Tribunal Overturns Revision Order: Original Tax Assessment by AO Restored After Adequate Inquiry and Explanation.

The ITAT set aside the revision order passed by Ld. Pr. CIT under section 263 of the Income-tax Act, 1961, which had deemed the original assessment under section 143(3) as erroneous and prejudicial to revenue. The Tribunal found that the original assessment by the AO was neither erroneous nor prejudicial, as the AO had conducted adequate inquiries and accepted the explanations provided by the assessee. Consequently, the Tribunal restored the original assessment order, allowing the grounds of appeal raised by the assessee. The appeal was allowed, and the decision was pronounced in open court.

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Issues involved:
The judgment involves a challenge to the correctness of an order passed by Ld. Pr. CIT under section 263 of the Income-tax Act, 1961 for the assessment year 2016-17.

Grounds of appeal:
1. The order passed by Ld. PCIT under section 263 setting aside the assessment under section 143(3) as erroneous and prejudicial to the revenue is challenged.
2. Ld. PCIT erred in exercising jurisdiction under section 263 despite full satisfaction of the Assessing Officer during the original assessment.
3. Ld. CIT erred in passing the revision order under section 263 without meeting the mandatory conditions as required by law.
4. Ld. PCIT erred in passing the revision order even though the Assessing Officer had made inquiries and the claim was allowed based on satisfactory explanation.
5. Ld. PCIT erred in holding that the amount received from pension policies was not exempt, despite the appellant not claiming any exemption under relevant sections.
6. The appellant seeks leave to amend the grounds of appeal.

Details of the judgment:
The Assessing Officer reopened the assessment based on the accretion amount claimed by the assessee on surrender of policy for the relevant year. The AO concluded the assessment, assessing the income of the assessee. Ld. Pr. CIT issued a notice under section 263, calling for revision of the assessment order. The revision directed the AO to verify the difference in the amount and pass a fresh assessment order.

The appellant contended that the assessment order was not prejudicial to the revenue, as the AO had inquired and accepted the explanation provided by the assessee. The Revenue argued that the AO did not make further inquiries and justified the revision by Ld. Pr. CIT.

After hearing the arguments, the Tribunal held that for invoking section 263, the order must be both erroneous and prejudicial to revenue. In this case, the redemption of units and claim of capital gain did not cause prejudice to revenue. The Tribunal set aside the revision order and restored the findings of the AO, allowing the grounds raised by the assessee.

In conclusion, the appeal of the assessee was allowed, and the order was pronounced in open court on the specified date.

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