INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Complete lack of enquiry by AO -

Assessment in case of assessee was completed under section 143(3). Subsequently, PCIT noticed that cash payment made by the assessee towards purchase of stock-in-trade was hit by the provisions of section 40A(3) but the AO did not invoke the said provision. Further, the PCIT also noticed that the deduction under section 80C to the extent of Rs. 1,00,000 for tuition fee paid for self was claimed in the return of income and was allowed by the AO. Accordingly the PCIT issued show cause notice under section 263 and concluded that the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue. Held: Although AO passed a very lengthy assessment order, however, the issue of applicability of section 40A(3) and correctness of claim of deduction under section 80C were not taken up for verification by him. Thus, the assessment order was completely silent on those issues and there was nothing on record to suggest that the AO had even raised any query on the said two issues. Therefore, the case of the assessee would fall in the category of complete lack of enquiry on the said two issues. Accordingly, the lack of enquiry on the part of the AO rendered the assessment order erroneous in so far as prejudicial to the interests of the Revenue and hence, the exercise of jurisdiction under section 263 was valid and proper.

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 80C

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