INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Invocation of jurisdiction - Pr. CIT alleged lack of third party investigation on AO's part

Pr. CIT invoked jurisdiction under section 263 on the ground that AO had not examined genuineness of the commission claimed as paid and had not made enquiries from third parties i.e., commission agents and thus, it was a case of lack of enquiry which made assessment order not only erroneous but also prejudicial to the interest of revenue. Accordingly, CIT passed order under section 263. Held: As evident, AO had called for information on the claim of deduction of expenditure made by assessee and in response thereto, assessee had filed voluminous details. Payments were made on receipt of claim bills through banking channels. Tax was also deducted from concerned payments. The bills raised by the commission agents along with the list of electric items sold by them based on which commission was claimed was placed before AO. This is also a fact that assessee had been paying and claiming as a deduction commission paid to agents, for all the previous as well as for the subsequent assessment years the issue whether third party enquiries have to be made or not during the course of investigation, was the prerogative of the AO, as he was the investigator. The type, nature and extent of investigation was the prerogative of the AO. The Pr.CIT could not invoke his power under section 263 for revising an order passed under section 143(3) for the reason that in his view, the investigation/enquiry should have been conducted in a particular manner or to a particular extent. Accordingly, order passed under section 263 was set aside.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

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