Once PCIT restores assessment to AO for denovo consideration, AO is obliged to independently apply mind without influenced by the remarks of PCIT – ITAT
In a recent judgment, ITAT Jabalpur has observed that once PCIT restores matter back to the file of the AO for denovo consideration, AO would be obliged independently apply his mind without being unduly influenced with the remarks of the PCIT.
ABCAUS Case Law Citation:
4951 (2025) (12) abcaus.in ITAT
In the instant case, the appellant assessee had challenged the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961 (the Act) setting aside the orders of the Assessing Officer passed u/s 143(3) of the Act.
The case of the assessee was selected for scrutiny for examination of abnormal increase in cash deposits during the demonetization period. The assessment was completed by the AO after making an addition on account of allegedly bogus sales u/s. 68 of the Act.
Subsequently, the PCIT observed that during the course of scrutiny proceedings, the assessee, for a substantial amount had not produced purchase bills in respect of purchases allegedly made from sister concerns.
From the said reason, PCIT concluded that the AO had failed to conduct proper enquiries on the issue and therefore, the order of the AO was erroneous, in so far as it was prejudicial to the interest of revenue since the enquiry which the AO was expected to have done had not been done by him.
The PCIT was of the view that it is legally settled question in law that non enquiry and non-application of mind and non-application of law renders and assessment erroneous in so far as it is prejudicial to the interest of revenue and after quoting from various judgments and perusing the documents available on records, he came to the conclusion that since the said purchase had to be considered as bogus purchase within the meaning of the provisions of Section 69C of the Act.
Therefore, the PCIT held that the assessment order passed was erroneous in so far as prejudicial to the interest of revenue. The matter was therefore, sent back to the AO for denovo consideration.
The Tribunal opined that the enquiry of the AO in the matter should have been taken into the logical conclusion and since it was not, no fault can be found with the order of the PCIT in restoring back to the matter of the AO for denovo consideration.
The Tribunal pointed out that once the matters have been restored back to the file of the AO, for denovo consideration, the AO would be obliged independently apply his mind to the facts of the submissions made by the assessee and without being unduly influenced with the remarks of the PCIT, since denovo assessment itself implies fresh application of mind to the facts of the case.
The Tribunal further observed that once the AO considers the issue afresh, he would be at liberty to consider under what provisions of the Act disallowances, if any, should be made.
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