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Facts
The assessee's case was selected for scrutiny, and the assessment was completed under Section 143(3). The PCIT-1 initiated revisional proceedings under Section 263, noting discrepancies in ledger accounts, unverified bank deposits during demonetization, and unverified credit slips. The PCIT-1 passed an ex-parte order, holding the assessment erroneous and prejudicial to the revenue, and directed a fresh assessment.
Held
The tribunal held that the PCIT-1 violated principles of natural justice by not providing adequate and reasonable opportunity of hearing to the assessee, as the notice under Section 263 was issued on March 27, 2022, requiring a response by March 29, 2022, with the limitation expiring on March 31, 2022. The tribunal remitted the matter back to the PCIT-1 to decide afresh after affording a proper opportunity of hearing to the assessee.
Key Issues
The key legal issue was whether the PCIT-1 erred in passing a revisional order under Section 263 without affording reasonable opportunity of hearing to the assessee, thereby violating principles of natural justice.
Sections Cited
Section 263, Section 143(3)
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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
ORDER
PER SUNIL KUMAR SINGH, JUDICIAL MEMBER
This appeal has been preferred against the impugned order dated 31.03.2022 passed by PCIT-1, Agra under the revisional jurisdiction vested in him u/s. 263 of the Income tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment year [A.Y.] 2017-18, wherein learned PCIT has cancelled the assessment order dated 10.12.2019 passed u/s 143(3) of the Act and directed the assessing officer to pass a fresh order denovo after affording reasonable opportunity of being heard to assessee.
The brief facts under appeal state that the assessee is an individual and engaged in the business of trading of shoes under the name and style of M/s Moral Footwear, Hing ki Mandi, Agra. Assessee e-filed return of income on 31.10.2017, declaring of total income of Rs. 8,37,520/-. Subsequently the case was selected for scrutiny under CASS. The assessment was completed u/s 143(3) of the Act, on 10.12.2019 assessing total income of Rs. 9,00,084/-. Ld. PCIT noticed certain discrepancies in the entries in the ledger account of M/s. Shoe Centre, Shilong and audited balance sheet, which were not verified by the AO. This a part certain deposits in the bank during demonetization period i.e. 09.11.2016 were also found Rajkumar Jetwani v PCIT-1, Agra unverified/unexplained. Ld. PCIT also found that the credit slips were also not verified by the AO. Ld. PCIT, therefore, issued notice to the assessee but for no avail. Ld. PCIT proceeded to pass ex-parte revisional order holding that the order passed by the assessing officer is erroneous in so far as it is prejudicial to the interests of the revenue.
Appellant assessee is in appeal before this tribunal on the ground that learned PCIT has erred in passing impugned order without affording reasonable opportunity of hearing to the assessee and without examining the record and making any enquiry.
We have perused the records. Heard learned representative for the appellant assessee and Ld. CIT (DR) for the respondent revenue.
Ld. AR has submitted that the notice u/s 263 dated 27.03.2022 was not served upon the assessee and the impugned order has been passed on 31.03.2022 in violation of the principles of natural justice. Prayed to allow the appeal.
Ld. CIT (DR) has supported the impugned order.
The sum and substance of the dispute is as to whether Ld. PCIT has erred in passing the revisionary order dated 31.03.2022 in violation of the principles of natural justice without affording adequate and reasonable opportunity to the assessee, hence, bad in law. If yes, the effect thereof ? 8. The principles of natural justice have many facets. In the instant case in hand, the first, facet of the principles of natural justice is "audi alteram partem", i.e. as to whether reasonable opportunity of hearing was afforded to the assessee in compliance of section 263(1) of the Act. It is an admitted fact that the notice u/s 263 of the Act was issued on 27.03.2022 and the assessee was required to respond before the Ld. PCIT by 29.03.2022. It is 'factum valeat’ that the limitation period was expiring on 31 of March, 2022. On this facet alone, it can be easily determined that the time of one or two days to file response against the detailed notice u/s. 263 of the Act cannot be said to be adequate and reasonable. Learned PCIT was expected to afford adequate and reasonable opportunity of hearing to the assessee to enable him to reasonably respond to such notice by ensuring the substantive compliance of section 263(1) of the Act. It is, admittedly clear that no reasonable and sufficient opportunity of hearing was granted to the assessee, violating the first facet of the Rajkumar Jetwani v PCIT-1, Agra principles of natural justice. This irregularity is, however, curable if an opportunity of hearing to the assessee is granted by remitting the matter to Ld. PCIT for deciding afresh after hearing the appellant in substance. We order accordingly. The aforesaid point is determined in positive in favour of the assessee and against the revenue 9. In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on 16.02.2026. Sd- Sd- (S. RIFAUR RAHMAN) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:16.02.2026