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2022 (4) TMI 389 - AT - Income TaxRevision u/s 263 by CIT - reopening on the basis of letter written by JCIT - HELD THAT - Assessment order cannot be said to be erroneous on face of it. There was sufficient and exhaustive inquiry on the issues by the AO and merely because the inquiry made were not considered satisfactory on higher or different parameters, the assessment order cannot be said to be prejudicial to the interest of revenue requiring exercise of Revisional powers. There is also nothing in the order of AO which can be considered to set a bad trend or pattern for similar assessments so to be taken as prejudicial to the interest of revenue administration. The settled position of law is that for the purpose of exercising jurisdiction u/s. 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry. If the Revisional authority is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Revisional Authority to conduct such enquiry. If the Revisional Authority does not conduct such basic exercise then the he is not justified in setting aside the order u/s. 263. In the case in hand the Ld. Revisional Authority has done no homework on its end but merely on basis of letter of JCIT pointing short comings, held that enquiry done by Ld. AO was not satisfactory. Infact where the Revisional Authority intends to set aside assessment order for lack of enquiry the direction in the order exercise of Revisional power should set or indicate the possible and prospective path of enquiry that the AO should follow further. Which is also not done in present case. The appeal of assessee is allowed and the impugned order u/s. 263 of the Act is set aside.
Issues Involved:
Assessment completed at nil income; Invocation of provisions of Section 263 of the Income Tax Act, 1961 by Revisional Authority; Adequacy of inquiry conducted by Assessing Officer; Validity of Revisional Authority's order. Analysis: 1. Assessment Completion at Nil Income: The assessee filed a return of income declaring NIL income for the assessment year 2015-16. The Assessing Officer (AO) issued a notice under section 143(2) of the Income Tax Act and completed the assessment at nil income. However, the Commissioner of Income Tax (Exemption) invoked Section 263 of the Act, citing lack of inquiries or verifications made by the AO. 2. Invocation of Section 263 by Revisional Authority: The Revisional Authority observed shortcomings in the AO's assessment order, including inadequately explained payments to specified persons, lack of evidence for certain submissions, and absence of Form 10 submission. The assessee challenged this invoking of Section 263, arguing that the AO had conducted thorough inquiries and justified the payments made. The Revisional Authority's order was based on a different view without conducting its own inquiry. 3. Adequacy of Inquiry by Assessing Officer: The Tribunal noted that the AO had conducted a detailed inquiry, seeking and receiving relevant information from the assessee regarding payments made to specified persons. The AO was satisfied with the explanations provided, including details of rent payments and salaries. The Tribunal found that the AO's assessment was not erroneous on the face of it and did not set a bad precedent for future assessments. 4. Validity of Revisional Authority's Order: The Tribunal emphasized that for Section 263 to be invoked, there must be a minimal inquiry to establish that the AO's order is erroneous and prejudicial to revenue. In this case, the Revisional Authority did not conduct any additional inquiry but relied on a letter from another authority. The Tribunal held that the Revisional Authority's decision lacked proper groundwork and failed to indicate a clear path for further inquiry, rendering the impugned order unsustainable. In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the Revisional Authority's order dated 26.03.2019 under Section 263 of the Income Tax Act, 1961.
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