Revision under section 263: PCIT cannot overturn AO order on mere suspicion; specific objective findings required, appeal allowed

Revisional jurisdiction under section 263 requires objective specific findings that an Assessing Officer's order is erroneous and prejudicial to revenue; mere subjective satisfaction or brief assessment is insufficient. Where the AO conducted enquiries, verified seized documents, recorded the assessee's statement and accepted detailed explanations, the revisional power cannot be exercised without specifying what further enquiries were necessary and adducing material showing error; consequently, the revisional order was set aside and the assessee's appeal allowed on those grounds.

---

---

Issues: Whether the Principal Commissioner of Income Tax was justified in invoking revisional jurisdiction under Section 263 of the Income-tax Act, 1961 by treating the assessment order passed under Section 143(3) r.w.s. 153C for the relevant assessment years as erroneous and prejudicial to the interests of revenue.

Analysis: The Assessing Officer initiated proceedings under Section 153C after seized material was forwarded and issued detailed notices under Section 142(1) raising specific queries about the seized documents. The assessee filed comprehensive responses, produced documentary evidence, and had her statement recorded during assessment proceedings. The AO examined the seized material, posed a detailed questionnaire, considered the explanations and documentary material and concluded that no addition was called for, completing assessment under Section 143(3) r.w.s. 153C.

Analysis: The PCIT set aside the assessment under Section 263 on the premise that necessary enquiries were not made and treated the order as erroneous and prejudicial. The Tribunal found that the PCIT did not identify any specific inquiry that was not conducted, nor point to any apparent error of law or reasoning; instead the PCIT's order reflected a change of opinion. The Tribunal also noted the PCIT's inconsistent treatment regarding alleged "on-money" and inapplicability of Section 69A where no unexplained money was found and the deal had been cancelled with amounts returned, and relied on Explanation 2 to Section 263 and authorities distinguishing lack of inquiry from inadequate inquiry.

Conclusion: The PCIT's exercise of revisional power under Section 263 was not justified; the assessment order was neither erroneous nor prejudicial to the interest of revenue and the revision order is quashed. The appeal is allowed in favour of the assessee.

---