(2016) 384 ITR 200 (SC)
Revision of orders by the Principal Commissioner or Commissioner
The Commissioner is not confined to the grounds in the notice and may consider other aspects that emerge, provided the assessee is given a reasonable opportunity of being heard on them. What is required is opportunity, not a separate notice for every ground.
In exercising the revisionary power, must the Commissioner confine himself to the grounds set out in the show cause notice, and is a separate opportunity of hearing required on each ground?
The assessee had filed a revised return withdrawing a claim for expenses that had been made in the original return. The Assessing Officer completed the assessment without making enquiries into certain aspects of the claim and the circumstances of its withdrawal. The Commissioner initiated revision proceedings, issued a show cause notice, and in the course of the proceedings examined aspects beyond those specifically enumerated in the notice, ultimately setting aside the assessment for lack of enquiry.
The Tribunal and the High Court held the revision bad, partly on the footing that the Commissioner had travelled beyond the show cause notice. The Revenue appealed to the Supreme Court, which reversed.
For the assessee
Revision is a serious power with significant consequences, and its exercise must be confined to the case put to the assessee. Considering grounds outside the notice denies the assessee the opportunity to meet them and offends the principles of natural justice.
For the Revenue
The revisionary jurisdiction is directed at the correctness of the assessment as a whole. The statute requires the assessee to be given an opportunity of being heard, which was done; it does not require a fresh notice each time a further aspect of the same assessment comes under consideration.
The Court held that the statute requires the Commissioner to give the assessee an opportunity of being heard and to make or cause to be made such enquiry as he considers necessary, but does not confine him to the grounds stated in the show cause notice. The revisionary jurisdiction is concerned with the correctness of the assessment order, and it would be artificial to prevent the Commissioner from considering an aspect that emerges during the proceedings merely because it was not enumerated at the outset. What the principles of natural justice require is that the assessee should have a reasonable opportunity to meet whatever is being held against it; they do not require a particular form or a fresh notice for each ground. The Court therefore held that the test is whether the assessee was in fact given an opportunity to respond to the matters on which the order was ultimately founded, and that prejudice must be shown rather than assumed. On the merits, the Court held that the failure of the Assessing Officer to make enquiries that the circumstances plainly called for rendered the assessment erroneous and prejudicial, and the revision was upheld.
Applies to revision under Section 377 of the IT Act 2025. Read with Malabar Industrial it marks the boundaries of the revisionary power: the twin conditions and the two-views principle constrain it, while this decision confirms that procedural objections based on the scope of the notice will rarely succeed absent demonstrated prejudice. The lack of enquiry ground it endorses is now the most common basis on which revision is exercised.