2012 (7) TMI 468 - AT - Income Tax

Powers of CIT(A) under sec. 263 - revision - denial of an opportunity of hearing to the assessee - Held that - Section 263 contemplates that the Ld. Commissioner may call for and examine the record of any proceedings if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interest of the revenue after giving the assessee an opportunity of being heard and after making necessary inquiries as he deems fit pass such orders thereon as the circumstances of the case justify - to hold dwell charge at the end of Ld. Commissioner and the paucity of time at a particular station cannot be valid reason for denying an opportunity of hearing to the assessee - because the act provides an opportunity of hearing before taking any action u/s 263 and such opportunities cannot be substituted in a subsequent proceedings his order deserves to be set aside - in favour of assessee.

Summary

Issues:
Challenge to order under section 263 without opportunity of hearing.

Analysis:
The appeal was filed against the order of the Learned Commissioner under section 263 of the Income-tax Act, 1961. The appellant contended that the Commissioner erred in setting aside the assessment order without providing an opportunity of hearing. The appellant, an educational society, had filed its return of income for the assessment year 2006-07, declaring nil income. The Commissioner believed that the Assessing Officer failed to consider the diversion of exempt income to a third party in a previous assessment year. The Commissioner issued a show-cause notice to the appellant, who requested an opportunity for a hearing. Despite the appellant's requests and submissions, the Commissioner deemed it impractical to grant a hearing due to time constraints.

The appellant argued that the Commissioner's factual error regarding the appellant's representative appearing for the case misled the decision. The appellant cited various legal precedents emphasizing the importance of an oral hearing for a fair assessment process. The Departmental Representative, however, contended that the Commissioner's decision to set aside the assessment was valid, as the appellant would have an opportunity for a hearing before the Assessing Officer in subsequent proceedings.

The Tribunal analyzed the provisions of section 263 of the Income-tax Act, emphasizing the requirement for the Commissioner to provide the assessee with an opportunity of being heard before passing any order. The Tribunal rejected the argument that a subsequent hearing before the Assessing Officer could substitute the initial opportunity for a hearing under section 263. It was held that the Commissioner must demonstrate the erroneousness of the order and its prejudice to the revenue before setting it aside, which necessitates providing a fair hearing to the assessee.

Consequently, the Tribunal set aside the Commissioner's order and remanded the issues back to the Commissioner for fresh adjudication after providing the appellant with a due opportunity of hearing. The appeal of the assessee was allowed for statistical purposes.