The show cause notice must mention the order which CIT sought to revise otherwise ntice treated to be invalid

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH “B”, KOLKATA

Before Hon’ble Sri C.D.Rao, AM & Hon’ble Sri George Mathan, JM

ITA No.353/Kol/2012

Assessment Year: 2007-08

GPSK Capital Private Limited

(Formerly Mantri Finance 

Private Limited, Kolkata

(PAN: AABCM 7457 P)

(APPELLANT)

-Versus-

C.I.T.-II,

Kolkata

(RESPONDENT)

For the Appellant: Shri K.K.Chhaparia

For the Respondent: Shri L.K.S.Dehiya

Date of Hearing: 29.06.2012.

Date of Pronouncement: 29.06.2012.

ORDER

Per Shri C.D.Rao, AM

This is an appeal filed by the assessee against order of the ld. CIT-II, Kolkata passed u/s 263 of I.T.Act in M.No.CIT,Kol-II/U/s.263/C-10/2011-12/9557-60 dated 17.02.2012 for Assessment Year 2007-08.

2. Shri K.K.Chhaparia, ld. AR appeared on behalf of the assessee and Shri L.K.S.Dehiya, ld. DR appeared on behalf of the revenue.

3. In this assessee’s appeal the assessee has raised the following grounds :-

“1. For that in the facts and circumstances of the case, the Ld. CIT. erred in violating the principles of natural justice by not the mentioning the grounds for initiating action u/s 263 of Income Tax Act, 1961 in the show cause notice issued. As such, the order passed u/s 263 is void abinitio. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law.

2. For that in the facts and circumstances of the case, the Ld. CIT erred in not passing a speaking order against the submissions of your appellant. As such, the order passed u/s 263 is void ab-initio. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law.

3. For that in the facts and circumstances of the case, the order u/s 263 is merely change in opinion. The order u/s 143(3) passed by the Ld. AO does not in any way represent erroneous order. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law.

4. For that in the facts and circumstances of the case, the Ld. CIT erred in incorrectly

Interpreting the term ‘taxable securities transactions’ as mentioned in section 88E of Income Tax Act, 1961. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law

5. For that in the facts and circumstances of the case, the Ld. CIT erred in directing the AO to reduce the rebate u/s 88E of Rs 10,06,071/-, The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law

6. For that the appellant craves leave to add, alter, delete all or any grounds of appeal at the time of hearing.”

3. It was the submission by the ld. AR that the show cause notice issued u/s 263 of the IT Act on 23.01.2012 had not mentioned which order was erroneous nor had he mentioned the error in the assessment order. It was the submission that the show cause notice did not show as to how and what was the issue in which order the said issue arose which was erroneous and prejudicial to the interest of the revenue. It was the submission that it was only when the assessee appeared before ld. CIT that he was told it was the assessment order dated 10.09.2009 u/s 143(3) of the IT Act which was considered as erroneous in so far as the AO had followed the judicial discipline in not

making additions in respect of the rebate claimed by assessee u/s 88E of the IT Act which the ld. CIT was of the view that it was subjudiced in so far as the order of the Tribunal was the subject matter of the appeals before Hon’ble Jurisdictional High Court. It was the submission that as the show cause notice itself was incomplete and non-specific and the show cause notice was issue and the consequential order passed u/s 263 of the IT Act.

In reply the ld. DR vehemently supported the order passed u/s 263 of the I.T.Act. It was the submission that substantive amount of opportunity was granted to the assessee and the ld. CIT had felt that the order passed by the AO u/s 143(3) of the IT Act was erroneous and prejudicial to the interest of the revenue which was brought to the attention of the assessee. It was the submission that the order of ld. CIT be upheld.

4. In reply the ld. AR on a specific query put by the Bench as to whether other than the show cause notice dated 23.01.2012 there was any other written communication from the ld. CIT. The reply given by the ld. AR was in the negative. There was no further communication in writing which had been received by the assessee.

5. We have heard the submissions. For better understanding of the issue it would be worthwhile to extract the show cause notice as issued by ld. CIT which is as under:-

“OFFICE OF THE COMMISSIONER OF INCOME TAX, KOLKATA-II. KOLKATA AAYAKAR BHAWAN, 3RD FLOOR, P-7, CHOWRINGHEE SQUARE, KOL-700 069

No. CIT-ll/Kol/u/s. 263/C1C’/2O11-12/7O E Dated: 23.01.2012

To

The Principal Officer,

M/s. Mantri Finance Pvt. Ltd.,

15A, Hemanta Basu Saran), Kolkata-700 QQL

Sub: Notice u/s.263 of the LT, Act 1961, in your case for A.Y2007-08 fixation of hearing - matter regarding – PAN:AABCM 7457 P

I have called for and examined the assessment record in your case for assessment year 2007-08.. It appears that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue.

You are requested to appear before me either personally or through an authorized representative in this regard on 07.02.2012 at 3:30 p.m.

Sd/-

[UJJWAL KU MAR ]

Commissioner of Income Tax, Kol-Il, Kolkata”.

5.1. A perusal of the show cause notice clearly shows that the issue which the ld. CIT-II, Kolkata has opined to be erroneous and prejudicial to the interest of the revenue is not specific. The show cause notice is absolutely vague. The show cause notice even does not mention the order which the ld. CIT has sought to revise. No further clarification to the show cause notice has been done also to the assessee. Under this circumstances we are of the view that the show cause notice itself is unsustainable under law and the consequential order passed u/s 263 of the IT Act as a consequent of the invalid show cause notice is bad in law. Even otherwise the show cause notice being vague it would clearly be mentioned that the order passed u/s 263 of the IT Act by the ld. CIT is in excess of the jurisdiction in so far as the decision exceeds the issue which has been raised in the show cause notice u/s 263 of the IT Act and even in this ground order passed u/s 263 of the IT Act is liable to be annulled. Under this circumstances the appeal of assessee is allowed.

6. In the result the appeal of assessee is allowed.

Order pronounced in the open court as dictated on 29.06.2012.

                                                            Sd/-                Sd/-

                                               [George Mathan ]  [C. D. Rao]

                                               Judicial Member   Accountant Member

Date: 29.06.2012.

R.G.(.P.S.)

Copy of the order forwarded to:

1. GPSK Capital Private Limited (Formerly Mantri Finance Private Limited), 15A, Hemanta Basu Sarani, 4th floor, Kolkata-700001.

2 The C.I.T.-II, Kolkata

3. The CIT-

4. The CIT (A)-

5. DR, Kolkata Benches, Kolkata

True Copy,

By order,

Deputy /Asst. Registrar, ITAT, Kolkata Benches