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Chhattisgarh State Minor Forest Produce (Trading and Development) Co-Operative Federation Limited v. Pr. Commissioner of Income TAX-1

Income Tax Act, 1961 – Section 263 – Revisionary power

Chhattisgarh HC25 Jul 2024TAXC/165/2024

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Case brief

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What is this about?

TAXC 165/2024 | High Court of Chhattisgarh, Bilaspur | Section 263 IT Act, 1961 revision — enquiry on assessee's reply/documents is incumbent; reasons for satisfaction/non-satisfaction must be recorded; appeal allowed, remanded to Pr. CIT Raipur-1 to reconsider reply and documents after hearing (assessee: Chhattisgarh State Minor Forest Produce Co-operative Federation Ltd.).

What did the court decide?

Question of law answered in favour of the assessee; case remanded to the Pr. CIT to reconsider the assessee's reply and documents and to pass a fresh order after affording an opportunity of hearing, in accordance with law and on its own merits. ¶36

Chhattisgarh State Minor Forest Produce (Trading and… — Income Tax | Chhattisgarh HC (2024)

What the court decided

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Outcome

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Issue for consideration

Whether the ITAT rightly confirmed the order of the Principal Commissioner of Income Tax passed under Section 263 of the Act, 1961, whereby the assessment order was set aside, despite the defence raised by the assessee not having been looked into and the requisite application of mind being absent.

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Court's answer

Section 263 of the Income Tax Act, 1961 makes it incumbent on the Pr. CIT exercising the power of revision to conduct an enquiry.

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Ratio / Principle

The enquiry contemplated by Section 263 means deliberating upon the reply and the documents placed by the assessee, not shelving them; the order cannot be set aside merely on the ground that the officer is not satisfied with the reply.

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Key takeaways

The reasons for the revising officer's satisfaction or non-satisfaction are required to be recorded.ratio¶33
Para 5 of the Pr. CIT's order, being the substratum of the entire issue, manifests that the requisite procedure under Section 263 (deliberation on the reply and documents with recorded reasons) was not followed in this case.ratio¶33
The appeal is allowed and the framed question of law is answered in favour of the assessee; the case is remanded back to the Pr. CIT to reconsider the assessee's reply and documents, and the authority is to pass the order after giving the assessee an opportunity of hearing, in accordance with law and on its own merits.

Detailed headnote1 paragraphs

Income Tax Act, 1961 — Section 263 — Revisionary power — Duty to conduct genuine enquiry and record reasons: The High Court of Chhattisgarh, Bilaspur (TAXC No. 165 of 2024, decided 26/07/2024; Per Goutam Bhaduri, J., bench comprising Goutam Bhaduri and Radhakishan Agrawal, JJ.) allowed the appeal of Chhattisgarh State Minor Forest Produce (Trading and Development) Co-operative Federation Limited against the order dated 09/05/2024 of the ITAT, Raipur Bench maintaining the revision order dated 30/03/2021 of the Principal Commissioner of Income Tax, Raipur-1, which had set aside the assessment order and remanded it to the Assessing Officer. Held that Section 263 makes enquiry incumbent on the revising authority; enquiry means deliberating upon the reply and documents furnished by the assessee, not shelving them; the order cannot be rejected merely because the officer is dissatisfied with the reply, and the reasons for satisfaction or non-satisfaction must be recorded; para 5 of the Pr. CIT's order showed that this procedure was not followed. The framed question of law was answered in favour of the assessee and the case was remanded to the Pr. CIT to reconsider the reply and documents and decide afresh after hearing, on merits and in accordance with law.

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TAXC No. 165 of 2024

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NAFR

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HIGH COURT OF CHHATTISGARH, BILASPUR

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TAXC No. 165 of 2024

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Chhattisgarh State Minor Forest Produce (Trading and Development) Co-operative Federation Limited, Van Dhan Bhawan, Sector – 24, Nava Raipur, Atal Nagar, Raipur (CG)492 015 PAN: AABAC5137E

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---- Appellant

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Versus

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Pr. Commissioner of Income Tax-1, Raipur, C.G.

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---- Respondent

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________________________________________________________ For the Appellant - Dr. Rakesh Gupta, Advocate along with Shri S. Rajeshwara Rao, Advocate For the Respondent - Shri Ajay Kumrani, Advocate appears on behalf of Shri Amit Chaudhari, Advocate

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________________________________________________________ Hon'ble Shri Justice Goutam Bhaduri & Hon’ble Shri Justice Radhakishan Agrawal

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Judgment on Board

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Per Goutam Bhaduri, J.

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26/07/2024

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Heard.

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The submission is made that the appellant, which is an apex body of the Co-operative, came into existence by an order of the State Government on 23/02/2001 to facilitate collection, storage, processing and disposal of specified forest produce within the periphery of the State of Chhattisgarh and the society was entitled for a commission of Re.1/- per annum for the aforesaid services rendered by it as an agent of the State Government of Chhattisgarh. The appellant came into

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TAXC No. 165 of 2024

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existence for the reason that the State Government while collecting the forest produce through private contractors found that the forest dwellers were not being fully paid and the benefit is not being passed. In view of such background, the role of the assessee was to act as an agency to facilitate collection, storage, processing and disposal of specified forest produce and to act as a coordinator.

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The documents filed along with this appeal would show that a revision proceeding was drawn under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act, 1961’) by the Principal Commissioner of Income Tax, Raipur-1 (hereinafter referred to as the Pr. CIT). The order of the Pr. CIT dated 30/03/2021 would show that pursuant to the notice issued a detailed reply was filed by the appellant and thereafter the learned Pr. CIT was pleased to dispose of the revision by order dated 30/03/2021 and the relevant part is reproduced hereinbelow:-

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I have gone through the case record and submission of the assessee furnished during assessment proceedings and revision proceedings. From the facts narrated above, it is clear that the Assessing Officer has not conducted proper enquiry regarding genuineness of the contention made by the assessee. Therefore, I am satisfied that the assessment order is erroneous in so far as it is prejudicial to the interest of revenue in view of Explanation 2 of Section 263 of the Income tax Act. The A.O. is directed to verify the claim of deduction u/s 80P(2)(d) of

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TAXC No. 165 of 2024

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the IT Act 1961 on interest received from banks on FDR, FFD, SB interest etc. and verify the claim of expenditure. I, therefore, set aside the assessment order and remand it back to the Assessing Officer for fresh adjudication of the issues discussed herein above by conducting necessary enquiries in this case and framing fresh assessment order after affording adequate opportunities to the assessee.

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When the appeal was filed against such order, the Income Tax Appellate Tribunal, Raipur Bench, Raipur (hereinafter ‘the ITAT’) by its order dated 09/05/2024 maintained the order on the ground that certain documents were sought from the assessee and having not been produced, there was no other option except to pass the order.

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The submission is made that the entire show-cause notice was replied in detail and minimum it is expected that while exercising such quasi judicial power, the authority herein i.e. the Pr. CIT was required to look into it and the reply filed along with the documents wherein everything was explained, but in a cryptic manner the order has been passed and the learned ITAT too failed to take into cognizance.

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We went through the record and the orders of the Pr. CIT and the ITAT. Prima facie , it do not satisfy us, therefore, we admit the appeal on the following question of law:-

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A. Whether the ITAT in confirming the order of learned Principal Commissioner of Income Tax passed under Section 263 of the Act, 1961, whereby the assessment order was set aside without looking into the defence raised and application of mind.

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TAXC No. 165 of 2024

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We went through the reply which was filed by the assessee before the Pr. CIT while power of revision was exercised. Section 263 of the Act, 1961 gives power to the Principal Chief Commissioner or the Officer as it is been prescribed that he may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous, in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order.

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The order of the Pr. CIT, therefore, necessarily would require to explain i.e. record reasons to exercise the power under Section 263 of the Act, 1961 to say that the order was prejudicial to the interest of Revenue. However, in case in hand after that proceedings were initiated, the enquiry was conducted and during such enquiry the reply and the documents were placed by assessee. Section 263 makes it incumbent to the Pr. CIT to conduct enquiry. The enquiry means not to shelve the reply and the documents but to deliberate upon it and the same cannot be set aside on the ground that the Officer is not satisfied with reply. The reasons for satisfaction or non-satisfaction are required to be recorded. In the instant case, after going through para 5 of the order, which is the substratum of the entire issue, it is manifest that the said procedure has not been followed.

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TAXC No. 165 of 2024

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Under the circumstances, we allow the appeal and answer the question of law in favour of the assessee and remand back the case to the Pr. CIT to reconsider the reply and the documents of assessee. It is directed that after giving opportunity of hearing to the assessee, the learned authority shall pass the order, in accordance with law and on its own merits.

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Sd/- Sd/-

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(Goutam Bhaduri) (Radhakishan Agrawal) Judge Judge

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A S H U

Chhattisgarh State Minor Forest Produce (Trading and Development) Co-Operative Federation Limited v. Pr. Commissioner of Income TAX-1

Case brief

What is this about?

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Chhattisgarh State Minor Forest Produce (Trading and Development) Co-Operative Federation Limited v. Pr. Commissioner of Income TAX-1

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

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