TaxTMI 
TaxTMI 
2025 (2) TMI 1579
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....ces of both appeals being identical, both the parties agreed to take appeal for assessment year 2016-17 as a lead case and follow the result of same in AY 2017-18. Therefore, same were heard together and disposed off by way of this consolidated order. The grounds raised in assessment year 2016-17 are reproduced as under: 1. The Ld. PCIT has erred in passing an Order Us 263 and setting aside the assessment Order framed by the Assessing Officer, although he was unable to satisfy the twin conditions of the AO's order being, Erroneous and Prejudicial to the interest of the Revenue. 2. The Ld. PCIT failed to take into consideration that an order is erroneous and prejudicial only if, it involves an error; deviates from law; ....
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.... debited in the profit and loss account having no nexus with said interest income was not allowable. He further noted that assessment was made when without making inquiry or verification in this regard. Accordingly, after considering submission of the assessee, he treated the order passed by the Assessing Officer as erroneous in so far as prejudicial to the interest of the Revenue and cancelled the said assessment order giveing direction to pass a fresh assessment order after making necessary inquiry in the matter. 4. Before us, the Ld. Counsel for the assessee has filed a Paper Book containing pages 1 to 50. The ld Counsel for assessee referred to paper book page 27 which is part of the questionnaire issued by the Assessing Officer. The....
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....submitted that the Assessing Officer had duly verified the issue of interest income, which formed the basis for reopening the assessment. According to him, while the assessment order may be prejudicial to the Revenue, it is not erroneous. He argued that the Assessing Officer, after considering the assessee's submissions, had taken a reasoned view that the interest income should be assessed under the head "Business and Profession." Therefore, the Learned Principal Commissioner of Income Tax (PCIT) cannot substitute his own view in place of the Assessing Officer's conclusion. In support of this argument, the Learned Counsel relied on the decisions in: * Karan Polymers Pvt. Ltd. v. PCIT (2022) 97 ITR (Trib.) 556 (Kolkata), ....
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....at, in light of Explanation 2 introduced with effect from 01.06.2015, this ground itself becomes infructuous. 4.4 We have considered the rival submissions and carefully examined the relevant materials on record. Explanation 2 to Section 263 of the Income Tax Act, which came into effect from June 1, 2015, stipulates that if the Assessing Officer fails to conduct the necessary inquiry or verification that ought to have been carried out during the assessment process, the resulting assessment order shall be deemed erroneous and prejudicial to the interests of the Revenue. The relevant provision of Section 263 is reproduced below: "263. Revision of orders prejudicial to revenue. [Explanation 2 .- For the purposes of this sec....
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....t case, the Assessing Officer was required to examine how the interest income qualified for assessment under the head "Business or Profession." He also needed to determine whether earning interest constituted the assessee's business activity or if the interest income was incidental to the assessee's business operations or advances on which interest was earned were made for furtherance of business activity. However, no such inquiries or verification were made, nor were any responses provided by the assessee. Therefore, we are of the considered opinion that the Assessing Officer failed to conduct the necessary inquiry or verification that ought to have been undertaken during the assessment proceedings. Accordingly, we concur with the ....