Jeevan Investment & Finance (P) Ltd. v. CIT

INCOME TAX ACT, 1961

--Revision--Enquiry by AONot responded to or explained--No enquiry--Where any enquiry made by AO is not responded to with proper explanation, that would render the enquiry futile which means no enquiry at all. CIT was justified in invoking power of revision where necessary information as to method of valuation of shares was not furnished by assessee in its support nor the AO enquired therein to. --Assessee declared loss. AO accepted the loss and allowed the same to be carried forward to be set off against speculation profits. He assessed the income as 'Nil'. CIT suo motu sought to revise the assessment order opining that the extent to which the claim of loss on shares was allowed, made the order erroneous. Assessee submitted that AO had already examined the issue of loss on sale of shares and accepted the claim of the assessee. Held: Assessee provided various details during assessment proceedings, however, it failed to provide reply regarding the method of valuation of unlisted shares, except that unquoted shares were valued at cost. The question raised by AO was not responded to by assessee with some explanation. This rendered the enquiry commenced, futile. In fact, the CIT in his order specifically exercised powers under section 263 on the basis that the necessary information was not furnished by the assessee in support of its claim nor the AO enquired into the same. Thus, this was a case of non-enquiry and not inadequate enquiry. Therefore, the order of the AO was certainly erroneous and prejudicial to interest of revenue, hence, CIT was justified in invoking section 263.