INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - No lack of enquiry on AO's Part -

Pr. CIT treated order passed by AO as erroneous and prejudicial to the interest of revenue on the ground that assessee had shown unsecured loan of Rs. 1.74 crores and AO had not looked into adverse evidences while completing assessment. He had not examined antecedents of the company and creditworthiness while accepting the loans. Held: Reasons recorded for reopening of assessment and reasons for initiating proceedings under section 263 were the same and based on the same material. Allegation in the show cause notice issued under section 263 was that AO failed to examine and that no enquiry was conducted into the veracity of the loans by AO was factually incorrect. It is well- settled preposition of law that inadequate enquiry cannot be a ground for exercising of revisionary powers under section 263. It is for AO to determine the extent of enquiry and investigation to be done on a particular issue. From the papers on record, it was clear that AO had conducted enquiries both with assessee as well as with the third parties and on receipt of all the information, accepted the loans as genuine. Pr. CIT could not substitute his opinion for that of AO. Also, Pr. CIT had not conducted any verification or prima facie investigation of his own to come to a conclusion that order passed by AO was erroneous and prejudicial to the interest of the revenue. Therefore, order passed by Pr. CIT under section 263 was bad in law.

Relied:Spectra Share and Scrips Pvt. Ltd. v. CIT (2013) 354 ITR 35 (AP) : 2013 TaxPub(DT) 1603 (AP-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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