Jurisdiction u/s 263 can invoke only on Inadequacy in Enquiry: ITAT sets aside Revisional Order [Read Order]

Jurisdiction under section 263 can invoke only on inadequacy in enquiry done by Assessing Officer and the Bengaluru bench of Income Tax Appellate Tribunal (ITAT) has set aside revisional order.

The assessee challenged the order of the Principal Commissioner of Income Tax (PCIT) Hubli passes u/s. 263 of the Income Tax Act, 1961 (Act) dated 25.03.2022 for AY 2017-18.

The assessee,Vanishree Holabasu Shettar engaged in the grocery (Aadat) business. The assessment was completed u/s. 143(3) of the Act assessing the total income at Rs.18,21,581/- after disallowing the agricultural expenses amounting to Rs.1,27,461/-. The PCIT set aside the assessment order u/s. 143(3) for the reason that the same was erroneous and prejudicial to the interest of the Revenue.

The PCIT invoked the jurisdiction by stating that the AO has verified only the agricultural income of the assessee and made the addition and there is nothing mentioned in the order to claim that the business income of the assessee is verified.

It was clear that the twin conditions should be satisfied to invoke Section 263 of the Act. The PCIT have the power to set aside the assessment order and send the matter for a fresh assessment if he was satisfied that further enquiry is necessary and the assessment order is prejudicial to the interest of the Revenue.

It was contended by the assessee that the AO has given a clear finding concerning the cash deposits done by the assessee during the demonetization period stating that the source for the cash deposit was the sale proceeds of the assessee’s business.

The PCIT observed and has stated that the further enquiry would have revealed if the cash deposited in bank a/c out of either unexplained cash or SBNs received after the notified date was in violation of law and would have resulted in unexplained income u/s. 69A of the Act.

The Tribunal observed that the explanation (2) to Section 263 of the Act could be invoked only in a very gross case of inadequacy in enquiring or where the mandatory enquiries are not conducted have reached finality.

Shri George George K, Judicial Member and MsPadmavathy S, Accountant Member have held that the PCIT is not justified in setting aside the order or the AO for examining afresh and quashed the order of PCIT. The appeal is allowed in favour of the assessee.

The appellant was represented by Shri Ravi Shankar and the respondent was represented by Shri Srinivas T. Bidari.

To Read the full text of the Order CLICK HERE

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