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Issues involved: Appeal against order u/s 263 of the Income Tax Act, 1961 for Assessment Year 2007-08.
Facts: The assessee initially declared income of Rs. 1,79,041/- which was later revised to Rs. 1,89,160/-. The case was processed u/s 143(1) and later selected for scrutiny assessment. The issues identified included treatment of shares and mutual funds as business income, incorrect exemption claim u/s 10(33), undeclared income from house property, and unverified liability. A show cause u/s 263 was issued, leading to objections and submissions by the assessee. Assessee's Submission: The assessee argued that the issues raised were beyond the scope of scrutiny assessment proceedings and that the Assessing Officer lacked authority to examine them. The assessee also provided detailed responses on the merits of the case, including the nature of investments, absence of borrowed funds, and lack of business expenses claimed. Assessing Officer's Order: The Assessing Officer accepted the income declared by the assessee based on the information received through AIR returns. The scope of enquiry under CASS was defined by CBDT Circulars, limiting scrutiny to aspects indicated in the AIR information. The AO requested specific details during assessment, and the investments in mutual funds were duly furnished by the assessee. CIT's Decision: The CIT directed a fresh adjudication by the Assessing Officer on various issues, including the treatment of shares and mutual funds, exemption claim under Section 10(33), income from house properties, and verification of a loan. The CIT annulled the previous order u/s 143(3) and instructed the AO to reexamine the case for a judicious assessment. Appellate Tribunal's Decision: The Tribunal noted that the CIT did not establish errors or prejudice in the AO's order, leading to the appeal being allowed. The Tribunal emphasized that the CIT did not find the AO's order erroneous or prejudicial to the Revenue, resulting in the impugned order u/s 263 being struck down. Conclusion: The appeal by the assessee was allowed, and the impugned order u/s 263 was set aside due to the lack of findings by the CIT regarding errors or prejudice in the AO's order.
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