In a significant case the Delhi High Court held that inadequacy of enquiry by the AO with the certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Income Tax Act,1961
The respondent Clix Finance India Pvt. Ltd is a Non-Banking Financial Company [ “NBFC” ] engaged in the business of providing finance to industry, trade etc. through hire purchase, lease and loans. After passing the assessment order of the respondent CIT quashed the assessment order by passing a revision order.
Aggrieved by the order the respondent filed an appeal before the ITAT who allowed the appeal filed by the respondent. Hence aggrieved by the Petitioner/revenue filed appeal before the court for set aside the ITAT order.
During the proceedings, counsel for the petitioner submitted that the revisional authority has rightly held that the AO has failed to make any enquiry and merely accepted the version of the respondent-assessee. Therefore the order passed by the AO without carrying out necessary verification, would be deemed to be erroneous as per Explanation 2 to Section 263 of the Income Tax Act.
According to the Counsel for respondent instant case cannot be said to be a case of lack of enquiry as the Revenue has itself not denied that both the issues in question were specifically enquired by the AO.Further the counsel argued that at the time of scrutiny assessment, the AO had specifically put an enquiry about the provision for doubtful assets amounting to Rs. 8,34,22,265/-
After analyzing the facts and submissions the division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja, observed that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Income Tax Act.
Therefore the bench concluded that both the claims were duly examined during the original assessment proceedings itself and neither there was any error nor the same was prejudicial to the interests of the Revenue.
Thus the court dismissed the appeal filed by the petitioner/revenu.
Prashant Meharchandani, Senior standing counsel who appeared for the petitioner and Sachit Jolly, Advocate who appeared for the revenue.
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