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2021 (11) TMI 677 - AT - Income TaxRevision u/s 263 by CIT - lack of enquiry or inadequate enquiry - PCIT revised the assessment order passed by the AO basically on the ground of insufficient enquiry - case was selected for scrutiny and the AO passed assessment order u/s. 143(3) of the Act and accepted the returned income - HELD THAT - PCIT has revised the assessment order on the ground of lack of enquiry or inadequate enquiry, which is contrary to the evidence on record. Further the Ld. PCIT has referred and relied Explanation 2 to section 263 of the Act, inserted w.e.f. 01.06.2015 to substantiate his action. As in the case of Narayan Tatu Rane 2016 (5) TMI 1162 - ITAT MUMBAI has held that the explanation does not authorize or gives unfettered powers to the commissioner to revise each and every order passed by the AO if in his opinion same has been passed without making enquiries or verification which should have been made. In the present case since the AO has passed the assessment order after due application of mind and after accepting the explanation given by the assessee, the same cannot be termed as erroneous. We are therefore of the considered view that the order passed by the AO is not ex facie erroneous, therefore the Ld. PCIT has wrongly directed the AO to pass assessment order afresh. In our considered view the observation of the Ld. PCIT that AO has passed the order without making proper enquiries is not factually correct. The order passed u/s. 263 is not in accordance with the settled principles of law. - Decided in favour of assessee.
Issues:
1. Revision of assessment order by Principal Commissioner of Income Tax under section 263 of the Income Tax Act, 1961. 2. Adequacy of enquiry conducted by Assessing Officer before passing the assessment order. 3. Interpretation of Explanation 2 to section 263 of the Act regarding the correctness of the assessment order. 4. Compliance with legal principles and precedents in revising assessment orders. Detailed Analysis: 1. The judgment involves the revision of an assessment order by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961 for the assessment year 2015-16. The PCIT set aside the assessment order passed under section 143(3) of the Act as erroneous and prejudicial to the revenue's interest, directing the Assessing Officer (AO) to conduct a fresh assessment after proper enquiry. 2. The key issue revolves around the adequacy of the enquiry conducted by the AO before passing the assessment order. The PCIT believed that the AO had not made sufficient enquiries, leading to the revision of the order. The appellant challenged this decision on the grounds that the AO had indeed conducted proper enquiries, as evidenced by detailed submissions and documents provided during the assessment proceedings. 3. The judgment delves into the interpretation of Explanation 2 to section 263 of the Act, which states that an order shall be deemed erroneous if it is prejudicial to the revenue due to a lack of necessary enquiries. The PCIT relied on this provision to justify the revision, whereas the appellant argued that the AO had appropriately verified and considered all relevant details, as required by law. 4. The court analyzed various legal precedents, including the judgments of the Supreme Court and different High Courts, to determine the correctness of the PCIT's decision. It emphasized that the power under section 263 cannot be invoked for every mistake made by the AO and highlighted the distinction between no enquiry and inadequate enquiry. The court ultimately concluded that the PCIT's finding of inadequate enquiry by the AO was not supported by the evidence on record and did not align with established legal principles. In conclusion, the court allowed the appeal of the assessee, setting aside the order passed by the PCIT. The judgment underscored the importance of conducting a thorough analysis of the evidence and ensuring compliance with legal standards when revising assessment orders under section 263 of the Income Tax Act, 1961.
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