the assessee relating to assessment year 2007-08. This appeal is against the order passed by Commissioner of Income Tax–XI, Kolkata under the provision of 263 of the Income tax Act, 1961 (hereinafter referred to as ‘the Act ‘) vide his order dated 28.03.2012. Assessment was framed by D.C.I.T., Circle-33, Kolkata u/s 115WE(3) vide his order dated 27.12.2010. The grounds raised by the assessee are as under :
“1. That the impugned order has been passed by the Ld. Commissioner of Income Tax without proper application of mind, as such it is not sustainable in law and facts of the case.
2. That the Ld. Commissioner of Income Tax has passed order u/s 263 of the I.T. Act, 1961 without issuing any proper and legal notice to the -M/s. Mitra Guha & Builders (India) Co. A.Y.2007-08 1
Appellant. For want of legal and proper notice the impugned order is liable to be quashed on this ground alone.
3. Without prejudice to foregoing contention that the Ld. Commissioner of Income Tax is not justified in holding that the order u/s 115WE(3) of the I.T. Act, 1961 passed on 21.12.2009 is erroneous and prejudicial to the interest of the revenue. The finding is misplaced, untenable and contrary to the facts of the case, as various legal and factual contentions raised on behalf of the Appellant have not been considered properly, which has resulted in erroneous order and untenable conclusion. Provisions of section 115WE (3) of the I.T. Act, 1961 have been misconstrued and misapplied in the matter.
4. That the impugned order is without jurisdiction, untenable and contrary to law.”
At the outset, the ld. AR has challenged the proceedings initiated u/s 263 of the Act on the ground that no proper and legal notice was issued by the Commissioner of Income tax. The ld. AR submitted that notice for initiation of proceedings u/s 263 of the Act was not issued by the proper authority. The notice was issued and signed by D.C.I.T., HQrs-11, Kolkata vide No.CIT- 11/Kol/263/AAFFM2988Q/11-12/1629 dated 11th July, 2011 which is placed at page 1 of the paper book. As per the law the notice should have been issued and signed by the ld. CIT. The ld. AR further submitted that the notice under section 263 of the Act was issued without mentioning the reasons for treating the order of the AO as erroneous and prejudicial to the interest of the Revenue.
On the other hand, the ld. DR submitted that the notice was issued by D.C.I.T., Hqrs-11, Kolkata in terms of directions issued to him. It means that there was a proper authorisation made by the Commissioner of Income Tax for issuing the notice u/s 263 of the Act. The ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of the parties and perused the materials available on record. In the case before us, the ld. AR has challenged the proceedings u/s 263 of the Act on two grounds. Firstly the notice u/s 263 ITA No.820/Kol/2012-M/s. Mitra Guha & Builders (India) Co. A.Y.2007-08 2 of the Act has not been signed by the proper authority. It was signed by D.C.I.T., Hqrs.11, Kolkata. Secondly, no reason for treating the order of the AO as erroneous in so far as prejudicial to the interest of the revenue has been mentioned. Now the issue before us arises for our adjudication so as to whether the notice issued u/s 263 of the Act is valid in the aforesaid facts and circumstances. At this juncture we find relevant to produce the provision of section 263 of the Act which reads as follows :-
“263 (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.” A bare reading of the said provision, reveals that it is “Commissioner”, who is to satisfy himself before initiating the proceedings u/s 263 of the Act. The Commissioner has been defined under section 2(16) of the Act which reads as under :-
“Definitions. 2.In this Act, unless the context otherwise requires,- [(16) “Commissioner” means a person appointed to be a Commissioner of Income-tax or a director of income tax are that a principal Commissioner or a principal director of income tax sub-section (1) of Section 117under sub-section (1) of Section 117;]” From the facts of the case in hand, we find that notice u/s 263 of the Act was not signed by the Commissioner of Income Tax as required under the provisions of law. In the similar facts and circumstances the Hon’ble ITAT, Kolkata Bench in the case of Bardhman Co-operative Milk Producers’ Union Limited vs CIT in for A.Y.2003-04 and 2004-05 have decided the issue in favour of the assessee. The relevant extract of the order is reproduced below :-
-M/s. Mitra Guha & Builders (India) Co. A.Y.2007-08 3
“9. From the above discussion regarding the provision of law and the case law in this regard, it is clear that for a valid assumption of the jurisdiction u/s 263 of the Act, the notice issued u/s 263 of the Act should be issued by the Ld. CIT. In this case, it is undisputed that notice was issued by ACIT, Hqrs, Burdwan who is not competent to assume jurisdiction u/s 263 of the Act. Hence, the notice was not under the seal and signature of Ld. CIT. Hence, as per the precedents referred to above, the assumption of jurisdiction u/s 263 of the Act in this case is not valid. Accordingly, the order u/s 263 of the Act passed in these cases are quashed.”
We further find that there was no reason mentioned in the notice issued u/s 263 of the Act for treating the order of AO as erroneous and prejudicial to the interest of the revenue. In this case, we find that it is a mandatory requirement for the Ld.CIT to incorporate the reasons for treating the order of AO as erroneous and prejudicial to the interest of the revenue. In holding so, we rely upon the decision of the Hon’ble Madhya Pradesh High Court in the case of CIT vs Sattandas Mohandas Sidhi reported in 230 ITR 591 (MP) wherein it was held as follows :-
Held, (i) that under section 263, notice has to be sent to the assessee and the notice should contain reasons as to how the order is prejudicial to the Revenue. According to section 282 of the Income-tax Act, a notice or requisition under the Act has to be served on the person either by post or as if it were a summons issued by the court under the Civil Procedure Code, 1908. In the present case, neither of the requirements was complied with by the Commissioner. Notice, by way of telegram could not be said to be a substitute for a notice by post. (ii) That so far as the service of the notice under section 282 of the Act is concerned, it is mandatory and it has to be in the manner provided under the Act and in no other way. Notice under section 263 of the Act requires that the reason for exercising the revisional jurisdiction has to be mentioned in the notice. The telegram which was sent to the assessee by the Commissioner did not contain any reason, except directing him to appear before that authority, and that was also misconceived. (iii) That, therefore, the order passed by the Commissioner of Income tax under section 263 was invalid for want of detailed show-cause notice under his seal and signature.
The facts of the present case being identical to the case referred above, we respectfully following the same hold that the assumption of jurisdiction u/s 263 of the Act in the present case is not valid. Accordingly order u/s 263 of the Act is quashed and appeal of the assessee is allowed. The other grounds of ITA No.820/Kol/2012-M/s. Mitra Guha & Builders (India) Co. A.Y.2007-08 4 assessee’s appeal on merits become academic and infructuous and we dismiss the same as having become infructuous.
In the result, the appeal of the assessee is allowed.