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TMI Blog2024 (8) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... stances can certainly be termed as inadequate inquiry. Therefore, in our opinion, the Ld.PCIT is not wrong in assuming jurisdiction u/s. 263 of the Act. Therefore, the first ground of the assessee s appeal is dismissed. Addition based on inference from the impounded documents - Validity of a notice issued u/s 263 based on incorrect grounds or unsupported evidence can be questioned. If the reasons cited in the notice are factually incorrect or legally unsustainable, the notice can be challenged as invalid. PCIT must have sufficient evidence to support the claim that the order is erroneous and prejudicial to the interests of the revenue. Mere suspicion or conjecture is not sufficient. As evident that for the Ld.PCIT to invoke Section 263 of the Act, it must be conclusively proven that the AO's order is both erroneous and prejudicial to the interests of the revenue. In this case, the AO made inadequate inquiries, during the proceedings, the AO could not provide any documentary evidence that formed the basis for reopening the assessment. This lack of evidence, supports the conclusion that the Ld.PCIT's action of setting aside the order of AO and directing him to pass a fresh or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 22-11-21 asking to provide required details. In the same notice, the AO provided the basis of forming reason to believe and details of escapement of income. On 09-12-2021, another notice u/s. 142(1) of the Act issued by the AO reminding the assessee to file all the details as required vide earlier notices. The assessee, in response to the said notice dated 09-12-2021, asked to provide the document on which the AO relied to conclude that there is escapement of income. The AO issued one more notice u/s. 142(1) of the Act on 24-01-2022 pointing out the non-compliance of the assessee and requesting the assessee to provide the details as called for. 2.3. The AO issued show cause notice u/s. 144 of the Act on 10-02-2022 highlighting the non-compliances to the notices issued earlier and giving draft computation of income adding Rs. 22,13,735/- u/s. 68 of the Act. The assessee, in reply to this notice, once again sought details of documentary evidence on which the AO has relied on. The assessee also furnished the details of bank statement, cash book and copy of purchase deed of immovable property. On the same day, i.e. on 10-02-2022, the assessee also submitted response to the said not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made, the same is required to be deleted on the ground of violation of the principles of natural justice. 3. The evidence brought on record without the knowledge of the assessee and used against him without giving him an opportunity to rebut it offends the principles of natural justice. There must be something more than bare suspicion to support the assessment, (Dhakeshwari Cotton Mills Ltd v. CIT (1954) 26 ITR 775 (SC). 4. In the caseof State of Kerala Vs. K.T. Shaduli Yusuf (1977), the Hon ble Supreme Court remarked that the tax authorities, which are empowered to assess tax, discharge quasi-judicial functions, and they are bound to observe the principles of natural justice while passing the order. 5. A Constitution Bench of this Court in the case of State of M. P. v. Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross examining the witnesses examined by that party. Not providing the said opportunity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther took us through the order of the Ld.PCIT and argued that the details relied upon by the Ld.PCIT in assuming his jurisdiction u/s 263 are not related to the assessee as no where there is mention of the plot number and name of the assessee. There is a reference of some Shri Tushar J. Bhalani in the order or the Ld.PCIT (page no. 4) but that is not assessee. The Ld.AR further argued that the Ld.PCIT, from the impounded material, has drawn only inference that the details are of the assessee. He once again stated that the assessee has not paid any cash against purchase of immovable property. 4.2. The Ld.AR placed reliance on the decision of co-ordinate bench in case of Rolesh Somchanbhai Shah Vs. ACIT, Circle-5(2)(1) (ITA No. 782/Ahd/2023), where the reliance was placed on the judgement of the Hon ble High Court of Gujarat in case of PCIT Vs. Kaushik Nanubhai Majithia (Tax Appeal No. 20 of 2024). 5. The Ld.DR, on the other hand, relied on the order of the Ld.PCIT and explained that the Ld.PCIT has rightly passed order on the basis of on the impounded documents. 6. We have heard the contentions of both the parties, perused the material available on record. We have noted the facts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as only inferred from the said document that the assessee has paid cash against purchase of immovable property. The assessee has also denied that he has paid any cash against the said transaction. The PCIT also has failed to prove that the cash is paid by the assessee. 6.4. We have also considered the judicial pronouncements relied upon by the Ld.AR. Given the principles established by these judicial precedents, the validity of a notice issued under Section 263 of the Act based on incorrect grounds or unsupported evidence can be questioned. If the reasons cited in the notice are factually incorrect or legally unsustainable, the notice can be challenged as invalid. The Ld.PCIT must have sufficient evidence to support the claim that the order is erroneous and prejudicial to the interests of the revenue. Mere suspicion or conjecture is not sufficient. 6.5. Based on the detailed analysis of the facts and judicial precedents, it is evident that for the Ld.PCIT to invoke Section 263 of the Act, it must be conclusively proven that the AO's order is both erroneous and prejudicial to the interests of the revenue. In this case, the AO made inadequate inquiries, during the proceedings, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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