Assessment order deemed erroneous for inadequate inquiries, appeal dismissed.

The Tribunal upheld the Principal Commissioner of Income Tax's order, finding that the Assessing Officer had not conducted adequate inquiries during the assessment, rendering the assessment order erroneous and prejudicial to revenue interests. The appeal was dismissed, and the Tribunal directed the order to be forwarded to the Registry of the Lucknow Bench of the Allahabad High Court for reference in the related Writ Petition.

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Issues Involved:
1. Legality of the Pr. CIT's revision order under Section 263.
2. Adequacy of the Assessing Officer's inquiries during the assessment.
3. Validity of the Pr. CIT's actions beyond the show cause notice.
4. Applicability of relevant case laws and legal precedents.

Summary:

Issue 1: Legality of the Pr. CIT's Revision Order under Section 263
The appeal was filed by the assessee against the impugned order dated 22/02/2022 by the Pr. CIT, Bareilly, which set aside the assessment order dated 24/12/2019 and directed a de novo assessment. The Pr. CIT observed that the Assessing Officer (AO) passed the assessment order without proper inquiries on specific issues, thereby making the order "erroneous in so far as it is prejudicial to the interests of revenue" under Explanation 2(a) to Section 263 of the Income Tax Act, 1961.

Issue 2: Adequacy of the Assessing Officer's Inquiries During the Assessment
The Pr. CIT identified five points where the AO failed to make necessary inquiries:
1. Genuineness of the source of cash deposits during the demonetization period.
2. Details of the license issued for trading liquor.
3. Verification of the source, genuineness, and creditworthiness of the partners' capital contributions.
4. Examination of major expenses like purchases, processing fees, and carriage onwards.
5. Verification of the source of a significant security deposit paid during the year.

The assessee argued that the AO had made adequate inquiries and provided necessary documentation. However, the Tribunal found that the assessee failed to substantiate these claims with sufficient evidence. The AO's order was deemed to have been passed without making the required inquiries, making it erroneous and prejudicial to the interests of the revenue.

Issue 3: Validity of the Pr. CIT's Actions Beyond the Show Cause Notice
The assessee contended that the Pr. CIT made fresh allegations in his order that were not raised in the initial show cause notice, violating the principle of natural justice. However, the Tribunal referred to the Supreme Court's decision in CIT vs. Amitabh Bachchan, which held that the Commissioner is not confined to the terms of the show cause notice and can make necessary inquiries deemed fit.

Issue 4: Applicability of Relevant Case Laws and Legal Precedents
The assessee relied on various case laws to argue against the Pr. CIT's order. However, the Tribunal noted that many of these cases were decided before the insertion of Explanation 2 to Section 263(1) of the IT Act, which became effective from 01/06/2015. The Tribunal found that the cases cited by the Pr. CIT, such as Meerut Roller Flour Mills Ltd. vs. CIT and Tara Devi Agarwal v. CIT, were more applicable to the present case.

Conclusion:
The Tribunal upheld the Pr. CIT's order, concluding that the AO had not made the necessary inquiries, thereby making the assessment order erroneous and prejudicial to the interests of the revenue. All grounds of appeal were dismissed, and the appeal was rejected. The Tribunal directed the office to forward a copy of the order to the Registry of the Hon'ble Lucknow Bench of Allahabad High Court, referencing the related Writ Petition.

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