Facts of the Case

The assessee’s case was assessed by the Assessing Officer, who passed an assessment order after examining the relevant material and details furnished.

Subsequently, the Commissioner of Income Tax (Central) invoked revisionary jurisdiction under Section 263, holding that the assessment order was erroneous and prejudicial to the interests of the Revenue.

The Commissioner set aside or modified the assessment order with directions for fresh examination. Aggrieved by this action, the assessee preferred an appeal before the Tribunal.

Issues Involved

  1. Whether the assessment order passed by the Assessing Officer was erroneous.
  2. Whether it was prejudicial to the interests of the Revenue.
  3. Whether the Commissioner validly exercised powers under Section 263.
  4. Whether revision can be invoked merely because the Commissioner holds a different view.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that the Assessing Officer had conducted proper inquiries and applied his mind before passing the assessment order.
  • It was argued that the order could not be termed erroneous merely because the Commissioner disagreed with the conclusions reached.
  • The assessee maintained that the twin conditions of Section 263 — “erroneous” and “prejudicial to the interests of Revenue” — were not satisfied.
  • Therefore, the revision proceedings were claimed to be invalid.

Respondent’s (Revenue’s) Arguments

  • The Revenue supported the Commissioner’s action, asserting that the Assessing Officer failed to make adequate inquiries on certain material issues.
  • Such failure rendered the assessment order erroneous and prejudicial to Revenue.
  • The Commissioner was therefore justified in invoking revisionary powers under Section 263.

Court Order / Findings (ITAT)

  • Revision under Section 263 can be exercised only when the assessment order is both erroneous and prejudicial to the interests of Revenue.
  • If the Assessing Officer has made inquiries and adopted a plausible view based on the material available, the order cannot be revised merely because the Commissioner prefers another view.
  • Inadequate inquiry is distinct from lack of inquiry; revision is justified only where there is a clear absence of inquiry on material issues.

Important Clarification

  • Taxpayers facing revision proceedings
  • Search and central circle assessments
  • Interpretation of “erroneous and prejudicial” conditions
  • Limits on supervisory powers of tax authorities

Link to download the order –https://itat.gov.in/public/files/upload/1606471191-Umesh%20Kumar%20Sindhi%20pdf.pdf

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