Prateek Madhan Vs PCIT (ITAT Delhi)
Delhi ITAT: PCIT Cannot Invoke Section 263 Merely Because He Prefers a Different View; ₹5.66 Crore Section 54 Claim & Cost of Removing Property Encumbrances Upheld
The Delhi ITAT quashed the PCIT’s revisionary order under section 263, holding that the assessment could not be branded erroneous for lack of enquiry when the AO had raised specific queries, obtained detailed replies and documentary evidence, and thereafter accepted the assessee’s position.
The assessee, a real-estate consultant, had sold a house for ₹14 crore. During reassessment, the AO specifically examined the cost of improvement and the assessee’s section 54 deduction of ₹5,66,40,885 and, after considering the documents furnished, accepted the returned income. The PCIT nevertheless invoked section 263 alleging inadequate enquiry on these issues.
Cost of removing encumbrances: The assessee had incurred expenditure towards getting the property vacated, settling disputes/damages and paying L&DO charges. The ITAT held that incidental expenditure incurred to make a property transferable with clean title, remove encumbrances and thereby enhance its market value can constitute cost of improvement. It relied, inter alia, on CIT v. Piroja C. Patel, CIT v. Abrar Alvi and CIT v. Bradford Trading Co. (P) Ltd. The AO’s acceptance was therefore a possible view which could not be disturbed u/s 263 merely on the allegation of inadequate enquiry.
Section 54 claim: The PCIT treated the new property as merely agricultural land. However, the agreement showed that the property comprised 12 bighas of land together with a tube well, electricity connection and approximately 28,000 sq. ft. of superstructure/constructed area. The Tribunal observed that the PCIT had overlooked this crucial fact.
The ITAT further held that for section 54, purchase/acquisition of the property is material; it is not necessary that the assessee should have become its registered owner. Relying on Delhi HC decisions in Balraj v. CIT and CIT v. R.L. Sood, it reiterated that acquiring substantial domain over the new residential property is sufficient compliance.
Importantly, the Tribunal held that where the PCIT alleges inadequate or lack of enquiry, he cannot simply remit the matter to the AO for a fresh investigation. He must himself undertake at least a minimal enquiry and establish how the assessment order is erroneous.
Since the AO had made relevant enquiries, considered substantive evidence and adopted a legally permissible view, a possibly different view of the PCIT could not justify revision under section 263. The assessee’s appeal was accordingly allowed and the section 263 order quashed.
Cases Discussed
- Commissioner of Income Tax 7 vs M/s. Paville Projects Pvt. Ltd., (Civil Appeal no. 6126 of 2021), [2023] 453 ITR 447
- ACIT, Circle 24(1), New Delhi Vs. Pushkar Dutt Sharma (2015) 56 taxmann.com 292 (Delhi- Trib)
- PCIT Vs. Delhi Airport Metro Express Private Limited (Delhi HC), ITA No.705/2017 order dated 05.09.2017
- CIT Vs. Leisure Wear Exports Ltd. (Delhi HC), (2012) 341 ITR 166 (Del)
- ITO Vs. D.G. Housing Projects Ltd. (Delhi HC), (2012) 343 ITR 329 (Del)
- CIT Vs. DLF Power Ltd. (Delhi HC), (2012) 345 ITR 446 (Del)
- CIT (Central) Ludhiana Vs. Max India Limited (SC), (2008) 166 Taxman 188 (SC)
- Balraj Vs. CIT (Delhi HC), (2002) 123 Taxman 290 (Delhi)
- CIT Vs. Miss Piroja C. Patel (Bombay HC), (2002) 122 Taxman 752 (Bombay)
- CIT Vs. Abrar Alvi (Bombay HC), (2001) 117 Taxman 95 (Bombay)
- CIT Vs. R.L. Sood (Delhi HC), (2000) 108 Taxman 227 (Delhi)
- Malabar Industrial Co. Ltd. Vs. CIT (SC), (2000) 243 ITR 87 (SC)
- Duggal & Co. Vs. CIT (Delhi HC), (1996) 220 ITR 456 (Del)
- CIT Vs. Bradford Trading Co. (P) Ltd. (Madras HC), (2003) 261 ITR 222 (Madras)
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the assessee against the order dated 27.03.2024 of the Ld. PCIT, Delhi-12 (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘Revisionary Authority’) in DIN & Order No: ITBA/REV/F/REV5/2023-24/1063493219(1) arising out of the assessment order dated 28.03.2022 u/s 147 r.w.s 144 r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by NFAC, for AY: 2016-17.
2. Heard and perused the records. At the outset the ld. Counsel has pointed out about delay of around 4 months in filing the appeal and in regard to which application for condonation of delay along with an affidavit and medical evidences have been filed to claim that assesse was facing matrimonial dispute including issue regarding custody of child and was under mental depression. The copy of settlement agreement with the spouse is also placed on record. We are satisfied that the delay is quite explained and accordingly we admit the appeal for hearing.
3. Then on merits of grounds we find that assesse had filed return of income in the capacity of an individual on 21.11.2016 declaring total income of Rs.15,01,360/-. The assesse is a real estate consultant and has earned commission income during the year under consideration. The reassessment proceeding was initiated u/s 147 on the basis of information coming to notice of assessing officer out of assessment of once Anju Madhan and there upon assesse filed return in response to notice at Rs.15,01,360/- on 16.09.2021. The assessing officer thereafter issued notice u/s 142(1) on 17.03.2022 calling assesse to make submissions and file evidences, which is reproduced below:
4.1 Again a notice u/s 142(1) of the I.T. Act, 1961 was issued on 17/03/2022 vide DIN No: ITBA/AST/F/142(1)/2021-22/1040982692(1) and duly served on the assessee as a final opportunity and details were called for, as per the reasons recorded for re-opening of the case as under :-
“In connection with the assessment/reassessment proceedings for A.Y.2016– 17, you are requested to submit the following details/documents :-
1. Please furnish the details of Business activities carried on by you during the year along with details of income from the said business for the previous 3 Years.
2. Copy of ITR filed in response to the notice u/s 148 of the I T Act dated 31.03.2021 along with all the enclosures for the A. Y.2016-17. Please note that if no return has been filed in response to the Notice, please note that the Original return of income filed by you for the A.Y. 2016-17 on 21.11.2016 declaring income of Rs. 15,01,360/-, shall be treated as Return of Income filed in response to the Notice issued u/s. 148 of the Act.
3. Please submit computation of Total income for the year under consideration.
4. Furnish the Sale deed of the Immovable property sold during the year under consideration and also give the Computation of Capital Gains on the said Transaction and also state whether the due taxes have been paid and please note that if the said details are not furnished, it shall be presumed that you have nothing to say in this regard and hence the entire sale consideration shall be treated as Taxable Capital Gains.
5. Furnish the statement of all bank accounts for the F.Y.2015-16 relevant to A. Y. 2016- Also furnish the cash flow statement.”
4. Based on the submissions assessing officer issued further notice u/s 142(1) calling for details as follows:
“5.1 Further, a notice u/s 142(1) of the Act has been issued on 23/03/2022 vide DIN ITBA/AST/F/142(1)/2021-22/1041379775(1) and the details called for as under:-
In connection with the assessment/reassessment proceedings for A.Y.2016-17, you are requested to furnish the details regarding your submission letter dtd.22/03/2022 following details:-
“1. You have claimed cost of improvement for F.Y.2007-08 to F.Y.2012-13. No document evidence in support of improvement carried out by you during the above period has been submitted as per your computation of total income (u/s 148).
In this regard, it is requested to submit ledger A/c of improvement done. If you have debited the improvement cost of the capital a/c, please furnish capital a/c for these years.
1. Furnish the documentary evidence regarding deduction u/s 54 amounting to Rs.5,66,40,885/- if you failed to furnish the above said details, the deduction cannot be allowed as the considering the matter being barred by limitation of time, on 31/03/2022.”
5. Thereafter assessing officer vide assessment order dated 28.03.2022 had concluded the assessment as follows:
“5.2 In response to the said notice, assessee has furnished all relevant documents vide reply letter dtd.25/03/2022 along with annexures. considering the fact of the case along with documentary evidences submitted by the assesse as the assessee has taken Sales Consideration Received at Rs.14,00,00,000/- on House 06/06/2015. The assessee has considered the said amount in his computation of total income for the period under consideration. In view of the above facts and considering the documentary submissions of the assessee, the contention of the assessee appears to be correct and the same is accepted, hence, the Income returned by the assessee is hereby accepted.
6. Assessed u/s. 147 r.w.s. 144 r.w.s. 144B of the I. T. Act. Give due credit for pre-paid taxes, after proper verification. Charge interest u/s.234A, 234B, 234C, 234D as applicable. Issue demand notice and challan accordingly.”
6. The ld. PCIT was however not satisfied with the assessment and invoked provision of Section 263 of the Act and issued a notice u/s 263 copy of which is available at page No. 39-45 dated 09.01.2024 and a notice dated 16.01.2024 copy of which is available at page No. 46-47. Ld. PCIT primarily examined the assessment records to conclude that ld. AO has not made inquiries and verification with regard to indexed cost of improvement and claim of deduction u/s 54 of the Act.
5.1 The assesse had responded to the notices, copy of which is available at page no. 265-271 and 272 -289 of the paper book wherein it was asserted by the assesse that during the assessment proceedings assessing officer had issued all relevant notices and raised relevant queries which was duly responded. It was specifically asserted that cost of improvement are actually part of the financials of the assesse and form part of the balance sheet which have been accepted in earlier years. The assesse has also on the basis of judicial precedent submitted that deduction u/s 54 was rightly allowed.
5.2 However, the ld. PCIT was not satisfied and had passed the impugned order and concluded that during the assessment proceedings the AO has not made proper inquiries and verification. There was non-application of mind on issues in hand and therefore, the assessment order was erroneous so far as prejudicial to the interest of revenue. The assessment order was set aside with a direction to make assessment after conducting proper inquiries and verification keeping in view the facts mentioned by the ld. PCIT.
6. The assesse is in appeal and has raised following grounds:
“1. That the appellant in the present appeal is aggrieved by an order dated 27-03 2024 passed by Principal Commissioner of Income Tax-12 (PCIT-12) Delhi, as per DIN and Order No. ITBA/REV/F/REV5/2023-24/1063493219(1) passed u/s 263 of the Income Tax Act, 1961 (“the Act”) in respect of assessment order dated 28-03-2022 generated as per DIN ITBA/AST/S/147/2021-22/1041796691(1) and passed u/s 147 r.w.s 144 read with section 144B of the Act by the National Faceless Assessment Centre, Delhi (NFAC). The order passed by PCIT-12 is invalid as the assessment order dated 28-03-2022 passed by NFAC was neither erroneous and nor prejudicial to the interest of revenue, therefore, invocation of power u/s 263 of the Act was unwarranted.
2. That under the facts and circumstances of the case, Ld. PCIT, has erred in law as much as in fact in holding that assessment order has been passed without making inquiries or verification which should have been made. For holding so Ld. PCIT has failed to appreciate that the fact of having made inquiries and verification has been recorded by the FAO in the assessment order dated 28-03-2022 in para 5.1 and 5.2 wherein it hasbeen mentioned that all the relevant documents were submitted in letter dated 25-03-2022. Thu, powers u/s 263 of the Act with reference to Explanation-2 to section 263 of the Act have wrongly been invoked and order dated 27-03-2024 is liable to be set aside.
3. That under the facts and circumstances of the case, Ld. PCIT has erred in law as much as in fact in holding that indexed cost of the amounts of Rs. 75,00,000/- (being one half of Rs.1,50,00,000/- pertaining to the share of the assessee paid to Sh. Jasvinder Singh for vacating ground floor is not eligible for deduction being outside the scope of section 55(1)(b)(2)(ii) of the Act as per her observations in para 10(a).
4. That under the facts and circumstances of the case, Ld. PCIT has erred in law as much as in fact in holding that indexed cost of the amounts of Rs. 65,00,000/- paid to Kanwari Padmini Shah as being paid as per court order dated 02-08-2006 in eviction petition no. 134/1993 is not eligible for deduction being outside the scope of section 55(1)(b)(2)(ii) of the Act as per her observations in para 10(b).
5. That under the facts and circumstances of the case, Ld. PCIT has erred in law as much as in fact in holding that indexed cost of the amounts of Rs. 50,00,000/- (being one half of Rs. 1,00,00,000/-pertaining to the share of the assessee paid to M/s Business Associates (Delhi) Pvt. Ltd in respect of Delhi High Court order dated 24-04-2007 in Civil Suit no. 2066 of 2006 is not eligible for deduction being outside the scope of section 55(1)(b)(2)(ii) of the Act as per her observations in para 10(c).
6. That under the facts and circumstances of the case, Ld. PCIT has erred in law as much as in fact in holding that indexed cost of the amounts of Rs. 24,07,000/- paid to Land and Development Officer (L&DO) on the basis of demand letter issued by the L&DO dated 11.05.2006 is not eligible for deduction being outside the scope of section 55(1)(b)(2)(ii) of the Act as per her observations in para 10(d).
7. That under the facts and circumstances of the case, Ld. PCIT has erred in law as much as in fact in holding that indexed cost of the amounts of Rs. 3,12,798/- paid to Land and Development Officer (L&DO) on the basis of demand letter issued by the L&DO dated 21.06.2012 is not eligible for deduction being outside the scope of section 55(1)(b)(2)(ii) of the Act as per her observations in para 10(e).
8. That under the facts and circumstances of the case, Ld. PCIT has erred in law as much as in fact in holding that the case of the assessee is fully covered The Commissionerof Income Tax 7 vs M/s. Paville Projects Pvt. Ltd. (Civil Appeal no. 6126 of 2021)” now reported in [2023] 453 ITR 447. The facts of the case of the assessee are entirely different from the facts of the case relied upon by Ld. PCIT and ratio laid down therein cannot be read out of the context and applied to the case of the assessee.
9. That under the facts and circumstances of the case, Ld. PCIT has erred in law as much as in fact in rejecting the exemption of Rs. 5,66,40,885/-claimed by the assessee u/s 54 of the Act in the return of income as against amount of Rs. 6,00,00,000/- paid by the assessee during the year under consideration as detailed in para 20 to 26 of the written submissions submitted on 22-02-2024 on ITBA portal. While rejecting the claim Ld. PCIT has failed to appreciate that in view of case law relied upon in para 20 to 26 of the written submissions and also in the agreement itself it is mentioned that the property agreed to be purchased was with constructed area of 28000 Sq. Ft. which could not be considered as mere agricultural land, as has been misconstrued, just only for the purpose to deny the claim of exemption u/s 54 of the Act.
10. That the present appeal was due to be filed on 26-05-2024 and thus, is belated by 4 months and few days. The appellant was prevented by sufficient cause for not filling the same within limitation of 60 days as the appellant is suffering from the trauma of matrimonial dispute including the issue regarding custody of child and was under severe mental depression. The application for condonation of delay u/s 253(5) of the Act shall be submitted separately.
11. That each of the above ground is independent and without prejudice to the other grounds of appeal preferred by the Appellant.
12. The Appellant craves leave to add, alter, vary, omit, substitute, or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal.”
7. Ld. Representative of both sides have primarily relied the respective cases as reflected in the impugned order. We have considered the same and have also gone through the material on record. Now, as we have taken into consideration the assessment order, part of which is also reproduced above wherein content of the notices u/s 142(1) of the Act have been reproduced, go to show that certainly the ld. AO was well aware of the issues involved and has raised substantive queries. The copies of the reply to these notices have made available by the assesse in the paper book at page No. 55-56, were copy of reply of the assesse in response to notice dated 15.11.2021 u/s 142(1) of the Act is provided. At page No. 59-60 copy of reply dated 22.03.2022 is on record which was submitted in response to notice u/s 142(1) of the Act dated 17.03.2022 (page No. 57-58 of the paper book). Then, at page No. 63-64 assessee has provided copy of reply dated 25.03.2022 in response to the notice u/s 142(1) dated 23.03.2022 (available at page No. 61-62 of the paper book). This reply is material to understand if ld. AO was aware of the issues and the response of the assesse was self-contained to help AO reach a definite finding and for convenience we reproduce this reply dated 25.03.2022 herein below:
8. In the light of aforesaid facts as we examined the impugned order we find that in para 13 & 14 ld. PCIT has made allegation that AO had passed the order without making inquiries or verification which should have been made. The order is completely silent to show that any further inquiries were made by Ld. PCIT to indicate that the queries raised by the AO vide notices u/s 142(1) of the Act were insufficient or not relevant to the issue for which the case of assesse was reopened and examined. In para 3.1 & 3.2 as a fact ld. PCIT observes of the notice u/s 142(1) being issued and the corresponding reply filed by the assesse, however, thereafter there is nothing in the impugned order to show that these questionnaires in any form were insufficient and what aspects remained unexplained which required any specific inquiry or verification. We are of considered view that when ld. PCIT alleges that the impugned order is erroneous so far as prejudicial to the interest of revenue on the basis that the same was made without making inquires or verification then it was all the more necessary to reflect in the order u/s 263 as to how by way of any further inquiry or query raised, the assertion of the assesse before the AO, is established to be incorrect and not sustainable in law. Therefore, if the ld. PCIT intended to hold that there is any error in the order of the Assessing Officer, which can be corrected by further enquiry then ld. PCIT should give a categorical finding by his own enquiries and investigations, howsoever, minimal be that. Hon’ble Delhi High Court in the case of PCIT Vs. Delhi Airport Metro Express Private Limited vide ITA No.705/2017 order dated 05.09.2017 has held that for the purpose of exercising jurisdiction u./s. 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal inquiry. If the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. If he does not conduct such basic exercise then the PCIT is not justified in setting aside the order u/s. 263 of the Act. Reliance for this can also be placed on the Hon’ble Delhi High Court decision in ITO Vs. D.G. Housing Projects Ltd. (2012) 343 ITR 329 (Del), whereby the Hon’ble High Court held as under :
“16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question.”
8.1 Rather based on the queries raised and the response of the assesse, we are of the view that it is not at all a case of making an order without making inquiries or verification. To allege that AO has not made proper inquiry or verification and there is non-application of mind on the issue in hand in a general manner does not make the assessment order erroneous so far as prejudicial to the interest of revenue because of the higher wisdom and acumen ld. PCIT in examining the issues and that does not make the conclusions drawn by AO in accepting the response of the assesse, erroneous so far as prejudicial to the interest of revenue, specially by alleging that there was lack of inquiry.
9. Ld. PCIT has relied judicial decisions in the case of CIT Vs. Leisure Wear Exports Ltd. (2012) 341 ITR 166 (Del) and Hon’ble Supreme Court decision in Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 87 (SC) and in Duggal & Co. Vs. CIT (1996) 220 ITR 456 (Del) and CIT Vs. DLF Power Ltd. (2012) 345 ITR 446 (Del) without reflecting in the order that what relevant queries necessary to verify correctness of averments of the assesse have not been made, as was concluded in the judicial decisions. The principles laid down in judicial decisions in case of impugned orders u/s 263 are quite factual and without saying principles apply squarely to facts, its not justified to say that for lack of enquiry the impugned order is erroneous so far prejudicial to interest to revenue.
10. At the same time, as we examined the issues on which ld. PCIT has found the conclusions arrived by ld. AO to be erroneous so far as prejudicial to the interest of revenue, on account of lack of enquiry and we find that as with regard to the issue of cost of improvement assesse has explained vide reply dated 25.03.2022 that as the property was occupied by earlier tenants and owners who had filed various suits in the Court and to get the property vacated, the assesse had to pay damages and the copy of these suits, damages, L&DO charges were filed with the AO but according to ld. PCIT such expenses do not fall part of the scheme of the Act. However, such incidental cost which make the property transferable with a clean title to prospective vendee and to remove all sorts of encumbrances so as to actually enhance the market value of the property, have to be certainly considered cost of improvement and there are numerous judicial verdicts in that regard which are also cited before us during the hearing and as for completeness we refer to decision of Hon’ble Bombay High Court in CIT Vs. Miss Piroja C. Patel (2002) 122 Taxman 752 (Bombay) and CIT Vs. Abrar Alvi (2001) 117 Taxman 95 (Bombay) and Hon’ble Madras High Court decision in CIT Vs. Bradford Trading Co. (P) Ltd. (2003) 261 ITR 222 (Madras). We find that these decisions have been very well taken into consideration by Coordinate Bench in ACIT, Circle 24(1), New Delhi Vs. Pushkar Dutt Sharma (2015) 56 taxmann.com 292 (Delhi- Trib). Thus, that being the state of affairs the conclusion which ld. AO had drawn was one of the possible view taken and could not have been thus interfered by recourse to Section 263 of the Act on the basis allegation or inadequate inquiry.
11. As with regard to the other issue examined by ld. PCIT that the sale consideration has not been invested in accordance with provisions of Section 54, we find that ld. PCIT has primarily reached a conclusion that the property purchased was agricultural land and not a residential house. However, copy of an agreement for purchase of the property is available at page No. 252-264 of the paper book, which refers to the amount paid for purchase of the property and the scheduled property is 12 bighas of land along with tube well, electronic connection super structured/constructed total area of 28000 sq.ft. approximately and ld. PCIT in the impugned order while referring to this property has only taken into consideration that the agreement to sell pertained to land and has completely missed out that this land was not barren land but also have super structured/constructed total are of 28000 sq.ft. and a plan copy was attached to the agreement. The agreement specifically mentions that this property for purchase is under some dispute for which vendee solely will responsible for pursuing the remedy including obtaining NOC from the revenue department for the registration of sale deed.
12. Now, the law in this regard is settled that to be eligible for benefit of Section 54 only purchase of property is necessary and it is not necessary that assesse should become owner of property. Reliance in this regard is rightly placed by ld. Counsel before us on the decision of Hon’ble Delhi High Court in Balraj Vs. CIT (2002) 123 Taxman 290 (Delhi). Similarly, Hon’ble Delhi High Court in CIT Vs. R.L. Sood (2000) 108 Taxman 227 (Delhi) has held that where assesse acquires substantial domain over new residential property, it could be said that assesse complied with the requirement of Section 54.
13. Thus, when this copy of agreement was made part of the reply vide notice dated 25.03.2022, AO’s conclusion that assesse had acquired the property for the purpose of Section 54 was sufficiently met and on the basis of allegation of lack of inquiry, the assessment order cannot be said to be erroneous, so far as prejudicial to the interest of revenue.
14. Now, when there was substantial material before AO in response to the queries raised and one of the views have been taken by the AO on settled principles of law, then for possibly different view ld. PCIT cannot invoke Section 263 of the Act and reliance in this regard can be placed in the decision of Hon’ble Supreme Court in CIT (Central) Ludhiana Vs. Max India Limited (2008) 166 Taxman 188 (SC). In this context, we would like to make a particular reference to the reliance placed by ld. PCIT on the decision of Hon’ble Supreme Court in Malabar Industrial Company Ltd. (supra) and we find that in that case the issue involved was examined by Hon’ble Supreme Court and the Hon’ble Supreme Court has held that provision cannot be invoked to correct each and every type of mistake or error committed by the AO. It is only when order is erroneous that Section 263 will be attracted. In that case, on facts Hon’ble Supreme Court has found that assessee’s return of income at nil was accepted without there being any query in context to certain amounts received which assesse had claimed to be compensation/damages for loss of agricultural income while the same should have been construed under the head income from other sources. However, in the case before us AO had raised all relevant queries which were duly replied with substantive evidences and the law in that regard also balanced towards the assesse. Therefore, accepting the assessee’s contention, when assessment order was passed the same was not at all erroneous so far as prejudicial to the interest of revenue, specially on allegation that there was no inquiry or lack of inquiry.
15. In the light of aforesaid discussion we sustain the ground raised. The appeal is allowed and the impugned order is quashed.
Order pronounced in the open court on 07.08.2026
