No revision u/s 263 without pointing out how assessment order is erroneous – ITAT

No revision u/s 263 without pointing out how assessment order is erroneous. Order quashed as CIT did not mention whether assessee’s contentions were acceptable or not.

ABCAUS Case Law Citation:
ABCAUS 2662 (2018) (12) ITAT

Important Case Laws Cited/relied upon:
Narayan Tatu Rane vs. ITO reported in (2016) 70 Taxmann.com 227

The assessee’s appeal was against the revisional order of the CIT passed u/s 263 of the Income Tax Act, 1961 ( the Act ).

The appellant assessee company filed its return of income and the assessment was completed u/s 143(3) of the Act after making additions to the returned income. Subsequently, the CIT perused the assessment records by invoking the provisions of  section 263 and observed that there were certain discrepancies.

Therefore, the CIT was of the opinion that the assessment order passed u/s 143(3) was erroneous and prejudicial to the interest of the Revenue. Therefore, he proposed to revise the same u/s 263 of the Act.

The assessee submitted its explanation. However, the CIT was not convinced with the assessee’s contentions and therefore, set aside the assessment order with a direction to redo the same.

Aggrieved by the revision order, the assessee is in appeal before Tribunal.

The assessee pointed out that AO called the details and after the information was submitted by the assessee 154 proceedings were dropped by the AO. Therefore, the assessee submitted that the AO had verified and applied his mind to the information and the relevant issues and therefore, the assessment order was not erroneous and prejudicial to the interests of the Revenue.

It was argued that the Commissioner u/s 263 cannot direct the AO to carry out fishing and roving enquiries with an objective of substituting his views with that of the AO.

It was further submitted that the Pr. CIT had also not brought out as to how the assessment order was erroneous and prejudicial to the interests of the Revenue.

The Tribunal found that to exercise jurisdiction u/s 263 of the Act, twin conditions of the assessment order being erroneous as well as prejudicial to the interests of the Revenue are to be satisfied. If the AO does not make any enquiry and allows deductions claimed by the assessee, then it may be can be said that the assessment order is erroneous.

The Tribunal opined that in the instant case, it was clear that the AO had called for the details during the assessment proceedings and had further issued a notice u/s 154 and after being satisfied, had dropped the 154 proceedings. Therefore, it was clear that the AO had applied his mind to the information filed by the assessee and therefore, the assessment order could not be said to be erroneous.

The Tribunal opined that the issues raised by the CIT as the mistakes/discrepancies were of factual nature and not against the law, therefore, for this reason also, the assessment order cannot be said to be erroneous.

The Tribunal also agreed with the contention that the CIT cannot direct the AO to redo the assessment without pointing out the errors committed by the AO and without giving a finding as to how the assessment order is erroneous.

The Tribunal noted that from the literal reading of the order u/s 263, the CIT pointed out certain discrepancies and then subsequently reproduced the assessee’s submissions and then directed the AO to redo the assessment. Thus, there was no finding whatsoever, as to whether the assessee’s contentions were acceptable to him or not and as to how the assessment order was erroneous.

Therefore, the Tribunal held that the revision order passed by the Pr. CIT was not sustainable.

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