- (1.) Assailing the show cause notice dated 3rd February, 2014 passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961, the petitioner has filed the instant writ petition. The challenge to the said notice is basically founded on the ground that the Commissioner has not recorded his satisfaction relating to error in the order passed under Section 148 of the said Act affecting the interest of the revenue. The undisputed facts are that the petitioner filed a return under Section 143 (1) of the said Act declaring a loss of Rs. 19,428/-. Subsequently a notice for reassessment under Section 148 of the said Act was issued on 7th April, 2011 on the premise that the petitioner being a Non-Industrial Company has written off preliminary expenses in access of Rs. 9,000/- and, therefore, is not eligible to wright off the expenses for increase in the authorized capital. By an assessment order dated 29th April, 2011, the Authority assessed the loss at Rs. 7,429/- after disallowing the access preliminary expenses of Rs. 9,000/- as well as a sum of Rs. 3,000/- under Section 14A of the said Act and computed the tax at rupees 'Nil'. The Commissioner of Income Tax issued the purported show cause notice under Section 263 intending to revise the order of reassessment made under Section 147 and 148 of the said Act raising doubt over the subscription of shares on premium in absence of any business activities and non-conducting of proper inquiry regarding the identity and worthiness of the shareholders.
(2.) The Authority thought that in absence of any proper inquiry, the order is erroneous and prejudicial to the interest of the revenue. Subsequently the petitioner disclosed before this Court that the Commissioner has passed the order under Section 263 of the said Act on 18th March, 2014 which was communicated after the filing of the instant writ petition. The challenge is further made to the said order dated 18th March, 2014 on the ground of violation of principle of natural justice. It is stated that despite the specific prayer having made for supply of the relied on documents, the Authorities have not provided such documents to the petitioner and such order is, therefore, liable to be quashed on the flagrant violation of the principle of natural justice.
(3.) The learned Advocate appearing for the petitioner submits that there is no recording of satisfaction by the Commissioner before issuing the show cause notice under Section 263 of the said Act for arriving at the conclusion that the order of reassessment is erroneous and prejudicial to the interest of the revenue. By relying upon a judgment of this Court rendered in case of Commissioner of Income Tax v- Karam Chand Thapar & Sons Ltd., 1990 186 ITR 368, the petitioner says that the word 'considers' postulate the careful examination, study and examination of the documents upon due application of mind. He further submits that the conditions laid down under Section 263 of the said Act is sine quo non to invocation of power and in absence of any of such conditions shall render the notice to be defective improper and liable to be quashed and set aside. He audaciously submits that the Commissioner should himself examine the records and the materials available, before arriving the conclusion that the order is erroneous as held in case of Commissioner of Income Tax vs Gabriel India Ltd., 1993 203 ITR 108. By relying upon a judgment of this Court in case of Commissioner of Income Tax vs- G.M. Mittal Stainless Steel (P) Ltd., 2003 263 ITR 255, the petitioner says that the Commissioner is statutorily bound to record reasons before coming to the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. Lastly he submits that if the show cause notice suffers from incurable infirmity and lacks material particulars, the High Court in exercise of power of judicial review can it set aside as held in B.P. Agarwalla & Sons Ltd vs- Commissioner of Income-tax & Others, 1994 208 ITR 863.;