IMPORTANT POINT
The Court established that the invocation of Section 263 requires a clear finding of both error and prejudice to revenue, emphasizing the need for adherence to procedural mandates.

JUDGMENT :

SOUMITRA SAIKIA, J.

1. Heard Dr. A. Saraf, learned Senior Counsel assisted by Mr. P. Baruah, learned counsel for the petitioner. Also heard Mr. S. Chetia, learned Standing Counsel, Income Tax Department.

2. The petitioner is a company incorporated under the Companies Act, 2013 having it’s registered office at 1, Block III CMJ House, Ferndale Complex, Keating Road, Shillong-793001, Meghalaya and is represented in the present proceedings by the authorised signatory, Sri Binit Singhania.

3. For the assessment year 2017-18, the petitioner e-filed its original return under Section 139(1) of the Act on 31.10.2017 declaring a total loss of Rs.58,74,28,484/- . The case of the petitioner was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) vide Notice No. ITBA/AST/S/143(2)/2018-19/1010964997(1) dated 09.08.2018 under Section 143(2) of the Act.

4. The petitioner responded by its communication dated 20.12.2018 in the said assessment proceedings. The Assessing Officer by order dated 31.12.2018 passed the final assessment order under Section 153A/153D/143(3) of the Act vide Assessment Order dated 31.12.2018, making an addition of Rs.87,29,120/-, thereby reducing the total loss to Rs.57,86,99,364/-. The said assessment order was passed by taking into account the records and evidences filed by the writ petitioner. Thereafter, the respondent No. 4 forwarded a proposal to the respondent No. 2 dated 10.03.2021 for revision of the Assessment Order dated 31.12.2018 under Section 263 of the Act. The respondent No. 2 solely on the basis of the proposal dated 10.03.2021, issued a Show Cause Notice No. ITBA/REV/F/REV1/2020-21/1031736946(1) dated 24.03.2021 directing the petitioner to show cause as to why the order under Section 263 of the Income Tax Act should not be issued for revision of the Assessment Order dated 31.12.2018 passed by the then Assessing Officer for the assessment year 2017-18. The only ground in the Show Cause Notice dated 24.03.2021 was in respect of an amount of Rs.9,93,67,946/- claimed under the head prior period expenses, which, according to the respondents ought to have been disallowed under the provisions of Section 37 of the Act but was not disallowed in the original assessment proceedings under Section 143(3) of the Act. By the Show Cause Notice the petitioner was directed to appear for hearing on 26.03.2021 and consequently, the petitioner was granted one day to appear before the authorities in response to the Show Cause Notice. Subsequently, the personal hearing was rescheduled on 30.03.2021. The petitioner appeared before the respondent No. 2 in response to the Show-Cause Notice and submitted its written submissions. Thereafter, vide Order No. ITBA/REV/F/REV5/2020-21/ 1032115258(1) dated 31.03.2021 the respondent No. 2 passed the impugned order holding the Assessment Order dated 31.12.2018 passed by the then Assessing Officer as erroneous and prejudicial to the interests of the revenue. Being aggrieved, the present writ petition has been filed.

5. Referring to the provisions of Section 263 under the Income Tax Act, 1961, learned Senior Counsel for the writ petitioner submits that a bare perusal of Section 263 of the Act makes it clear that there are mandatory preconditions and procedures laid down which are required to be scrupulously followed before invoking the jurisdiction by the Principal Chief Commissioner of Income Tax or the Chief Commissioner. It is submitted that the Revisional Authority has to call for and examine the records of the case and the assessee must be given an opportunity of being heard. The Revisional Authority will invoke its jurisdiction under Section 263 of the Income Tax Act only upon being satisfied that the order passed by the assessee officer is erroneous and that it is also prejudicial to the interests of revenue. The Revisional Authority, only upon being satisfied and upon hearing the assessee may pass an order modifying or cancelling the assessment order and