Facts of the Case

The assessee, Shri Dinesh Kumar Singh, was subjected to scrutiny assessment under Section 143(3) of the Income-tax Act. Subsequently, the Principal Commissioner of Income Tax (PCIT) invoked revisionary jurisdiction under Section 263, holding that the assessment order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interests of revenue. The PCIT set aside the assessment order and directed the Assessing Officer to conduct fresh inquiries and frame a denovo assessment.

Issues Involved

  1. Whether the conditions prescribed under Section 263 for revision were satisfied.
  2. Whether the assessment order was indeed erroneous and prejudicial to the interests of revenue.
  3. Whether the Assessing Officer had conducted adequate inquiry during original assessment proceedings.
  4. Whether the PCIT was justified in setting aside the assessment order for fresh examination.

Petitioner’s (Assessee’s) Arguments

  • The Assessing Officer had duly examined the books of account and relevant material during scrutiny.
  • Necessary inquiries were conducted before passing the assessment order.
  • The PCIT invoked Section 263 merely on the ground of inadequate inquiry or a different opinion.
  • Revision cannot be based on suspicion or desire for deeper investigation when the AO has applied his mind.
  • Therefore, the revision order was invalid and liable to be quashed.

 Respondent’s (Revenue’s) Arguments

  • The assessment order lacked proper examination of certain issues and transactions.
  • Failure of the AO to make detailed inquiries rendered the order erroneous.
  • Such deficiencies were prejudicial to the interests of revenue.
  • The PCIT was justified in exercising revisionary powers and directing fresh assessment.

Court Order / Findings (ITAT)

  • Section 263 can be invoked only when the assessment order is both erroneous and prejudicial to the interests of revenue.
  • If the Assessing Officer has conducted inquiries and applied his mind, the order cannot be revised merely because the PCIT holds a different view.
  • Inadequate inquiry does not automatically render an order erroneous unless it results in unsustainable conclusions.
  • Revisionary powers cannot be exercised to conduct fishing or roving inquiries.

Important Clarification by the Tribunal

  • Section 263 is a supervisory power, not an appellate power.
  • The PCIT cannot substitute his judgment for that of the Assessing Officer merely because he believes further inquiry was desirable.
  • Revision is permissible only where there is clear lack of inquiry or incorrect application of law causing prejudice to revenue.

Link to download the order  https://itat.gov.in/public/files/upload/1667544498-Dinesh%20Kumar%20singh.pdf

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