Invoking power u/s 263, merely on the basis of suspicion, is unjustified

Narendra Goel Vs PCIT (ITAT Delhi)

Facts- Assessment u/s 143(3) was framed vide order dated 31.5.2017 determining income at Rs.17,82,584/-. Subsequently, the learned Pr.CIT on examination of record observed that the AO had not carried out requisite inquiry regarding advances from customers and also introduction of fresh capital. Accordingly, a notice u/s 263 of the Act was issued to the assessee. In response thereof, authorized representative of the assessee appeared and filed reply to the show cause notice issued by the learned Pr.CIT. However, the reply of the assessee was not found acceptable. The learned Pr.CIT observed that the assessee had simply submitted a verbal narration without furnishing any documentary evidence in support of its claim. It was further observed that assessee did not submit copy of bank statement reflecting the repayment of liabilities due to M/s Maa Kaila Foundries Private Limited in support of the confirmation of accounts.
Therefore, the learned Pr.CIT revised the assessment order and directed the AO to pass the assessment order afresh after examining the issue as observed by the learned Pr.CIT. Aggrieved against this the assessee is in appeal before this Tribunal.

Conclusion- The law is well settled that for exercising power u/s 263 twin conditions are required to be satisfied – (i) that the order should be erroneous and; and (ii) it should cause prejudice to the interests of Revenue. Moreover, it is not the case where the assessee failed to substantiate his claim, rather the explanation along with supporting evidences were placed before the assessing officer and the learned Pr.CIT. In our considered view merely on the basis of suspicion, invoking of powers u/s 263 would not be justified.

The concluded assessment should be revised where there is blatant error committed by the assessing officer, which culminated into the prejudice to the interest of Revenue. But where the Assessing Officer made necessary inquiry and satisfied itself about the explanation offered to him, revising such an order is highly unjustified and contrary to the ratio laid down by the Hon’ble Supreme Court in the case of M/s Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83. Therefore, in the present case the action of the learned Pr.CIT is unjustified and the same is hereby set aside and the assessment is restored.

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