TaxTMI 
TaxTMI 
2025 (8) TMI 1852
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....sed by the AO is neither erroneous nor prejudicial to the interest of the revenue and is against various judicial pronouncements on the subject. 2. The Learned Principal Commissioner of Income Tax, Mumbai -5 (PCIT) has erred in passing the order u/s 263 of the Income tax Act, 1961 dated 10/12/2024, without appreciating the fact that the provisions of section 263 cannot be revoked when the larger issue is pending before the CIT (A), which is based on the principle of doctrine of merger, according to which there cannot be more than one decree or operative order giving the same subject matter at a given point of time, particularly when the said fact brought to his attention. 3. The Learned Principal Commissioner of Income Tax, Mumbai -5 (PCIT) has erred in passing the order u/s 263 of the Income tax Act, 1961 dated 10/12/2024 and directing the AO to treat the entire expenses of Rs 9,41,47,312/- as unexplained expenditure under the provisions of section 69C of the Income tax Act when the AO has taken 10% of the same based on various juridical pronouncements including by the jurisdictional Bombay High Court and ITAT Mumbai since he has not rejected the books of account....
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....ture' and added to total income u/s.69C and taxed at 60% u/s.115BBE of the Act. In view of the above, he concluded that the assessment order passed under section 143(3) r.w.s. 144B of the Act was erroneous in so far as it is prejudicial to the interest of the revenue within the meaning of section 263 of the Act. Accordingly, proceedings were initiated and a show cause notice was issued to the assessee company in response to which the assessee has stated that the assessment order passed in the case was neither erroneous nor prejudicial of the interests of the Revenue since the AO had made enquiries about the income of the assessee and called for extensive records and examined the same in detail. It has also been stated that provisions of section 263 cannot be invoked when a larger issue is pending before CIT(A). Further, the assessee also contended that the purchases under reference can neither be termed as bogus nor unverifiable. 3.2 However, the ld. PCIT claimed that the contention of the assessee that the purchases from three parties could not be accepted in view of the fact that the creditworthiness and genuineness of these parties could not be proved during the course of....
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....es Ltd. v. CIT (supra) held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the PCIT. The twin conditions are that the order of the AO must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law, or (iii) Assessing Officer's order is in violation of the principle of natural justice, or (iv) if the order is passed by the AO without application of mind. (v) if the AO has not investigated the issue before him; because AO has to discharge dual role of an investigator as well as that of an adjudicator then in aforesaid any event the order passed by the AO can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. Their Lordship held when the AO adopted one of the c....
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.... look into the very same issue from different perspective. We find that the action of the ld. PCIT is in complete disregard to the specific provisions of clause(c) of Explanation to section 263(1) of the Act, which places a clear embargo on the ld. PCIT with respect to exercise of revisionary jurisdiction on assessments which have been subject matter of appeal. Reliance in this regard is placed on the decision of the Hon'ble Calcutta High Court in the case of Oil India Ltd vs CIT reported in 138 ITR 836 (Cal) wherein, the hon'ble Court while interpreting the scope of powers of the Commissioner u/s 263 of the Act held that where an appeal is preferred before the Appellate Assistant Commissioner (AAC) and a subject is particularly raised, he cannot revise such an order taking into account an aspect not dealt by the AAC. 5.2. Further, we are of the considered opinion that the ld. CIT(A) having conferred with the co-terminus powers with that of the AO has got ample power to even enhance the assessment if circumstances so warrant. Just because the ld. CIT(A) had not exercised his enhancement powers in the instant case, even if it is to be done, that would not confer automatic....
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....rt held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. It was observed that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. The hon'ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: "The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction.....