2019 (5) TMI 1606 - HC - Income Tax

Revision u/s 263 by CIT - fundamental requirement for assumption of jurisdiction u/s 263 - No enquiry by CIT undertaken - ITAT set aside the impugned order by the Pr. CIT. - HELD THAT - Order of the Pr. CIT only contains the conclusion arrived at by the Pr. CIT that the order of the AO is erroneous but gives no indication that the Pr. CIT undertook any enquiry before arriving at such conclusion. Indeed the jurisdictional requirement of Section 263 of the Act does not appear to have been kept in mind in the present case by the Pr. CIT. Consequently, the Court finds no error having been committed by the ITAT in setting aside the said order of the Pr. CIT. No substantial question of law arises

Summary

Issues:
1. Appeal against ITAT order for AY 2009-2010
2. Justification of setting aside order under Section 263 of the IT Act

Analysis:
1. The appeal before the High Court was against an ITAT order for the Assessment Year 2009-2010. The Revenue questioned whether the ITAT was correct in setting aside an order passed by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961.

2. The original assessment for the year in question was conducted by the Assessing Officer under Section 143(3) of the Act. The Principal Commissioner later initiated a review under Section 263, citing reasons such as inadequate verification of sundry creditors, unexplained fall in gross profit, and disproportionate household expenditure by the Assessee.

3. After issuing a show cause notice and considering the Assessee's reply, the Principal Commissioner concluded that the original assessment was erroneous and prejudicial to revenue due to the AO's failure to conduct proper inquiries. The Assessee challenged this decision before the ITAT.

4. The ITAT observed that the Assessee had provided necessary details during the original assessment. It found that the Principal Commissioner did not conduct any further inquiry before deeming the AO's order as erroneous. As per Section 263, a proper inquiry is a prerequisite for invoking jurisdiction, leading the ITAT to set aside the Principal Commissioner's order.

5. Upon hearing arguments from both sides, the High Court noted that the Principal Commissioner's order lacked details of any inquiry conducted before deeming the AO's order as erroneous. The Court found that the jurisdictional requirement under Section 263 was not met in this case.

6. Consequently, the High Court upheld the ITAT's decision to set aside the Principal Commissioner's order, as no substantial question of law arose. The appeal was dismissed, affirming the ITAT's ruling.