Invoking Revisionary powers u/s 263 merely on the basis of suspicion not justified. Where AO made necessary inquiry and satisfied itself about explanation offered, revising such order is unjustified – ITAT
ABCAUS Case Law Citation
ABCAUS 3591 (2022) (05) ITAT
Important case law relied referred:
CIT vs. Anil Kumar Sharma 335 ITR 83
CIT vs. Rashid Exports 66 Taxmann.com 38
M/s Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83
In the instant case, the assessee had challenged the order passed u/s 263 of the Income Tax Act 1961 (the Act) by the Principal Commissioner of Income-tax (Pr.CIT).
In the instant case, case assessment was framed u/s 143(3) of the Act. Subsequently, the Pr.CIT on examination of record observed that the Assessing Officer (AO) had not carried out requisite inquiry regarding advances from customers and also introduction of fresh capital.
Accordingly, a notice u/s 263 of the Act was issued to the assessee and finally being not satisfied with the submissions/explanations of the assessee, PrCIT held that the assessment order was erroneous and prejudicial to the interests of revenue.
Accordingly, he revised the assessment order and directed the Assessing Officer to pass the assessment order afresh after examining the issue as observed.
The Tribunal observed that the Assessing Officer had issued a questionnaire along with notice u/s 142(1). In response thereto, the assessee had filed reply regarding the queries raised by the Assessing Officer. It transpired from the records that notices u/s 133(6) of the Act were also issued before framing the assessment.
The Tribunal observed that the assessee in response to notice u/s 263, had duly explained the queries raised and on the basis of material placed, no case is made out of any prejudice caused to the Revenue.
The Tribunal stated that the law is well settled that for exercising power u/s 263 twin conditions are required to be satisfied – (i) that the order should be erroneous and; (ii) it should cause prejudice to the interests of Revenue.
Further, the Tribunal opined that it was not the case where the assessee failed to substantiate his claim, rather the explanation along with supporting evidences were placed before the assessing officer and the Pr.CIT.
Invoking Revisionary powers u/s 263 merely on the basis of suspicion not justified
The Tribunal stated that merely on the basis of suspicion, invoking of powers u/s 263 would not be justified. The concluded assessment should be revised where there is blatant error committed by the assessing officer, which culminated into the prejudice to the interest of Revenue. But where the Assessing Officer made necessary inquiry and satisfied itself about the explanation offered to him, revising such an order is highly unjustified and contrary to the ratio laid down by the Hon’ble Supreme Court.
Accordingly, the Tribunal allowed the appeal and set aside the order of Pr.CIT.
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