Revenue appeal against ITAT order quashing a Section 263 revision by the Principal Commissioner. The High Court held that no reasonable opportunity of hearing was afforded to the assessee before the ex parte revisional order and answered the substantial question in favour of the assessee.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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TAXC No. 36 of 2022
2025:CGHC:16499-DB
Digitally signed by ANKIT ANKITKUMAR KUMAR SINGH SINGH Date:2025.04.16 17:46:31 +0530
HIGH COURT OF CHHATTISGARH AT BILASPUR
AFR
TAXC No. 36 of 2022
[Arising out of order dated 11.10.2021 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.29/RPR/2021]
... Appellant
versus
... Respondent
For Appellant :- Mr. Ajay Kumrani, Advocate. For Respondent :- Mr. Neelabh Dubey, Advocate, through video conferencing and Mr. Jitendra Sahu, Advocate.
Division Bench
Hon'ble Shri Justice Sanjay K. Agrawal & Hon'ble Shri Justice Deepak Kumar Tiwari
Judgment On Board (08.04.2025)
Sanjay K. Agrawal, J
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hearing by formulating the following substantial question of
law:-
“Whether the Income Tax Appellate Tribunal was justified in quashing the revisional order of the Principal Commissioner of Income Tax, passed under Section 263 of the Income Tax Act, 1961, holding that no reasonable opportunity of hearing was granted to the Assesee to set aside the order passed by the Assessing Officer while invoking Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961? ”
(i) The respondent herein i.e. assessee is the company engaged in manufacturing and selling of sponge iron and MS ingots and for the assessment year 2015-16, it submitted its return on 27.09.2015 declaring taxable income of 7,99,351/-₹ and thereafter, the return was processed under Section 143(1) of the Act, 1961, resulting into demand of 8,44,800/-.₹
(ii) The assessment was completed on 29.12.2017 under Section 143(3) of the Act, 1961 and an addition of ₹9,00,00,000/- was made by the Assessing Officer (A.O.) under Section 68 of the Act, 1961 on account of unexplained cash credit.
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(iii) The Principal Commissioner of Income Tax (for brevity “PCIT”) invoked revisional proceedings under Section 263 of the Act, 1961 and order was passed on 26.03.2021. In which the finding has been recorded by the PCIT that the order of A.O. is prejudicial to the interest of the revenue and the PCIT directed the A.O. to conduct an assessment de novo.
(iv) Feeling aggrieved by the order of the PCIT under Section 263 of the Act, 1961 the assessee/respondent herein approached before the Income Tax Appellate Tribunal (for brevity ‘ITAT’). The ITAT allowed the appeal in favour of the assesse/respondent herein against which the present appellant/Revenue has preferred an appeal under Section 260A of the Act, 1961.
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Income Tax, Mumbai v. Amitabh Bachchan1 and therefore, the present appeal desserves to be dismissed.
1 (2016) 11 SCC 748
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both must be fulfilled before the power can be exercised. If either of the elements is lacking, the Commissioner does not gain jurisdiction to revise.
2 (2000) 2 SCC 718
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wrong or incomplete appreciation of facts. Crucially, an order is not erroneous merely because the Commissioner holds a different opinion on the matter.
“The ITO's conclusion cannot be termed as 'erroneous' simply because the Commissioner does not agree with it. An AO's order cannot be held to be erroneous simply because it did not make an elaborate discussion.”
3 (1993) 203 ITR 108 (Bom)
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would convert the revisional power into an appellate review, which is not its intent.
Supreme Court explained this phrase by giving examples:- “if the ITO adopts one of two permissible courses of action and the result is loss of Revenue, or where two views are possible and the ITO adopts one in favour of the assessee, such an order cannot be treated as prejudicial to Revenue unless the view adopted is unsustainable in law. Thus, even some degree of revenue loss is tolerated if it stems from a legitimate exercise of judgment by the A.O. Only where the A.O.'s view is patently wrong or the acceptance of the assessee's claim is
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founded on no evidence at all, can the order be prejudicial requiring correction”.
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the Act, 1961 is not in accordance with law and it is in teeth of the provisions contained in Section 263 of the Act, 1961 as no reasonable opportunity of hearing was granted to the assessee/respondent and also incidentally held that the action of the A.O. is not erroneous. As such, though the PCIT has found the order of the A.O. erroneous in so far as it is prejudicial to the interest of Revenue, but no reasonable opportunity of hearing was aforded to the assessee/respondent herein to defend himself in light of provisions contained in Section 263 of the Act, 1961 and, therefore, the order of the PCIT is liable to be quashed/set aside.
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hearing the assessee/respondent herein, the finding recorded by the PCIT that the order is erroneous in so far as it is prejudicial to the interest of Revenue, is not the correct finding based on the records and, therefore, it has rightly been set aside by the ITAT. As such, we do not find any merit in the present tax appeal. Consequently, the question of law is answered in favour of the assessee and against the Revenue. Resultantly, the tax case deserves to be and is accordingly, dismissed, leaving the parties to bear their own cost(s).
Sd/- Sd/(Sanjay K. Agrawal) (Deepak Kumar Tiwari) Judge Judge
Ankit
2 issues framed by the court
Whether the PCIT's revisional order under Section 263 was valid when no reasonable opportunity of hearing was granted to the assessee.
Whether the ITAT was justified in quashing the PCIT's revisional order.
Colour shows how this judgement treated each authority
Commissioner of Income Tax, Mumbai v. Amitabh BachchanApplied¶15
(2016) 11 SCC 748 · Who else cites this
Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, Kerala StateRelied on¶8
(2000) 2 SCC 718 · Who else cites this
CIT v. Gabriel India Ltd.Relied on¶10
(1993) 203 ITR 108 (Bom)
5 provisions across 1 enactments
Income Tax Officer-3(1) Raipur
Shilphy Steels Private Limited
Sanjay K. Agrawal
Deepak Kumar Tiwari
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
