The Income Tax Appellate Tribunal ( ITAT ), Ahmedabad Bench quashed revision order on the ground that there was no demonstration as to how order passed by the Assessing Officer (AO) is erroneous.
The assessee’s, Ravindra kumarHiralal Shah case was taken for scrutiny assessment and after calling for information by issuing notice under Section143(2) and 142(1) of the Income Tax Act and the assessment has been completed. The AO added Rs. 4 lakhs as the business income and Rs. 2 lakhs as the speculative profit for the relevant assessment year and determined the total income of Rs. 11 lakhs and demanded tax thereon.
The Principal Commissioner of Income Tax (PCIT) held that as per Explanation 2(a) of section 263 of the Income Tax Act, the order passed by the Assessing Officer under Section 143(3) of the Act was erroneous in so far as it is prejudicial to the interest of revenue and requires to be revised.
The PCIT held that the assessment order passed by the A.O. is without making proper inquires and verification, which should have been made, therefore the assessment order is erroneous and prejudicial to the interest of revenue.
The Counsel for the assessee contended that when the enquiry made by the Assessing officer is considered to be inadequate by the PCIT, that cannot make the assessment order erroneous. There is no law which provides for the extent of enquiry being called adequate.
The Counsel further submitted that when an Assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order and prejudicial to the interests of the revenue, unless the view taken by the Assessing Officer is unsustainable in law.
A Coram consisting of Annapurna Gupta, Accountant Member and T.R. Senthil Kumar, Judicial Member observed that “The PCIT has not demonstrated in his order how the order passed by the Assessing Officer as erroneous order. Therefore in our considered view, the invocation of Revision proceedings under Section 263 of the Act itself unjustifiable, against the provisions of law and therefore, the same is hereby quashed.”
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