Appeal allowed by ITAT Kolkata against CIT's order under section 263 for assessment year 2006-07.

The Appellate Tribunal ITAT Kolkata allowed the appeal against the CIT's order u/s. 263 for assessment year 2006-07. The Tribunal found that the assessment order was not erroneous, and the CIT was not justified in assuming jurisdiction under section 263 of the Income Tax Act. Consequently, the order of the CIT was cancelled, and the appeal of the assessee was allowed.

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Issues involved: Appeal against order of CIT u/s. 263 for assessment year 2006-07.

Grounds of appeal:
1. CIT's order u/s. 263 cancelling assessment and directing de novo assessment was unjustified.
2. CIT's order u/s. 263 was bad, illegal, and unjustified.
3. CIT's action of setting aside assessment u/s. 263 was unjustified.

Facts:
- CIT noted debits towards provision for doubtful debts/deposits in profit and loss account.
- CIT observed under-statement of income due to non-addition of provisions while computing total income.
- Assessee claimed the amount as bad debts, written off in profit and loss account.
- Assessee relied on Vijaya Bank case for methodology.
- CIT set aside assessment, directing reframe after verification of books of account.

Assessee's arguments:
- Two views possible as seen from Section 154 proceedings.
- Cited case supporting contention that assessment order was not erroneous.

Department's submission:
- CIT's order of setting aside assessment should be upheld.

Judgment:
- For CIT to assume jurisdiction u/s. 263, assessment order must be both erroneous and prejudicial to revenue.
- Examination focused on whether sundry debtors were written off.
- Methodology of writing off debts in conformity with Supreme Court decision.
- Actual write off of amount justifies deduction on bad debt.
- CIT not justified in assuming jurisdiction u/s. 263.
- Order of CIT cancelled, appeal of assessee allowed.

Conclusion:
The Appellate Tribunal ITAT Kolkata allowed the appeal against the CIT's order u/s. 263 for assessment year 2006-07, finding that the assessment order was not erroneous and the CIT was not justified in assuming jurisdiction under section 263 of the Income Tax Act.

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