AO Can’t Expand Scope Beyond Section 263 Order Issues | Kerala HC

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  • Last Updated on 18 June, 2025

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Section 263 Reassessment Scope

Case Details: Synthite Industries (P.) Ltd. vs. Additional/Joint/Deputy/Assistant Commissioner Of Income Tax/Income Tax Officer, National E-Assessment Centre, New Delhi - [2025] 175 taxmann.com 257 (Kerala)

Judiciary and Counsel Details

  • Dr. A.K. Jayasankaran Nambiar & Easwaran S., JJ.
  • Abraham Joseph Markos, Alexander Joseph Markos, Isaac Thomas, Sharad Joseph Kodanthara & V. Abraham Markos, Advs. for the Petitioner.
  • Jose Joseph, Adv. for the Respondent.

Facts of the Case

The Principal Commissioner passed an order under section 263 and directed a reassessment concerning the specific issues mentioned therein. The Assessing Officer (AO) issued a show cause notice to the assessee regarding five issues that were directed to be re-examined by the Commissioner. However, the time granted to the assessee to respond to the five issues was insufficient.

Therefore, the assessee approached the High Court, challenging the assessment order. The High Court set aside the assessment order and directed the AO to redo the assessment process after permitting the assessee to show cause meaningfully.

Thereafter, the AO issued a show cause notice covering almost forty-seven issues. The aggrieved assessee filed a writ petition to the Kerala High Court.

High Court Held

The High Court held that it was trite that when an AO proceeds to re-do an assessment under an order passed by the Principal Commissioner under section 263, the fresh order to be passed by the AO has necessarily to be confined to the points specified in the order of the Principal Commissioner. Therefore, the AO initially issued a show cause notice limiting the proposal to only the five issues enumerated in the order of the Principal Commissioner.

Merely because the assessee had impugned the assessment order that was subsequently passed under the said show cause notice, and the High Court had set aside the said assessment order on the ground of violation of the principles of natural justice, it was not open to the AO to now enlarge the scope of the inquiry to issues other than what was expressly covered by the earlier notice.

Therefore, the writ petition was allowed, and the notice issued by the AO was quashed.

List of Cases Reviewed

  • Single Judge of Kerala High Court in W.P.(C) No.5229 of 2024, dated 9-2-2024 [para 7] reversed

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied