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Issues Involved:
1. Validity of the jurisdiction assumed under Section 263. 2. Adequacy of the enquiries conducted by the Assessing Officer (AO). 3. Taxability of capital gain arising from the sale of business and brand name. 4. Relevance and admissibility of the material found during the survey under Section 133A. Issue-wise Detailed Analysis: 1. Validity of the Jurisdiction Assumed Under Section 263: The learned counsel for the assessee argued that the CIT did not specify in the notice issued under Section 263 how the errors allegedly committed by the AO were prejudicial to the interest of the Revenue. It was contended that the expression "prejudicial to the interest of the Revenue" means a loss caused to the Revenue as a result of errors, and unless the CIT points out specifically how the errors resulted in revenue loss, the prerequisite condition for assuming jurisdiction under Section 263 is not satisfied. The Tribunal noted that the CIT held the assessment erroneous and prejudicial to the interest of the Revenue due to the lack of proper enquiries by the AO. The Tribunal concluded that the assumption of jurisdiction by the CIT was in accordance with law, as the AO's failure to make necessary enquiries rendered the assessment erroneous and prejudicial to the interest of the Revenue. 2. Adequacy of the Enquiries Conducted by the AO: The CIT identified that the AO accepted expenses aggregating to Rs. 285.41 lacs without making proper inquiries as to their genuineness, which was necessary given the facts and circumstances of the case. The Tribunal observed that the CIT had specifically pointed out the enquiries that the AO ought to have made, and there was no evidence to show that such enquiries were not required or had been made by the AO. The Tribunal upheld the CIT's decision, stating that the AO's failure to conduct proper and sufficient enquiries made the assessment erroneous and prejudicial to the interest of the Revenue. 3. Taxability of Capital Gain Arising from the Sale of Business and Brand Name: The CIT raised the issue of the taxability of capital gain arising from the sale of the assessee's business and brand name, which was not initially mentioned in the notice issued under Section 263. The Tribunal noted that the CIT raked up this new issue based on material found during a survey conducted under Section 133A after the initial notice was issued. The Tribunal held that the CIT's reliance on this new issue was beyond the scope of the revision proceedings under Section 263, as it was not part of the original notice. The Tribunal deleted the direction given by the CIT to the AO to examine the issue of capital gain, concluding that it was not tenable. 4. Relevance and Admissibility of the Material Found During the Survey Under Section 133A: The Tribunal observed that the CIT relied on material found during the survey conducted after the initial notice under Section 263 was issued. The Tribunal held that the CIT could rely on information, documents, or reports that came to light subsequent to the passing of the AO's order, provided they formed part of the record at the time of examination by the CIT. However, since the survey was conducted after the initial notice, the Tribunal concluded that the material found during the survey could not be considered part of the record available at the time of examination by the CIT. Therefore, the reliance on such material to allege that the AO's order was erroneous and prejudicial to the interest of the Revenue was not in accordance with law. Conclusion: The Tribunal upheld the CIT's assumption of jurisdiction under Section 263 due to the AO's failure to conduct proper enquiries, making the assessment erroneous and prejudicial to the interest of the Revenue. However, the Tribunal deleted the CIT's direction to the AO to examine the issue of capital gain arising from the sale of the assessee's business and brand name, as it was beyond the scope of the revision proceedings under Section 263. The appeal of the assessee was partly allowed.
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