ITAT Quashes Section 263 Revision Orders: AO Took a “Plausible View” After Inquiry
Issue
Whether the Principal Commissioner of Income Tax (Pr. CIT) can invoke revisionary jurisdiction under Section 263 to set aside a scrutiny assessment order on the ground of “lack of inquiry” or “failure to verify,” when the Assessing Officer (AO) had raised specific queries on those very issues during the assessment and accepted the assessee’s explanations with due application of mind.
Facts
Assessment Years: 2020-21 & 2021-22.
Scrutiny Assessment: The AO selected the case for complete scrutiny to examine 10 specific issues, including large deductions under Section 35, unsecured loans, inventory valuation, and liabilities.
AO’s Inquiry: The AO issued multiple notices under Section 142(1) with detailed questionnaires. The assessee furnished comprehensive replies and documentary evidence for all queries.
Assessment Order: The AO considered the submissions and passed a reasoned order, making specific disallowances (e.g., u/s 35(2AB) and 14A) while accepting other claims.
Revision Order (Sec 263): The Pr. CIT later issued a show-cause notice alleging that the AO failed to make “in-depth enquiries” on various issues (e.g., FTS, intangible assets, loan genuineness, stock reconciliation).1 Despite the assessee’s detailed rebuttal, the Pr. CIT set aside the assessment order, directing the AO to redo it.
Decision
The Income Tax Appellate Tribunal (ITAT) quashed the revisionary orders passed by the Pr.2 CIT for both years.
AO Applied Mind: The Tribunal found that the AO had specifically queried the issues flagged by the Pr. CIT and had accepted the assessee’s explanations after verifying the documents.
Plausible View: The AO’s decision to accept the return (with some modifications) was a “plausible view” based on facts and law.
Distinction: The Tribunal distinguished between “lack of inquiry” (where Sec 263 applies) and “inadequate inquiry” (where it does not, if the AO has taken a plausible view).
No Substitution: The Pr. CIT cannot invoke Section 263 merely to substitute their own opinion for that of the AO or to direct a “fishing and roving enquiry” without finding the order erroneous and prejudicial to the revenue.
Key Takeaways
Bar on Review: Section 263 is not a power to review an assessment just because the Commissioner disagrees with the AO’s conclusion.
Inquiry is a Shield: If the AO raises a query and the assessee replies, the AO is presumed to have applied their mind. A lack of detailed discussion in the assessment order does not automatically mean “non-application of mind.”
Remand without Finding: A Pr. CIT cannot simply remand a case back to the AO for “verification” without first recording a specific finding on how the order is erroneous and prejudicial.
IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, CHANDIGARH
M/s Rico Auto Industries Ltd.
B-26, Focal Point
Ludhiana (Punjab)-141010
बनाम/
Vs.
Pr. CIT-1
Aaykar Bhawan, Rishi Nagar
Ludhiana (Punjab) – 141001
Source :- 1762938163-6vjJfJ-1-TO