By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Chartered Accountants
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24 303 ITR (AT) 7
Colorcraft v. ITO (Mum.)
A.Y. : 2000-01. Dated : 12-5-2006
Whether the CIT can pass order u/s.263 on grounds different
from those specified in the notice issued for initiating revision proceedings —
Held, No.
The assessee filed its return for A.Y. 2000-01 claiming
deduction u/s.80HHC, which was allowed by the Assessing Officer during
assessment u/s.143(3). Subsequently, the Commissioner issued notice u/s. 263.
One of the grounds for revision stated in the notice was that deduction
u/s.80HHC was allowed on export profits including duty drawbacks which did not
qualify for deduction u/s.80HHC. However, subsequently a revision order was
passed holding that excessive deduction u/s.80HHC was allowed for 3 reasons :
(i) Export incentive should have been excluded in entirety
instead of 90%.
(ii) Excise Refund and Sales Tax Set-off should have been
included in the total turnover, and
(iii) Excise Refund and Sales Tax Set-off should have been
excluded from export profits.
On assessee’s appeal against the above order of revision
u/s.263, the ITAT held that :
(a) Before assuming jurisdiction u/s.263, the assessee
should be given an opportunity of being heard, by issue of a show-cause
notice.
(b) A person, who is required to show cause against a
proposed action, must know the basis of the proposed action. Then only the
opportunity granted will be an effective opportunity.
(c) There must be a nexus between the reasons stated in the
notice and the order passed u/s. 263.
Applying the above principles, the ITAT held that since in
the instant case, notice was issued for excluding duty drawback from the quantum
of deduction u/s.80HHC, but the revision order was passed on 3 altogether
different grounds, the revision order was not valid.
Cases referred to :
(i) Bagsu Devi Bafna v. CIT, (1966) 62 ITR 506
(Cal.)
(ii) CIT v. G. K. Kabra, (1995) 211 ITR 366 (AP)
