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)