ITAT: Where Sufficient Enquiry Done By AO, No Jurisdiction Can Be Presumed by PCIT u/s 263 IT Act
The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, titledM/s Venkatesh Technokraft Pvt. Ltd. (Appellant) v. The ITO (Respondent) ruled that the PCIT cannot assume jurisdiction under Section 263 of the Income Tax Act, 1961 (IT Act) when the Assessing Officer(AO) has made sufficient inquiry.
The ITAT coram of JM R.L. Negi and VP N.K. Saini said that considering the totality of the facts the Commissioner of Income Tax (CIT) was not justified in exercising his powers under Section 263 of the Act and considering the assessment order by the Assessing Officer (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 factual matrix of the case is that 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 inquiries 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 the 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 was 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 CIThas wrongly assumed jurisdiction under Section 263 of the Act to set aside the assessment passed by the AO 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 submitted that if at all the Pr. CIT was not satisfied from the inquiry made by the AO, he could have made the inquiry 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 AO 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 inquiry and only on the suspicion, the assessment order framed by the AO after the proper inquiry and application of mind, cannot be set aside.
However, the AO after appreciating the complete documentary evidence placed on record and applying his mind to the facts of the case accepted the evidence filed by the assessee and had taken a possible view.
The ITAT stated that 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.