The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench ruled that the PCIT can not assume jurisdiction under section 263 when AO has made sufficient enquiry.
The assessee, M/s Venkatesh Technokraft Pvt. Ltd. filed its return of income declaring an income of Rs. 19,52,040/- which was processed under section 143(1) of the Act, later on the case was selected for scrutiny. The AO assessed the income which was returned by the assessee.
The Pr. CIT thereafter exercised his revisionary power under section 263 of the Act and observed that proper and sufficient enquiries had not been made by the A.O. which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the Revenue.
The Pr. CIT observed that the AO asked the assessee to produce the Directors of the investor companies. The Assessee reiterated the submissions which were made earlier and also furnished the documentary evidence regarding source of source of the deposits in banks of the investing companies from where funds were transferred to the assessee’s bank account through banking channels only. It was stated that the same were also produced before the AO. It was further stated that since all the investing companies and their respective Directors were based in Calcutta therefore the commission may be issued in accordance with the provisions of law to procure whatever further information is required.
The assessee raised the issue that Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Act to set-aside the assessment passed by the Assessing Officer in as much as the order is neither erroneous nor prejudicial to the interest of Revenue and as such the assumption of jurisdiction under section 263 of the Act is beyond his competence.
The assessee urged that Ld. Counsel for the Assessee submitted that if at all the Ld. Pr. CIT was not satisfied from the enquiry made by the A.O. he could have made the enquiry himself but this exercise had not been done by him, therefore, the impugned order passed by the Pr. CIT may be quashed.
It was reiterated that the A.O. asked the assessee to furnish the information relating to investor companies which were furnished vide letter, therefore it was not a case of lack of enquiry and only on the suspicion, the assessment order framed by the AO after the proper enquiry and application of mind, cannot be set aside.
The coram of R.L.Negi and N.K.Saini said that As regards to the allegation that the assessee could not produce Director of the Investor companies, it is noticed that the assessee furnished confirmatory letters received from the Investing companies along with copies of the Balance Sheets, copies of Ledger Accounts of the broker etc and requested to the Ld. Pr. CIT to issue commission as per provisions of Section 131(1)(d) of the Act, since all the Directors of Investing Companies were permanently based in Kolkata which was nearly 1700 Km away from Ludhiana and therefore the assessee requested AO to issue the commission. However the AO after appreciating the complete documentary evidence placed on record and applying his mind to the facts of the case, accepted the evidences filed by the assessee and had taken a possible view.
“The Pr. CIT was not justified in exercising his powers under section 263 of the Act and considering the assessment order passed by the AO as erroneous and prejudicial to the interest of the Revenue, the same is quashed and the assessment order passed by the AO is restored,” the ITAT said.
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