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There is no dispute to the fact that section 263 of the Act permits the CIT to revise an order of assessment as being erroneous and prejudicial to the interest of the revenue if the assessing officer has not conducted necessary enquiry with respect to any particular item of income/ expenditure, and accordingly direct the assessing officer in exercise of the powers conferred upon him by the said section to conduct a de novo verification/ examination of the relevant issue after giving an opportunity of hearing to the assessee. However, the fact remains that before the CIT proceeds to take such an action under section 263 of the Act, there are certain basic or fundamental conditions, which he must satisfy, failing which the order passed by the CIT containing such direction to the assessing officer to conduct a de novo verification examination, would be rendered illegal and void ab initio.

On a conjoint reading of the decisions of the Hon'ble Calcutta High Court and the Hon'ble Andhra Pradesh High Court, the following propositions of law evolve, which have a direct nexus with the case on hand:

(i) The CIT must give an adequate opportunity of hearing to the assessee. Requiring the assessee to respond within an unreasonably short time should be condemned as violating the principles of natural justice, which would make the order passed under section 263 of the Act ab initio void.
(it) While passing the order under section 263 of the Act, the CIT cannot traverse or travel beyond the allegations raised in the notice issued under section 263 of the Act, to which the assessee could have responded in the course of the hearing afforded to him. If the CIT, in the final order passed under section 263 of the Act, revises the order of assessment passed by the assessing officer on a logic or ground or material which was not earlier disclosed to the assessee vide the notice under section 263 of the Act, then the order passed by the CIT under section 263 of the Act would be illegal and ab initio void, as violating the fundamental principles of natural justice. In fact, on a similar issue, the Hon'ble Kolkata Tribunal, in the case of GECA Isthom India Ltd v. Dy. CIT(2000) 112 Taxman 241 (Kol) (Mag.) (copy enclosed at pp. 31 to 36 of the paper book) has delivered a decision in favour of the assessee by following the principles of natural justice relating to proceedings under section 263 of the Act, which had been laid down by the Hon'ble Calcutta High Court, as above.

It is submitted that if examined on the touchstone of the aforesaid principles laid down by the Hon'ble High Courts and Tribunal, the order passed by the CIT under section 263 of the Act inter alia with respect to the said sum of Rs. 657 crores, is clearly illegal and ab initio void, for the following reasons :

(i) The CIT brought the issue relating to the sum of Rs. 657 crores to the notice of the appellant for the first time vide the letter/notice dated 29-3-2005, which was issued in continuation to the earlier notice issued under section 263 of the Act, dated 18-3-2005. As stated earlier, the said letter dated 29-3-2005, was served at the receiving section of the appellant only at 5.30 p.m. on 29-3-2005, namely, after closure of office hours and the CIT required the appellant to comply with the said notice at 11.30 a.m. the following day, namely, 30-3-2005. It is palpably apparent that an unusually short time was afforded to the appellant to comply with the allegation of the CIT. As stated earlier, the normal procedure for routing mails in the system of the appellant-company, escalated the said notice to the concerned person in the afternoon of 30-3-2005, and the appellant could not have prepared a suitable or reasonable submission and also arrange an appropriate representation before the CIT within the next day, i.e., 31-3-2005, even if the CIT were to have deferred the hearing scheduled on 30-3-2005 by one day. Thus, since not even one full working day was afforded to the appellant to reasonably comply with the notice/ letter dated 29-3-2005, and accordingly rebut the allegations contained therein with respect to the said sum of Rs. 657 crores, the order passed by the CIT under section 263 of the Act inter alia with respect to the said sum of Rs. 657 crores is patently illegal and ab initio void, having infringed the principles of natural justice.