The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that it is difficult to hold that the action of the AO is unintelligible as the revisionary proceeding was intiated in the event of ‘absence of inquiries or verifications which should have been made’, thus set aside the order under Section 263 of Income tax Act,1961.
The assessee Ellora Infratech Pvt. Ltd was assessed under Section 143(3) of the Income Tax Act relevant to Assessment Year 2013-14. The assessee had filed the return at loss of Rs.3,44,964/- which was assessed at a loss of Rs.2,63,933/-.
Subsequent to the assessment, the Principal Commissioner of Income Tax (PCIT) received a proposal from the new incumbent Assessing Officer (AO) vide its communication seeking invocation of supervisory jurisdiction under Section 263 of the Income Tax Act. Thereafter, in exercise of powers conferred under Section 263 of the Income Tax Act, the PCIT issued Show Cause Notice (SCN) to the Assessee on the next date under Section 263 of the Income Tax Act alleging that the impugned assessment order is erroneous in so far as it is prejudicial to the interest of the Revenue for the reasons mentioned the SCN.
The PCIT thus held that the order passed under Section 143(3) of the Income Tax Act is erroneous and prejudicial to the interest of the revenue and consequently cancelled and set aside the assessment order with a direction to the AO to pass a fresh reasoned assessment order based on facts and issues discussed in the revisional order.
Aggrieved by the order the assessee filed an appeal before the Tribunal belatedly by about 230 days.
The Authorised Representative of the assessee (AR) submitted that revision based on inadequacy or insufficiency of enquiry without making any enquiry himself to raise probabilities of any misdemeanor is contrary to the plethora of judicial precedents.
The Departmental Representative (DR) submitted that no serious prejudice has been caused to the assessee as the assessee would be entitled to counter all allegations and place all evidences in the course of assessment post revisional order. The DR thus submitted that no interference with the revisional action is called for.
The Tribunal comprising of Chandra Mohan Garg, Judicial Member and Pradip Kumar Kedia, Accountant Member observed that clause (a) of Explanation (2) to Section 263 of the Income Tax Act inserted by Finance Act, 2015 seeked to clarify that the order passed by the lower authorities to be erroneous in so far as prejudicial to the interest of the Revenue in the event of ‘absence of inquiries or verifications which should have been made’.
The Tribunal held that it is difficult to hold that the action of the AO is unintelligible. In our view, the AO has not committed any error in not chasing ‘will o the wisp’ in the absence of any brazen circumstances available. The basis of issuance of show cause notice under Section 263 of the Income Tax Act does not appear to be tenable in law in the peculiar set of facts.
The assessment order passed under Section 143(3) of the Income Tax Act could not be frustrated in the circumstances. The impugned revisional order passed under Section 263 of the Income Tax Act thus quashed and set aside.
The appeal of the assessee was allowed.
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