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2023 (4) TMI 680 - AT - Income TaxRevision u/s 263 - Non disclosure of income on account of sundry receivables - as per CIT AO has not even mentioned the most important fact that during the year under consideration a survey was conducted on the premises of the assessee and substantial income was disclosed - whether AO considered the disclosure of income properly and determined the income of the assessee for the year under consideration on the basis of documentary evidences available at the time of records and if any further clarification or verification or enquiry was to be conducted whether such action has been taken or not? - HELD THAT - It is important to mention here that the AO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the AO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in the section 263 includes the failure to make such an inquiry becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. We note that object of section 263 of the Act is to ensure that leakage of Revenue is plugged and tax due to the state not reaching the coffers of the state is prevented by exercise of revisional jurisdiction by the Principal Commissioner/Commissioner. Besides just obtaining the information by AO/and just having documents in assessment file, in respect of the issue raised by the PCIT cannot be taken as akin to enquiring about the information in respect of the issue raised by the PCIT. In appropriate cases, AO should conduct further enquiry also. In the assessee's case under consideration, what the talk about further enquiry, the AO has not made any enquiry and accepted the return of income filed by the assessee, as it is, without enquiring about the issue raised by the PCIT. AO did not issue any notice u/s 142(1) of the Act to conduct enquiry. Besides, no any reply was given by assessee. Whatever return of income filed by the assessee has been accepted by AO, blindly and without conducting any enquiry, hence order passed by the AO is erroneous as well as prejudicial to the interest of Revenue. Thus we are of the view that revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 of the Act was in tune with the facts and evidences on record, as narrated above, therefore we uphold the order of ld PCIT and dismiss the appeal of the assessee.
Issues Involved:
1. Jurisdictional conditions for passing an order under section 263. 2. Adequacy of inquiry by the Assessing Officer (AO) regarding income declared during the survey. 3. Whether the assessment order was "erroneous" and "prejudicial to the interest of the revenue." Summary of Judgment: Issue 1: Jurisdictional Conditions for Passing an Order under Section 263 The assessee challenged the correctness of the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263, arguing that the jurisdictional conditions were not satisfied. The Tribunal noted that the PCIT exercised jurisdiction under section 263 due to the AO's failure to verify the nature of the disclosed income during the survey and its proper classification for taxation purposes. Issue 2: Adequacy of Inquiry by the Assessing Officer The PCIT observed that the AO did not conduct a detailed inquiry into the income declared during the survey. The AO failed to verify whether the disclosed income was unaccounted purchases, sales, expenses, or investments, and did not apply the provisions of sections 68/69/69A/69B/69C as mandated. The Tribunal found that the AO had not scrutinized the issue raised by the PCIT, as there was no mention of the survey findings or any related inquiry in the assessment order. Issue 3: Erroneous and Prejudicial to the Interest of Revenue The Tribunal agreed with the PCIT that the assessment order was "erroneous" and "prejudicial to the interest of the revenue" because the AO accepted the returned income without proper verification of the survey disclosures. The Tribunal emphasized that the AO is required to ascertain the truth of the facts stated in the return and conduct necessary inquiries, which was not done in this case. The Tribunal upheld the PCIT's order to revise the assessment and directed the AO to reframe the assessment after making proper inquiries. Conclusion: The Tribunal dismissed the appeal filed by the assessee, upholding the PCIT's order under section 263 and confirming that the AO's assessment was erroneous and prejudicial to the revenue's interest. The AO was directed to conduct a fresh assessment with proper inquiries into the disclosed income during the survey.
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