Section 263 do not give unfettered power to PCIT to revise each and every order – ITAT
In a recent judgment, ITAT Delhi has held that section 263 of the act does not give unfettered power to PCIT to revise each and every order to re-examine the issues already examined by the Assessing Officer (AO) during assessment proceedings.
ABCAUS Case Law Citation:
4233 (2024) (08) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the Principal Commissioner of Income-Tax (PCIT) under Section 263(1) of the Income Tax Act, 1961 (the Act).
The appellant/assessee e-filed return of income-tax which was selected for complete scrutiny assessment through CASS. Notice u/s 143(2), 142(1) of the Act along with detailed questionnaire.
The Authorised Representative (AR) of the assessee attended the assessment proceedings and replied to questionnaire and also submitted cash book, ledger, stock register and relevant bills/voucher of all expenses. The AO completed the assessment by making making certain additions to the income declared.
Subsequently, a show-cause-notice under Section 263 of the Act was issued. Later, the assessment was set aside with the directions to the Assessing Officer to make assessment afresh.
Before the Tribunal the assessee contended that Pr. CIT erred in rejecting the contention of the assessee that all the issue were before the Assessing Officer in proceedings under Section 143(3) of the Act and was allowed after application of mind as such the same cannot be the matter for revision u/s 263 of the Act. It was argued that proceedings under Section 263 cannot be used for substituting option of Assessing Officer by that of Pr. CIT.
The assessee further submitted that Pr. CIT erred in invoking revisionary power under Section 263 of the Act that despite the fact that even after thorough examination, no specific findings had been given on the issue as to how the order of Assessing Officer was erroneous and prejudicial to the interest of the Revenue by the assessment order.
The assessee submitted that there is difference between ‘no enquiry’ and ‘lack of enquiry’. The PCIT himself admitted that all the issues were examined by the AO. The assessee in its reply had submitted evidences to demonstrate that each of the issue was examined. In fact, assessee in its reply to show cause notice by PCIT also enclosed all the details. The PCIT thereafter had nowhere found any flaw in any of these documents. In case he was having any doubts or any apprehension, the least he could have done was to carry out some verification/ enquiry so as to make an allegation of order being prejudicial to the interest of the Revenue. The PCIT instead had just sent back the order to AO with direction to carry out verification. Hence, the important condition of assessment order being prejudicial to the interest of Revenue does not get fulfilled. It is a settled law that in case of ‘inadequate enquiry’ not a case of ‘no enquiry’, Ld. PCIT himself has to carry out enquiry so as to demonstrate order being prejudicial to the interest of the Revenue.
The assessee also submitted that to exercise revisionary power under section 263 of the Act, the PCIT must undertakes some minimal enquiry and give reasons for coming to the conclusion that assessment order was erroneous and prejudicial to the interest of the Revenue.
In support of its contention, the assessee relied upon a catena of judgments including Hon’ble Supreme Court.
The Tribunal noted that it was apparent on record that all issues were examined by AO and decided in favour of assessee in original assessment proceedings. The PCIT had no where found any flaw in the documents. The PCIT had not undertaken any enquiry or given reasons for coming to conclusion that assessment order was erroneous and prejudicial to interest of revenue.
The Tribunal observed that the Hon’ble Delhi High Court held that the fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee.
The Tribunal further noted that the Hon’ble Supreme Court had enunciated the meaning and intont-of the phrase “prejudicial to the interests of the Revenue”. It was held that inadequate enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act.
The Tribunal held that Explanation 2 to section 263 of the act does not give unfettered power to PCIT to revise each and every order to re-examine the issues already examined by the AO during assessment proceedings.
Therefore, the Tribunal held that the impugned order was beyond jurisdiction, bad in law and void ab initio. Consequently, the impugned order was set aside.
Accordingly, the assessee’s appeal was allowed.
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