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Issues Involved:
1. Whether the CIT was justified in setting aside the assessment order under section 263 of the Income-tax Act. Issue-wise Detailed Analysis: 1. Justification of CIT's Action under Section 263: The primary issue in this appeal is whether the CIT was justified in setting aside the assessment order under section 263 of the Income-tax Act. The relevant facts are that the assessee, a partnership firm, was subject to search operations under section 132 of the Act, which led to the discovery of duplicate sets of accounts indicating unaccounted business activities. The Assessing Officer (AO) completed the assessment under section 143(3), determining a total income of Rs. 4,77,472 based on these duplicate accounts. 2. CIT's Observations and Actions: The CIT observed that the AO's assessment order was erroneous and prejudicial to the interest of the revenue because the AO accepted numerous cash credits in the seized duplicate books without proper evidence or inquiry. Some creditors even denied advancing any amounts to the assessee. Hence, the CIT issued a show cause notice and subsequently set aside the assessment order, directing the AO to conduct a fresh assessment with proper inquiries. 3. Assessee's Arguments: The assessee contended that the CIT had no authority under section 263 to revise the assessment order, arguing that the AO had exercised his discretion properly under section 68 and section 132(4A). The assessee also cited the judgment of the Allahabad High Court in Pushkar Narain Sarraf v. CIT and the CIT(A)'s decision in a sister concern's case to support their position. 4. Tribunal's Analysis and Conclusion: The Tribunal examined the provisions of section 263, which allows the CIT to revise an assessment order if it is erroneous and prejudicial to the revenue. The Tribunal noted that the AO failed to make necessary inquiries into the genuineness of the cash credits and the creditworthiness of the creditors, which is a requirement under section 68. The Tribunal also referred to various judgments, including those of the Supreme Court and High Courts, emphasizing the AO's duty to investigate the facts stated in the return, especially when circumstances suggest further inquiry is prudent. The Tribunal rejected the assessee's reliance on section 132(4A), clarifying that while this section raises a statutory presumption about the correctness of entries in seized books, it does not override the need to prove the genuineness of transactions during regular assessment. The Tribunal also dismissed the assessee's argument that the CIT should not have set aside the entire assessment, noting that the CIT acted within his powers by directing the AO to reframe the assessment after proper inquiries. 5. Final Decision: The Tribunal upheld the CIT's order, concluding that the AO's failure to make necessary inquiries rendered the assessment order erroneous and prejudicial to the revenue. The appeal of the assessee was dismissed, confirming the CIT's direction to the AO to conduct a fresh assessment in accordance with the law.
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