Section 40A(3), 263 of Income Tax Act, 1961— A perusal of the show cause notice as extracted clearly shows that the issue of verification as to whether the payment is made after deduction of TDS or not and as to whether the provisions of section 40(a)(ia) of the Act would apply in respect of the payments made, is not a part of the show cause notice. It is true that the assessee has discussed the provisions of rule 6DD and the applicability of Rule 6DD(k) of the Act, in his reply to the show cause notice, the provisions of rule 6DD(k) is in respect of reasons for making the payment in a manner other than as prescribed under the Act, and is not in any way connected to the applicability of Sec.40(a)(ia) of the Act or the deduction of TDS u/s.194C(6) of the Act. A perusal of Section 263(1) of the Act clearly shows that the words used are “after giving the assessee an opportunity of being heard”.

In the present case, the directions given by the ld.PCIT to the Assessing Officer is not an issue, that has been put to the assessee or one which has been done after giving the assessee an opportunity of being heard. This being so, his direction is unsustainable and consequently, the order passed u/s.263 of the Act becomes unsustainable and consequently quashed.[M/S. EVER GREEN TRAILOR SERVICE VERSUS INCOME TAX OFFICER, WARD-1, NAMAKKAL. (VICE-VERSA)] [2019] 17 ITCD Online (55) [ ITAT CHENNAI]