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Issues:
1. Validity of assessment cancellation under section 263 of the IT Act for the assessment year 1996-97. Analysis: The appeal was filed against the CIT's order canceling the assessment under section 263 of the IT Act. The CIT's power under section 263 requires informing the assessee of the charges to be addressed. The grounds for action under section 263 must be clearly stated in the show-cause notice. The show-cause notice in this case cited two reasons for considering the assessment erroneous and prejudicial to the Revenue's interest. The first reason was the absence of a partnership deed or certified copy, affecting the clarity of profit division. The second reason was the failure to credit interest received to the profit and loss account, resulting in underassessment. The assessee argued that the partnership deed was duly certified and presented to the AO during assessment proceedings, challenging the CIT's claim of non-filing. The CIT also raised concerns about the taxability of a refund and interest under section 244A. The CIT directed the AO to verify the contentions regarding these amounts. Additionally, the CIT observed discrepancies in the payment of salaries and interest to partners compared to the partnership deed's provisions. The learned CIT set aside the assessment, citing errors in granting registration to the firm and non-compliance with certain provisions of the Act. The assessee contended that the CIT exceeded the show-cause notice's scope by delving into broader issues beyond what was initially raised. The CIT's observations and findings were deemed illegal and a violation of natural justice principles. The Tribunal found that the conditions for invoking section 263 were not met. The CIT's claim of non-filing of the partnership deed was factually incorrect, as the deed for the relevant year was on record. The Tribunal also noted that the CIT's assumptions regarding remuneration and interest payments were not sufficient to deem the assessment erroneous or prejudicial to the Revenue's interest. The Tribunal emphasized that the CIT's jurisdiction under section 263 should be based on concrete evidence and not mere doubts or assumptions. The Tribunal concluded that the CIT's order under section 263 was unjustified and canceled it. The appeal was allowed in favor of the assessee.
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