Tribunal quashes order under Section 263 of Income Tax Act, citing Assessing Officer's valid jurisdiction

The tribunal allowed the appeal, quashing the order passed under Section 263 of the Income Tax Act. It held that the Assessing Officer had conducted thorough verification of transactions, including purchase and sale of shares, and had taken a possible view within his jurisdiction. The tribunal found the Principal Commissioner of Income Tax's invocation of Section 263 lacked a clear indication of error or prejudice to revenue in the AO's assessment, thus ruling in favor of the assessee.

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Issues Involved:
1. Delay in filing the appeal.
2. Validity of the invocation of jurisdiction under Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr. CIT).
3. Examination of the Assessing Officer's (AO) actions and findings during the original assessment.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed with a delay of 242 days. The assessee submitted a condonation petition dated 12/02/2021, citing the prevailing pandemic as a sufficient cause for the delay. The tribunal accepted this explanation, condoned the delay, and admitted the appeal.

2. Validity of the Invocation of Jurisdiction under Section 263:
The Pr. CIT invoked Section 263, stating that the AO's assessment was erroneous due to a lack of enquiry, thus prejudicial to the interests of the revenue. The Pr. CIT directed a de-novo assessment on specific issues, instructing the AO to conduct adequate and effective enquiries.

3. Examination of the Assessing Officer's Actions and Findings:
The AO had issued notices under Sections 143(2) and 142(1) and verified the transactions of purchase and sale of shares. The AO concluded that the transactions were genuine and completed the assessment, making a minor disallowance under Section 14A read with Rule 8D(2).

The tribunal found that the AO had indeed conducted a thorough verification of the transactions, including examining Demat statements, contract notes, bank passbooks, and broker ledger accounts. The AO had taken a possible view, which cannot be deemed unsustainable in law.

The tribunal referred to several precedents, emphasizing that for the Pr. CIT to invoke Section 263, the order must be both erroneous and prejudicial to the interests of the revenue. It was noted that the AO had acted within his jurisdiction, and the Pr. CIT's order lacked a clear indication of how the AO's assessment was erroneous or prejudicial.

Conclusion:
The tribunal quashed the order passed under Section 263, stating that the AO had conducted adequate enquiries and that the Pr. CIT failed to demonstrate that the AO's order was erroneous and prejudicial to the revenue. The appeal of the assessee was allowed.

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