The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the revisional order under section 263 of the Income Tax Act, 1961 cannot be merely based on suspicion.
During the original assessment proceedings, the Assessing Officer issued a questionnaire along with notice u/s 142(1) dated 19.12.2016. the assessee had filed his reply regarding the queries raised by the Assessing Officer. The Assessing Officer after issuing notices under section 133(6) of the Act, framed assessment wherein he duly explained the transaction related to M/s Maa Kalika Foundaries Pvt. Ltd., introduction fresh capital and also description “CAS CHQ XFER WD”. However, the Principal Commissioner invoked his power under section 263 of the Act and observed that the order was erroneous and against the interests of the Revenue.
On first appeal, the Commissioner (Appeals) confirmed the revisional order.
A two-Member bench comprising Shri Kul Bharat, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member observed that the Pr.CIT has not made out a case of any prejudice caused to the Revenue.
“The law is well settled that for exercising power u/s 263 twin conditions are required to be satisfied – (i) that the order should be erroneous and; and (ii) it should cause prejudice to the interests of Revenue. Moreover, it is not the case where the assessee failed to substantiate his claim, rather the explanation along with supporting evidences were placed before the assessing officer and the learned Pr.CIT. In our considered view merely on the basis of suspicion, invoking of powers u/s 263 would not be justified. The concluded assessment should be revised where there is blatant error committed by the assessing officer, which culminated into the prejudice to the interest of Revenue. But where the Assessing Officer made necessary inquiry and satisfied itself about the explanation offered to him, revising such an order is highly unjustified and contrary to the ratio laid down by the Hon’ble Supreme Court in the case of M/s Malabar Industrial Co. Ltd. Vs. CIT. Therefore, in the present case the action of the learned Pr.CIT is unjustified and the same is hereby set aside and the assessment is restored,” the Tribunal said.
Sh. Ankit Gupta, Advocate appeared for the assessee.
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