By TIOL News Service

CHENNAI, OCT 29, 2018: THE ISSUE BEFORE THE HIGH COURT IS - Whether a show cause notice is mandated to be issued by CIT prior to passing of his revisional order u/s 263. NO IS THE VERDICT.

Facts of the case:

The assessee bank had preferred the present appeal challenging the action of ITAT in not canceling the revisional order u/s 263 even when the issues found to be erroneous and prejudicial in the order of the Commissioner were completely different from and unrelated to the issues, for which, notice u/s 263 was given. The counsel for assessee contended that the order passed by the CIT in remanding the matter to the AO for a fresh decision was wholly without jurisdiction. It was submitted that the CIT had issued a notice u/s 263 proposing to invoke the said power on certain stated grounds. However, when the CIT passed his order, the same was on a new ground, which was not mentioned in the show cause notice. The assessee accordingly challenged the said order before the Tribunal by contending that the contents of the order u/s 263 were not related to the show cause notice issued in this regard. The Tribunal, though accepted the case as projected by the assessee, while setting aside the order, but remanded the matter to the CIT for de novo consideration.

High Court held that,

++ the issue raised under present appeal has been answered by the Supreme Court in case of Amitabh Bachchan, wherein an identical contention as advanced by the assessee's counsel herein was advanced before the Supreme Court contending that no show cause notice was given prior to the order passed u/s 263 and that the reasons stated in the order passed u/s 263 were totally different. The Supreme Court, after taking note of Section 263, has held that: "....Reverting to the specific provisions of Section 263, 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 u/s 263. 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 this position that this Court has repeatedly held that power of revision u/s 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. 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 the principles of natural justice....";

++ the decision of Supreme Court in the case of Amitabh Bachchan would squarely apply to the facts and circumstances of this case, that the Commissioner of Income Tax was not denuded of his powers to decide the matter as detailed in the order and that there was no requirement of issuance of any show cause notice.

(See 2018-TIOL-2284-HC-MAD-IT)