CIT cannot invoke Section 263 for detailed Inquiry When AO Has Examined Issues: ITAT Mumbai

Purna Purshottam Exports Vs PCIT (Central) (ITAT Mumbai)

Summary: The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled in favor of Purna Purshottam Exports, stating that the Principal Commissioner of Income Tax (PCIT) cannot invoke Section 263 of the Income Tax Act, 1961, if the Assessing Officer (AO) has already conducted a thorough examination of the issues. The case revolved around discrepancies in the valuation of diamonds revealed during a survey under Section 133A and subsequent tax assessments for the financial year 2018-19. The PCIT alleged that the AO’s assessment order was erroneous and prejudicial to the interests of the Revenue, citing inconsistencies between the valuation of diamonds recorded during the survey and the financial records. The AO had added ₹4.02 crore to the assessee’s closing stock based on the survey findings, which was challenged by the assessee on the grounds that these adjustments had already been accounted for and explained during the assessment proceedings. Despite these submissions, the PCIT invoked Section 263 and directed a reassessment. The ITAT observed that the AO had examined all relevant materials, including the survey findings and the assessee’s responses, before finalizing the assessment. It noted that no irregularities in the stock quantity were found, and the alleged valuation discrepancies had already been reflected in the books of accounts. Citing judicial precedents, including CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC), the tribunal emphasized that an assessment order cannot be deemed erroneous if the AO has applied their mind to the issues and made an informed decision. The ITAT also addressed procedural lapses, such as the failure to consider written submissions due to technical glitches, which led the PCIT to invoke Section 154 for rectification. The tribunal concluded that these procedural issues did not justify reopening the assessment and held the PCIT’s order invalid. This judgment reinforces the principle that revisional powers under Section 263 must be exercised judiciously and cannot override the AO’s findings if due diligence has been demonstrated. The ruling provides clarity on the limits of revisional authority and safeguards against unwarranted reassessments.

Key Takeaways from the Ruling

1. Scope of Section 263 is Limited:

• CIT cannot invoke revisionary powers merely to conduct a more detailed inquiry when the AO has already examined the issues.

2. Explanation 2(a) to Section 263 Must Be Applied Carefully:

• Just because an order lacks extensive inquiry does not automatically make it erroneous.
• The CIT must prove that the order is unsustainable in law.

Background of the Case

• The assessee filed a return of income declaring ₹95,16,150/-.
• During the course of assessment under Section 143(3), the Assessing Officer (AO) assessed the total income at ₹4,02,01,020/- based on findings from a survey conducted under Section 133A on 16.02.2018.
• The AO specifically examined discrepancies in the valuation of diamonds based on the Fortune Note Book (impounded during the survey). The discrepancy in valuation per carat was accounted for, and an additional sum of ₹4,02,01,020/- was taxed under Section 69C as unexplained expenditure.

Invocation of Revisionary Powers under Section 263 by Pr. CIT

• The Pr. CIT initiated revision proceedings under Section 263, holding that the assessment order was erroneous and prejudicial to the interest of revenue on the following grounds:

1. The valuation of diamonds per carat considered in the assessment order did not align with the survey findings.

2. The valuation of rough diamonds admitted during the survey was not fully considered.

3. The stock register and inventory details for the year were not analyzed in detail.

4. The assessment order was passed without adequate inquiry, which, according to Explanation 2(a) to Section 263, made it erroneous.

• Consequently, the Pr. CIT set aside the assessment order, directing the AO to redo the assessment.

2. Analysis of Assessee’s Submission Against Section 263 Proceedings

(A) AO Had Duly Considered the Issues in the Assessment Proceedings

• The assessee contended that the AO had conducted thorough inquiries before finalizing the assessment, verifying:

1. All impounded materials found during the survey.

2. Books of accounts and financial statements (including valuation of stock).

3. Stock register & inventory valuation details for the year.

4. The valuation discrepancies found in the Fortune Note Book.

• Based on these inquiries, the AO assessed an additional income of ₹4,02,01,020/- and taxed it under Section 69C.

(B) No Unaccounted Stock or Physical Discrepancy Found

• The only issue found during the survey was a difference in the valuation rates per carat recorded in the Fortune Note Book (₹35,395 vs ₹40,919 per carat).
• The assessee voluntarily offered the differential amount (7277.5 carats × ₹5,524 = ₹4,02,01,020/-) as increased closing stock valuation, leading to higher taxable profits.
• There was no finding of any unaccounted stock during the survey. The closing stock valuation was duly reflected in the books of accounts.

(C) The AO Had Properly Considered the Assessee’s Submissions

• The assessee had furnished all necessary details during the assessment proceedings, including:
• Balance Sheet & Profit and Loss Account with annexures.
• Stock valuation reports showing rough and polished diamond valuations.
• Inventory details & Fortune Note Book records.
• Since these details were examined and considered by the AO, the Pr. CIT’s claim that there was inadequate inquiry was incorrect.

3. ITAT’s Observations & Findings

The ITAT ruled in favor of the assessee, stating that the Pr. CIT was not justified in invoking Section 263. The key findings were:

(A) Section 263 Requires Satisfaction of Twin Conditions: 

To invoke revisionary jurisdiction under Section 263, two conditions must be satisfied:

1. The order must be erroneous.

2. The error must be prejudicial to the interest of revenue.

• The ITAT found that in this case, both conditions were not satisfied, as the AO had already made proper inquiries before finalizing the assessment.

(B) Explanation 2(a) to Section 263 Was Incorrectly Invoked

• Explanation 2(a) states that an order shall be deemed erroneous if it is passed without making inquiries or verification that should have been made.
• However, the ITAT clarified that this does not mean that every order lacking extensive inquiry can be revised.
• If the AO has conducted reasonable and prudent inquiries and taken a possible view, then Section 263 cannot be invoked merely because a fuller inquiry was possible.

Key Point: 

Revisionary powers cannot be used just to conduct a more detailed investigation when the AO has already examined the issues.

(C) Supreme Court & High Court Precedents Supporting the Assessee

The ITAT relied on key judicial precedents:

1. Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC)

• The Supreme Court ruled that mere differences in opinion cannot justify a revision under Section 263.
• The CIT must show that the order is wholly unsustainable in law.

2. CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom)

• The Bombay High Court held that if the AO has applied his mind to an issue, the CIT cannot revise the order just because he believes further inquiries should have been conducted.
• Applying these principles, the ITAT concluded that Pr. CIT had wrongly invoked Section 263, as the AO had already made inquiries and applied his mind.

4. Final Ruling of ITAT

(A) The Revision Order Under Section 263 is Invalid

• Since the AO had examined all relevant aspects and taken a considered view, the assessment order was not erroneous.
• The Pr. CIT failed to demonstrate that the AO’s view was wholly unsustainable.
• Therefore, the revision order was quashed.

(B) AO’s Assessment Order Remains Valid

• The ITAT reinstated the original assessment order passed under Section 143(3), setting aside the revisionary proceedings.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal preferred by the assessee emanates from the order of the ld. Pr.CIT(Central), Mumbai-1, dated 30.03.2024 for A.Y.2018-19 passed u/s 263 of the Income Tax Act,1961(henceforth ‘the Act’)as per the following grounds of appeal :-

The order dated 30.03.2024 passed under section 263 of the Act is without jurisdiction and bad in law

1. The Ld. PCIT is not justified in passing the order dated 30.03.2024 under section 154 r.ws 263 of the Act without appreciating the conditions precedent to invoke the provisions of section 263 of the Act are not satisfied in the present case. Thus, the order under section 154 r.w.s 263 of the Act is bad in law and same may be quashed and set aside.

2. The Ld. PCIT is unjustified in invoking the provisions of section 263 of the Act without appreciating that the assessment order passed under section 143(3) of the Act is neither erroneous nor prejudicial to the interest of the revenue and therefore, the provisions of section 263 of the Act are not attracted in the present case. Hence, the revision order passed under section 263 of the Act is without jurisdiction and the same may be quashed and set aside.

3. The Ld. PCIT failed to appreciate that the Assessee has duly considered the stock of rough diamond and its valuation admitted during the course of survey proceedings while computing the closing stock for the year under consideration. The details of diamond sold and the stock in accordance with the survey finding were duly submitted before the Ld.A.O. in the course of assessment. Thus, the PCIT is not justified to infer that the stock shown by the Assessee is not in the line with the survey findings.

Therefore, the order dated 154 r.w.s 263 of the Act is not at all justified and the same may be quashed and set aside.

4. The PCIT failed to appreciate that the Ld.A.O. has duly verified and examined the claim of a closing stock and the stock admitted in the course of survey while passing the assessment order. Thus, the assessment order is neither erroneous nor prejudicial to the interest of the revenue and consequentially, the order passed under section 154 r.w.s 263 of the Act is bad in law and void ab-initio ad the same may be quashed and set aside.

5. The Appellant seeks leave to add, alter and amend any of the above grounds.

2. Facts of the case as culled from the records reveal that the assessee filed return declaring income at Rs. 95,16,150/-. The assessment u/s.143(3) of the Act,1961 was completed assessing the income at Rs. 4,02,01,020/-based on a survey report. However, the order was found to be prejudicial and erroneous in terms of section 263 of the Act by the ld. PCIT. He noted that a survey u/s. 133A of the Act was conducted in the case of the assessee on 16.02.2018. It was seen from the survey findings that valuation of the diamonds and rate of diamond per carat was quite different from that is taken while framing assessment order. The valuation of the rough diamonds admitted during the survey proceedings had not been considered in totality during the assessment proceedings. The records did not contain details of the inventory valuation for the year under consideration for ascertaining the correct value of the diamond held as stock. Further, the rate of diamonds per carat shown in the financials for the year varies with the survey findings. Accordingly, he observed that it was evident that valuation and the quantification of the diamonds that had been sold and held as stock during the year under consideration was not in line with the survey findings that had been admitted by the assessee during the survey proceedings and in the assessment order for determination of total income. Thus, the assessment order passed by the A.O. was rendered erroneous in so far as the assessment order passed for the reasons mentioned above. Therefore, there was prima facie action under section 263 of the Act. He further held that the provisions of section 263 read with deeming provisions of Explanation 2 were squarely applicable as the order was passed without making inquiries or verification which should have been made. Considering the facts and circumstances of the case, he held that the assessment order passed u/s 143(3) dated 21.06.2021 by Assessing Officer was erroneous and prejudicial to the interest of Revenue, within the meaning of section 263 of the Act and set aside the assessment order with a direction to complete the assessment order de novo afresh after considering the abovementioned points discussed in para 2 after affording proper opportunity to the assessee. However, it was later found that the assessee had made a written submission which were not taken into consideration ITA No.2143/Mum/2024 as due to some technical glitch the submissions by the assessee was not visible in the system. Accordingly, he invoked provisions of section 154 of the Act r.w. section 263 of the Act and set aside the assessment order for framing it de novo .

3. Before us, the ld. DR for the Revenue relied on the revision order, the ld. Authorised Representative of the assessee per contra made a detailed submission in support of the grounds of appeal reproduced in foregoing paras above. He drew attention to the reply submitted by it before the ld. PCIT in response to the show cause notice issued by him. Factual aspects of the case and the arguments made before him are extracted below for the sake of clarity:

“1. The Assessee is engaged in the business of Import and Export of rough and polished Diamonds. On 16.02.2018, a survey action was conducted ACIT Circle 32(1), Mumbai at the office premises of the Assessee at EC 4071, BDB, BKC Bandra (B), Mumbai under section 133A of the Act. During the course of survey proceedings, ‘Fortune Note Book’ was found. On perusal of the same, it was observed by the survey officer that, the actual value of stock is not disclosed properly by the Assessee in its books of accounts as there are two valuations are maintained in the said book in front of closing stock (7277.52 cts). Thereafter, on 16.03.2018, a statement of Shri Dinesh Kalathiya, a Partner of the Assessee was recorded under section 131 of the Act. In this statement, while answering the question no.16 & 17 pertaining to the above discrepancies, Shri Dinesh Kalathiya stated that there are two valuations pertaining to the closing stock out of which, a rate of Rs.35,395/- is the valuation rate as per books whereas a rate of Rs.40,919/- is the actual rate per carat. Further, while answering to question no.18, Shri Dinesh Kalathiya offered an amount of Rs.4,02,01,020/- [i.e. 7277.52 cts x Rs.5,524/- (being difference of 40,919/–35,395/-) to buy peace of mind and the same was added to the valuation of closing stock which resulted in increased gross profit during the year.

2. The Assessee filed its return of income for the year under consideration i.e. A.Y. 2018-19 on 14.08.2018 declaring total income at Rs.95,16,150/-. The said return was selected for scrutiny assessment in pursuance to the survey action conducted under section 133A of the Act. During the course of assessment proceedings, the Assessee in response to the show cause notice dated 23.04.2021, filed detailed submissions vide letter dated 04.05.2021 along with the details of Average Stock Valuation including the calculation of Closing Stock and also a stock item register. The Average Stock Valuation sheet clearly shows that the Assessee has arrived at closing stock of Rs.42,01,93,733/- after considering the closing stock of rough and polished Diamond and the said closing stock is duly reflected in the books of account of the Assessee.

3. The Ld.AO, after considering the impounded material as well as the books of account of the Assessee, was of the view that the amount of Rs.4,02,01,020/-offered as an additional amount on account of difference in valuation is nothing but the unexplained expenditure. Therefore, the AO, vide an assessment order dated 21.06.2021 passed under section 143(3) of the Act, added the sum of Rs.4,02,01,020/- under section 69C of the Act and thereby imposed the taxes in accordance with the provisions of section 115BBE of the Act.

4. On appeal, the Ld.CIT(A) dismissed the appeal of the Assessee without appreciating the submissions of the Assessee.

5. The Assessee therefore, filed an appeal before the Hon’ble ITAT challenging the disallowance of Rs. 4,02,01,020/- made by the Ld.A.O. and confirmed by the CIT(A) under section 69C of the Act. The ITAT, after considering the submissions of the Assessee, allowed the appeal [ITA 1618/Mum/2023] for the A.Y. 2018-19 vide an order dated 28.08.2023 The relevant observations of the ITAT as reproduced as under:

“6.4 We have heard rival submission and perused the relevant material on record. It is undisputed that no difference in quantity of the stock was found during the course of the survey. The Assessing Officer has referred only difference in valuation of stock. It is not the case of the Assessing Officer that any of the purchases were not found to be recorded in the books of accounts. The difference in valuation as on the date of the survey as compared to the valuation at the time of purchase comprises in the profit and loss account at the time of recording of sales. Therefore, the assesse was not required to offer the said profit during the year under consideration. Despite the assessee has enhanced value of the closing stock as on the date of the survey and included the same for the purpose of declaring profit. In such scenario, the said disclosure would be at maximum in the nature of business profit and it cannot be in the nature of unexplained expenditure to be taxed u/s 115BBE of the Act. The invoking of the said section by the Assessing Officer is without substantiating that any purchase of the assessee was in the nature of unexplained purchases. The sources of the purchases by the assessee are duly explained and only assessee has offered the difference in valuation of the stock and said valuation was recorded by the assessee in the note found during the course of survey. In the facts and circumstances discussed above, we set aside the order of the Ld. CIT(A) on the Officer to cancel the action of taxing the undisclosed profit declared by the assessee appeal of the assessee are accordingly allowed.”

6. With regard to the show cause notice issued by the ld. PCIT, as per detailed submission made, it was further submitted the issues raised in the show cause notice under section 263 of the Act with respect to the valuation and rates of diamond per carat and the valuation of rough diamonds admitted during the survey had duly been considered by the Ld. A.O. while passing the assessment order. Before finalising the assessment, AO has verified all the impounded material found during the survey action and books of accounts submitted by the Assessee along with the valuation of stock and stock item register. On going through all details furnished by the Assessee, the Ld. A.O. was of the view that additional amount of Rs.4,02,01,020/- offered by the Assessee during the survey on account of difference in valuation recorded in the ‘Fortune Note book’ is an unexplained expenditure under section 69C of the Act.

7 ………………

8. It is an undisputed fact that there is no discrepancy found with respect to the stock of rough and polished diamond during the course of survey proceedings. The only discrepancy in the course of survey action was pertaining to two different rates mentioned in the Fortune Note Book for which the Assessee has voluntarily offered a sum of Rs.4,02,01,020/- (i.e. 7277.5 cts x Rs.5,524), being the difference of the valuations (i.e. Rs.35,395 and Rs.40,919) pertaining to the closing stock, mentioned in the impugned Fortune Note Book for tax as increased valuation of closing stock, thereby resulting in increased gross profit during the year. The Assessee has furnished all the relevant details and documents including the submissions made before the Ld.A.O., Balance Sheet and Profit and Loss accounts along with Annexures, Details of Average Stock Valuation and the impounded note book before your honours along with the present submission. Your honours would appreciate that the Average stock valuation made by the Assessee clearly shows that the closing stock at Rs.42,01,93,733/- computed by the Assessee comprises of the closing stock of rough diamond valued at Rs.7,43,06,079/- and closing stock of polished diamond valued at Rs.34,58,87,654/-. Further, the said closing stock of Rs.42,01,93,733/- is reflected in the books of accounts of the Assessee which were duly submitted in the course if assessment proceedings and considered by the Ld.A.O. while passing the assessment order. Thus, it is incorrect to mention that the valuation of the rough diamonds admitted during the survey proceedings have not been considered in totality during the assessment proceedings. The rough diamonds purchased by the assesee is duly reflected in the books of accounts and has been accepted.

9. In view of the above, the Assessee submits that the assessment order is neither erroneous nor prejudicial to the interest of the Revenue. Therefore, your honours are not justified to invoke the provisions of section 263 of the Act. The Assessee to support its contentions relied on the decision of Hon’ble Supreme Court in the case of Malabar Industries Co. Ltd. Vs. CIT [2000] 243 ITR 83(SC) also relied on the decision of Hon’ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. [1993] 203 ITR 108 (Bom).

4. We have carefully considered all the relevant facts of the case as also rival submissions and the legal position in the matter. It appears that the ld. PCIT proposed action u/s 263 mainly on the ground of valuation of the diamonds and rate of diamond per carat which according to him was quite different from that is taken while framing assessment order. The ld.AR has explained that there is no discrepancy found with respect to the stock of rough and polished diamond during the course of survey proceedings. The only discrepancy in the course of survey action was pertaining to two different rates for which the assessee voluntarily offered a sum of Rs.4,02,01,020/- (i.e. 7277.5 cts x Rs.5,524), being the difference of the valuations (i.e. Rs.35,395 and Rs.40,919) pertaining to the closing stock for tax as increased valuation of closing stock, thereby resulting in increased gross profit during the year.

4.1 We also find from the records that the issue relating to the excess stock found during the survey has been examined by the AO in detail during assessment proceedings which is evident from the notices and questionnaires issued from time to time. The ld.AR has taken us through various pages of the paper book submitted by him before us. As per pages 82-84 of, vide notice u/s 142(1) dated 15.02.2021, the AO issued a detailed questionnaires calling for various details relating to financial of the assessee. More specifically, he called for the Trading and Profit and loss account for the period 1.4.2017 to 16.2.2018(date of survey) and for the subsequent period upto 31.3.2018.Specific query appears on Excess stock on point no.15 pertaining to the additional income offered of Rs 4.02 cr. Vide another letter dated 23.4.2021, he also issued a show cause notice specifically w.r.t. the survey pertaining to the valuation rates as per paras 3 to 5.Another show cause notice dated 1.6.2021 specifically related to the excess stock as found during survey. It is found from the page-95 to 104 of the detailed reply submitted by the AR of the assessee that various explanations were furnished by the assessee vide reply dated 4.5.2021. Reconciliation of the stock as on the date of survey and the stock position of Rough diamonds submitted before him are also part of the reply. The assessee has also furnished all the relevant details and documents including the submissions made before the AO, Balance Sheet and Profit and Loss accounts along with Annexures, Details of Average Stock Valuation and the impounded note book etc. It was further explained to us that the average stock valuation made by the assessee clearly shows that the closing stock at Rs.42,01,93,733/- computed by it comprised of the closing stock of rough diamond valued at Rs.7,43,06,079/- and closing stock of polished diamond valued at Rs.34,58,87,654/-. Further, the said closing stock of Rs.42,01,93,733/- is reflected in the books of accounts which were duly submitted in the course if assessment proceedings and considered by the AO while passing the assessment order. Thus, it is incorrect to mention that the valuation of the rough diamonds admitted during the survey proceedings had not been considered in totality during the assessment proceedings. Rough diamonds purchased by the assessee is duly reflected in the books of accounts and has been accepted.

4.2 All the above stated facts clearly demonstrate that the issue of excess diamond has been deeply scrutined by the AO during assessment proceedings and it is not a case where no enquiry has been conducted into the issue as alleged by the ld.PCIT. Even, the hon’ble ITAT allowed the appeal of the assessee vide ITA 1618/Mum/2023 for the year vide order dated 28.08.2023 w.r.t. the excess stock.

4.3 We observe the Pr.CIT has drawn support from Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6­2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification ‘which should have been made’ will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 143(3) of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell upon the impact of Explanation 2 for the purposes of section 263 of the Act. The aim and object of introduction of aforesaid Explanation by Finance Act, 2015 was explained in CBDT Circular No. 19/2015 [F.NO.142I14/2015T PL], Dated 27-11-2015 which is reproduced hereunder:

“53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue.

53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it/s prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment.

53.2 The interpretation of expression “erroneous in so far as it prejudicial to the interests of the revenue” has been a contentious one. In order to provide clarity on the issue, section 263 of the Income-tax Act has been amended to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner. (a) the order is passed without making  inquiries or verification which, should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

53.3 Applicability: This amendment has taken effect from 1st day of June, 2015.”

4.4 We find merit in the plea of the assessee that the ld. PCIT is expected to demonstrate that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The powers cannot be exercised for directing a fuller inquiry to merely to find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action in the light of the Explanation 2 is permitted, he can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to section 263 of the Act is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorize or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry required on the basis of record available before the AO was not conducted, the revisionary power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has duly scrutinize the whole issue of excess stock as apparent from various queries made during the assessment proceedings. He passed after making due enquiries after due application of mind.

4.5 We find that twin conditions are not satisfied for invoking the jurisdiction under section 263 of the Act. Here, in our view, it cannot be held that the assessing officer did not carry out enquiry or verification which should have been done. Thus, we are of the view that the Ld Pr. CIT was not justified and not correct in law in holding that the impugned assessment order was erroneous. Accordingly, we find merit in the contentions of the assessee that the revision order passed by ld. PCIT for the year under consideration is beyond the scope of section 263 of the Act and hence not valid. Accordingly, we set aside the revision order passed by him.

5. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 18.02.2025.