TaxTMI 
TaxTMI 
2025 (9) TMI 1825
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.... ld. Pr. CIT, Jaipur-2 is grossly erred in law as well as on the facts of the case in taking the action u/s 263 of the Act on the allegations that : (a) The AO has not failed to verify the financial transaction of cash of Rs. 75,00,000/- received advance for building construction from Matrix JEE Academy. Which are contrary to the facts, without considering the material evidences available on record in their true perspective and sense and such a finding being perverse, the impugned action is bad in law without jurisdiction and being void ab initio, the impugned order u/s 263 may kindly be quashed. 3.2 That the ld. Pr. CIT, Jaipur-2 is grossly erred in law as well as on the facts of the case in taking the action u/s 263 of the Act on the allegations or issue on which the case was reopened u/s 147/148 and already examined in that assessment u/s 147/148 and such a action again u/s 263 being perverse, the impugned action is bad in law without jurisdiction and being void ab initio, the impugned order u/s 263 may kindly be quashed. 4. The appellant prays your honors indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of hearing....
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.... 4. Being aggrieved by the order of the ld. PCIT, the assessee has preferred the present appeal on the grounds as raised and reproduced in para 1 above. In support of the various grounds so raised by the ld. A/R of the assessee, the written submissions have been filed, which are being reproduced hereunder : "GOA : 1-3: Invalid jurisdiction and Action u/s 263 FACTS: 1. The brief facts of the case are that the assessee is a regular IT assessee and filling his ITR regularly. He is having the income from house property, interest or other sources. For the year he has filed his ITR declaring the total income of Rs.19,89,250/- on dt.27.08.2018(1- 6) . In this case the ld. AO JAO had issued the notice u/s 148A(b) on dt.12.03.2022 on the reason that As per information available in this office, you have received advance of Rs.75,00,000/- from M/s Metrix JEE, Sikar. This cash receipt of Rs. 75,00,000/- stand unexplained cash receipts in your hands and does not commensurate with the details whatsoever have been shown in the return of income for the F.Y. 2017-18 relevant to A.Y. 2018-19. Copy of notice is enclosed (PB 7-8). In response thereto assessee has filed th....
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....view of the above the assessment order prima facia is found to be erroneous as the assessing officer has erred in correctly computing the total income u/s 143(3) r.w.s 147/144Bof the Act. on the issue vide notice dt.28.01.2025(PB41-42). In this notice the ld. Pr. CIT has alleged that: The AO has failed to determine proper tax liability attributable to the cash transactions made by you during the FY - 2017-18 relevant to AY - 2018-19. Since, the AO vide order dated 18/03/2023 has failed to compute total taxable income in respect of the above cash transactions made by you during FY - 2017-18, therefore, the said assessment order is found to be erroneous in so far as it is prejudicial to the interest of Revenue. "In view of the above the assessment order prima facia is found to be erroneous as the assessing officer has erred in correctly computing the total income u/s 143(3) r.w.s 147/144Bof the Act. Hence the ld. Pr. CIT has issued notice u/s 263 to the assessee on dt.28.01.2025. 5. In response thereto the assessee has prepared the detailed reply explanation with details explaining all the facts, details on 10.02.2025 by stating all the details/inf....
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....therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." [Explanation 2 .- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdiction....
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....ondition "erroneous" not held second condition "in so far as it is prejudicial to the interests of the revenue" when there is no proper satisfaction of the ld. PCIT as per sec. 263 and not fulfilled both the condition and primary condition in the SCN, hence when the Notice u/s 263 itself illegal invalid void-ab-initio, then all the consequent proceedings and order is illegal and bad in law and liable to be quashed. 1.3 On perusal of the order of the ld. AO as well as the order of the ld. Pr. CIT itself it is very clearly proved that the order of the AO has neither erroneous nor prejudicial to the interests of the revenue. Because as we would like to draw kind attention of the hon'ble bench that in the above matter the case of the assessee has been reopened u/s 148 was issued for purpose to verify and examination of alleged cash receipts of Rs.75,00,000/- from M/s Matrix JEE, Sikar and this very issue replied u/s 148A(b) and also in the course of assessment itself. 1.4 Thereafter the ld. AO has issued the detailed query letter to the assessee u/s 142(1) raising various query (PB 16-27) and asked to the assessee to produce the all the details and replies. In respons....
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....e shown as to how the order was prejudicial to the interest of the Revenue. In the present case the appellant has furnished a detailed reply (PB 43-54) with the details (1-40) to the show cause notice by making the reference to the facts of the case and legal position. Despite that the Pr. CIT did not prove or bring any material or circumstantial evidence on record that the details contentions of the assessee on these issues are not genuine, bogus, not verifiable and not correct. 3. Case reopened u/s 148 for limited issue: Further when the very basis of reopening of the case under section 148 was on account of same issue i.e alleged advance of Rs.75,00,000/- from M/s Metrix JEE, Sikar as alleged unexplained cash receipts", then how it can be said that the AO has failed to make the inquiry, where the scope of inquiry is limited only to the extent of that issue and in the action u/s 148 this same issue was taken and also examined in assessment. And till date the position is same there is no change. It was not a regular assessment it was a reassessment for the limited purpose or issue and on perusal of the entire record or detailed it cannot be said that the ld. AO has not ma....
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....ound that for the year under consideration, the A.O. on the basis of information from DDIT(System) issued notice U/s 148 of the Act on 30/03/2017 after recording the reasons, as the reason was cash deposits of Rs.50,55,800/- in the bank account. In response of which the assessee filed its return of income on 28/04//2017 declaring total income of Rs.1,08,464/- and claimed the deduction u/s 80P. Thereafter, Scrutiny assessment was started by the A.O., who had issued statutory notice U/s 143(2) and also 142(1) of the Act dated 06/06/2017 thereby raising query and in his query letter which has been responded by the assessee vide filing reply which has already been placed on record at page No. 3-4 and 6-11 of the paper book. The A.O. thereafter considered, examined and verified the same and also examined the books of account which have been placed on record by the assessee. Thereafter, the assessment was completed U/s 148 r.w.s 143(3) of the Act by the A.O. vide his order dated 30.06.2017 after examining all the details. 12. We observed that the ld. PT.CIT or the Commissioner may call for and examine the record of any proceeding U/s 263 if he considers that any order passed therein by t....
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....o that issues, when the scope of inquiry by the AO is limited to that issue and the ld. Pr. CIT also cannot go beyond that issue while exercising jurisdiction u/s 263 of the Act our view. The case of the assessee was more specific to the limited scrutiny or it is not case of the assessee for complete scrutiny u/s 143(3) for regular assessment and the very basis of reopening of the case under section 148 was on account of cash deposits in the bank, then how the ld. Pr. CIT can hold that the AO has failed to make the inquiry, where the scope of inquiry is limited only to the extent of that issue and in the action u/s 148 the issue of deduction u/s 80P was not there. Thus in the proceedings u/s 263 the ld. Pr. CIT cannot assume or except or direct to the ld. AO to examining the issue which was not subject matter of the reasons recorded u/s 148 and under the 148/147 assessment. Our this view found strength from the decision of Coordinate Bench of this Tribunal in the case of Mahendra Singh Dhankhar HUF vs. ACIT ITA No. 265/JP/2020 Jun 30, 2021 (2021) 62 CCH 0271 Jaipur Trib The present case of the assessee is more strong footing here being the assessment u/s 147/148. Therefore....
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....ion that was vested with A.O while framing assessment as what cannot be done directly cannot be done indirectly-Therefore, where matter was selected for limited scrutiny, revisional jurisdiction cannot be exercised for broadening scope of jurisdiction that was originally vested with A.O while framing assessment-As per PCIT, reason for which matter was selected for limited scrutiny i.e, mis-match of sales turnover vis-à- vis ITR, CIB & AIR has a direct bearing on opening and closing stock of cost of construction and W.I.P and in turn, on taxable income, therefore, AO was duty bound to examine these issues and AO having failed to examine these issues, AO has effectively failed to examine issues for which matter was selected for limited scrutiny-As far as matters for which case was selected for limited scrutiny in terms of mis-match of sales turnover, same has been duly examined by AO and even PCIT has not recorded any adverse findings in terms of lack of enquiry or inadequate enquiry on part of AO-Order passed by PCIT u/s 263 is set aside-Assessee's appeal allowed." (2.4) In the case of Paul Bharwaj vs. Pr. CIT in ITA No. 463/Chd/2019May 13, 2021 (2021) 62 CCH 012....
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....ed by assessee in this case has already been decided in favour of assessee Pr. CIT(A) has exceeded jurisdiction u/s 263 by directing AO to make fresh assessment on issues which were not subject matter of assessment framed on basis of limited scrutiny-Assessee's appeal allowed. Thus in the present case the position are same and the principal of the above judgments are also applicable in the present case. Thus in the light of the facts and position the Pr. CIT cannot be said to be justified in holding that assessment order was passed without making inquiry or verification when firstly the case of reopened for the limited purpose secondary despite the same assessee has produced all the details which examined and deduction allowed 4. As before the ld. Pr. CIT through letter dt.10.02.2025(PB43-54) we had explained that "7. Regarding the issue in hand the assessee has submitted before the ld. AO as under: " Regarding advance amount in cash Rs.75,00,000/-: In this regards it is humbly submitted that your humble assessee has not received any advance amount in cash from M/s Matrix Jee Academy, Sikar. The amount paid in cash as shown in the ta....
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....erroneous in the assessment order passed by the ld. AO. Therefore the above notice are bad in law, invalid, illegal and on facts of the case, for want of jurisdiction, barred by limitation and various other reasons and hence the same may kindly be dropped. 10. Further it is submitted the ld. AO carried out the Assessment through a teamwork of assessment unit, technical unit, review unit, verification unit etc. Since different unit are headed by Principal Commissioner of Income Tax, therefore in a faceless regime, normally there cannot be a case of prejudice of lack of inquiry for the reason that there is application of mind applied by multiple officers of the Department and not by a single officer and thus we are in the view that the assessee had furnished the requisite information's and the NFAC has completed the assessment after considering all the aspects and facts of the case, therefore the order passed by the learned AO cannot be termed as erroneous as alleged by your goodself. 11. Further on perusal of all the notices, replies thereof and assessment order it is clear that during the assessment the ld. AO made various significant queries which are vital a....
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....ile passing the orderi.e he has not rebutted the affidavit filed by the assessee and the contention made in the letter of affidavit should be accepted as truth unless rebutted. Because these affidavits have not been rebutted by lower authority by bring any contrary evidence or without examining. It is very settled legal position that in the cases where affidavit has been filed yet the contents thereof have not been rebutted by the AO/authority, the facts mentioned therein have to be read as the facts binding upon the Income Tax authorities. Kindly refer Mehta Pareek& Co. 30 ITR 181 (SC), ITO v. Dr. TejgopalBhatnagar 20 TW 368 (Jp)Paras Cotton Company vs. CIT (2003) 30 TW 168 (JD)., CIT v/s LunardDimond Ltd. 281 ITR 1 (Del). Recently in CIT v/s Bhawani Oil Mills (P) Ltd 239 CTR 445/49 DTR 212(Raj.)- It has been held that contents of affidavit could not be treated as of a lesser importance than the statement given by the creditor before the AO. Recently this Hon'ble ITAT in the case of NarayaniBaiDangi v/s ITO Ward 2(1), Udaipur in ITA No.22/Jodh/2022 dt.13.10.2023 it has been held that we respectfully relied on the order Mehta Parikh & Co, (supra). The revenue has not acted....
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.... further scrutiny was made by the Income-tax Officer or the Appellate Assistant Commissioner of the entries in the cash book of the appellants. The cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner, considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits. This being the position, the state of affairs, as it obtained on 12th January, 1946, had got to be appreciated, having regard to those entries in the cash books and the affidavits filed before the Appellate Assistant Commissi....
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.... verification or proper inquiry has been made by the AO on the issue. The AO has made the inquiry admittedly on the above issue. Which is clear on perusal of the query letter and replies and details filed and explained and the AO made inquiry and assessee filed all the details related thereto. No one (AO) can read the mind of other person (Pr. CIT) while doing the work on its sprite and cannot guess the expectation or manner of his superior authority. Here the meaning is that non making of an enquiry may render the subject assessment erroneous, however the process of making enquiries may be endless. For someone, some enquiries may be sufficient (here AO), however, the same may be insufficient for the other (here Pr. CIT). There is no definition of proper inquiry in the act. There is no straight jacket formula or parameter to make inquiry in the assessment proceedings. What is required is that the AO should frame the assessment in accordance with the provisions of the Act, as interpreted and in the light of the relevant judicial pronouncements, as available on the date of framing the assessment or material available before him. The AO being a quasi-judicial authority can also take s....
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....f the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right-public or private-of a citizen. [L HirdayNaran Vs Income Tax Officer [(1970) 78 ITR 26 (SC)].As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise the powers, to help anyone, when circumstances so justify or warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, C....
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....tated in the return when the circumstances of the case are such as to provoke an inquiry. (Emphasis, by underlining, supplied by us).It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real-life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills [(1896) 2 Ch 279, 288)], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. His Lordship had said that an auditor (read Assessing Officer in the present context) "is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound.". Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hil....
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....an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. ClT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have claimed out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. The above findings are also fully applicable in the present case. In case of Chorma Business Ltd v/s DPR. CIT 82 TTJ 540(Cal) it has been held that "AO bef....
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....inor reflecting from a short assessment order), which is not at all a case here. Also refer Gyan Chand Gupta V/s PR. CIT 135 TTJ 01(Jp), M/s. Om RudraPriya Holiday Resort Pvt. Ltd. vs. Pr. CIT(2018) 54 CCH 0597 JaipurTrib In CIT v/s Jain Construction 257 CTR 336(Raj.) It has been held that Revision u/s 263-Order erroneous and prejudicial to interest of revenue-CIT issued a notice u/s 263 to assessee on ground that assessment order of AO passed u/s 143 (3) was an order erroneous and prejudicial to interest of revenue- Tribunal allowed appeal of assessee-Held, safeguard provided to assessee in section 263 is that mere erroneous orders are not revisable but revisional authority has to further establish with material on record that such erroneous order is also prejudicial to interest of revenue-Twin conditions of assessment order being erroneous and it also being prejudicial to interest of revenue, keeps initial burden on Commissioner, who invokes such jurisdiction-Premise for invoking revisional jurisdiction on the ground that the Assessing Authority made insufficient enquiry or improper enquiry and failed to verify closing stocks in record of assessee, before passing assessm....
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....ould be said that finding of the Tribunal was perverse. Therefore, the Tribunal was correct in cancelling the order under section 263." 9.2 Also refer CIT v/s Ganpat Ram Bishnoi 296 ITR 292(Raj.)The record of proceedings clearly shows that the AO has framed his assessment after due application of mind and holding enquiries into all areas, which, according to the CIT have not been at all enquired into and the AO has acted merely on furnishing evidence on one single date. The Tribunal noticed that as per the record of the proceedings, the AO required the assessee to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000 with evidence, confirmation of unsecured loans, amongst other matters, which the AO desired to enquire into. The assessee has produced desired information. The AO studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid. The AO again required the assessee to furnish the details of partners capital accounts and also to produce voucher for expenses and the matter was adj....
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....on has been considered by the AO, the record shows that the AO has applied his mind- Thus, it is not a case of lack of enquiry even if the enquiry was inadequate and the CIT was not justified in passing the order under section 263- findings of the Tribunal quashing the order of the PR. CIT passed under Section 263 do not warrant any inference- CIT V/s Sunbeam Auto Ltd. (2009) 227 CTR (Del) 133: (2009) 31 DTR (Del) 1 followed". 9.4. In the case of The Lake Palace Hotels & Motels Pvt Ltd v/s The PR. CIT Udaipur 48 TW 181(Jd). It has been concluded that : The fundamental principles which emerge from the catena of judicial pronouncements may be summarized asunder : (i) The PR. CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. Both the conditions must be fulfilled: (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requiremen....
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.... High Court in the case of Anil Bulk Carriers (P) Ltd. vs. PR. CIT (2005) 194 CTR (All.) 226 : (2005) 276 ITR 625 (All.). It is submitted that department can assume jurisdiction under section 263 of Income tax Act if twin conditions of the order being erroneous and prejudicial to the interest of the revenue are satisfied. If the view taken by the A.O. is one of the possible views then learned CIT cannot assume jurisdiction. For this purpose reliance has been placed on the followings decisions: 1. Malabar Industrial Co. Ltd. v. PR. CIT [2000] 243 ITR 83 (SC) 2. PR. CIT VS MAX INDIA LTD.(2007)213 CTR 266(SC) It is further submitted that proceedings under s. 263 cannot be taken on the ground that the AO has not made sufficient enquiry. The learned PR. CIT can assume jurisdiction if there has been lack of enquiry. In the instant case, the enquiry has been made, though the enquiry may not be sufficient in the opinion of the learned PR. CIT. The reliance is placed upon the decision of Hon'ble Delhi High Court in the case of CIT v. Hindustan Marketing & Advertising Co. Ltd. [2010] 46 DTR (Del.) 109. The attention is drawn towards the decision of Hon....
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....erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment, assuming it to be so, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were incom....
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.... commissioner of orders prejudicial to revenue-AO observed that return submitted by Assessee was duly supported by necessary evidence and accepted Assessee's return-CIT in exercise of his power u/s 263, issued notice to Assessee being of opinion that assessment of AO was erroneous and prejudicial to interest of Revenue-ITAT viewed that CIT could not have formed any opinion that assessment order was erroneous and no reasons had been recorded to demonstrate that assessment order was prejudicial to interest of revenue-Held, perusal of Order of ITAT would testify that AO had consciously examined all relevant records in accepting return submitted by Assessee-CIT did not find fault with any findings of AO, culminating in ultimate conclusion that return of Assessee was acceptable-Decision of CIT authenticates that Assessee furnished all relevant records and documents in support of its return accepted by AO- CIT did not reject documents to be irrelevant-CIT only remanded matter to AO observing that documents ought to have been laid before him and examined at time of assessment-Revisional jurisdiction available to Commissioner u/s 263 subject to condition that Order of AO was erroneous ....
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....to transactions carried out by the assessee. 10. On Merit our submissions are as under: 10.1 kindly refer our Submissions which has also been filed before the ld. CIT vide PB 43-54 also above para4"as part of our WS before your honor. 10.2 Contradictory approach of the Revenue: Further it is very admitted facts that the assessee had not received any cash amount from M/s Matrix Jee Academy, Sikar. If the ld. PCIT was of having any doubt or documents which proves that the assessee had received cash advance receipts, then he must have bring the same before on record and out to have confronted to the assessee, but he has failed to do so rather taken action u/s 263 on assumption, presumption and suspicion. And it is the settled legal position of law that the observation based on assumption, presumption and suspicion and his own guess work and it is the settled legal position of law that suspicion may be strong however cannot take the place of reality, are the settled principles kindly refer Dhakeshwari Cotton Mills 26 ITR 775 (SC) also refer R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All). Also refer CIT v/s Kulwant Rai 2....
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.... obliged to consider all sums received by it as income unless such receipt could be categorized as income. The Tribunal had held in the assessee's own case for the earlier years that it would not be proper and appropriate to treat professional advance received as income, unless and until proposed assignments had materialized. The Tribunal held that the amount of Rs. 55 lakhs received by the assessee as advance could not have been treated as his income for the impugned assessment year. Such addition stands deleted. In 'R.S. Suriya V. Assistant Commissioner of Income Tax' - 2015 (11) TMI 339 - ITAT CHENNAI the appellant is a cine artist. There was a search in the premises of the appellant on 19.01.2010. The appellant filed returns for the assessment years 2004-05 to 2006-07 in response to the notice under Section 153A. The assessments were completed and the Assessing Officer brought to tax advances received from various producers as income of the assessee. The appellant contended that these amounts received by the appellants are only advances and since the films were not commenced these advances cannot be treated as income of the appellant and it should be taxed ....
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....d. DR supported the order of the ld. PCIT. The ld. D/R submitted that the case of the assessee was reopened under section 147 to examine the issue of transaction of Rs. 75,00,000/- received by the assessee from M/s. Matrix JEE Academy, Sikar, but the AO has failed to make enquiry in respect of the aforesaid transaction of Rs. 75,00,000/- and also failed to determine total income of the assessee for AY 2018-19 properly, the very basis on which the case was reopened. Therefore, the order of the AO being prejudicial to the interest of the revenue has been rightly quashed. 6. We have heard the rival contentions and perused the material placed on record. The assessee has challenged the action of the ld. PCIT as per provision of section 263 of the IT Act, 1961. As narrated hereinabove, the brief facts related to the case of the assessee are that the assessee derives income from house property, interest and other sources, and filed his return of income declaring income of Rs. 19,89,250/- under section 139 of the IT Act, 1961, for the year under consideration. As per the information available with the Revenue Authorities, the assessee has received an advance of Rs. 75,00,000/- from M/s.....
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....s reopened for verification of alleged receipt of advance of Rs. 75,00,000/- from M/s. Matrix JEE Academy, Sikar. The said issue was examined on the basis of information/documents sought by the AO and furnished by the assessee. All the details related to alleged transaction were examined as is evident from the findings recorded in the body of the assessment order. The ld. PCIT being not satisfied with the order of the AO, held that the AO had failed to make enquiry in respect of the aforesaid transaction made by the assessee during the F.Y. 2017-18 and also failed to determine total income of the assessment for AY 2018-19 properly. Accordingly, the ld. PCIT issued notice under section 263 on 28.01.2025 fixing the case for hearing on 05.02.2025. In compliance to the notice, the assessee submitted the written submissions on 12.02.2025, relevant part of which has been reproduced by the ld. PCIT in his order are as under : "4. Thereafter the ld. FAO started the assessment proceedings. During the course of assessment proceedings the ld. AO has issued the notices u/s 142(1)/143(2) by raising the various queries vide notices dt. 26.08.2022, 19.10.2022, 07.03.2023 etc. (PB 16-27).....
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.... revenue did not pinpoint any error on the part of the AO, the order passed after due application of mind could not be subjected to proceeding under section 263 of the IT Act, 1961. 6.1 The prerequisite for exercising the jurisdiction by the learned PCIT under section 263 of the Act is that the order of the AO is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The ld. PCIT has to satisfy by an order in writing that the twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e., if the assessment order is not erroneous, but it is prejudicial to the Revenue, provision of section 263 cannot be invoked. This provision cannot be invoked to correct each, and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, then the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' must b....