The present appeal was filed by the assessee, Subhash Jaiswal Associates, an Association of Persons engaged in the retail liquor business, against the order dated 21.02.2022 passed by the Principal Commissioner of Income Tax, Bareilly, under section 263 of the Income-tax Act, 1961, for the Assessment Year 2017-18.

The assessment for the relevant year was originally completed under section 143(3) of the Act on 15.12.2019, determining total income at ₹97,61,730 as against the returned income of ₹94,78,920. Subsequently, the learned PCIT initiated revisionary proceedings under section 263 on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue, alleging lack of enquiry on multiple issues including cash deposits during demonetisation, liquor licence details, unsecured loans, sundry creditors, and various expenditure claims.

In response to the show cause notice, the assessee submitted that the case had been selected for scrutiny primarily on the issue of cash deposits during demonetisation and that the Assessing Officer had issued notices under sections 142(1) and 133(6), examined books of account, verified unsecured loans on a test-check basis, and accepted the explanations after due consideration. It was contended that the assessment order was passed after proper application of mind and that the revision proceedings were based merely on a change of opinion.

The Tribunal, after examining the assessment records, order-sheet notings, and replies filed by the assessee during assessment proceedings, observed that the Assessing Officer had indeed conducted enquiries on the issues forming part of scrutiny, including verification of unsecured loans through notices under section 133(6). The Tribunal held that it was not necessary for the Assessing Officer to carry out 100% verification when a reasonable and representative sample had been examined and found satisfactory.

The Tribunal further observed that the Principal Commissioner sought to invoke section 263 on the ground of inadequate enquiry, which is impermissible in law. It was reiterated that revisionary jurisdiction under section 263 can be exercised only in cases of complete lack of enquiry and not where the Assessing Officer has taken one of the possible views after conducting enquiries. Reliance was placed on settled judicial principles laid down by the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs CIT and CIT vs Gabriel India Ltd.

It was also noted that certain issues forming part of the revision order were not even mentioned in the show cause notice, thereby violating principles of natural justice. Further, invocation of Explanation 2 to section 263 without confronting the assessee was held to be unsustainable.

In view of the above facts and legal position, the Tribunal held that the assumption of jurisdiction under section 263 was invalid and accordingly quashed the impugned revision order.

As a result, the appeal filed by the assessee was allowed.

Source: https://itat.gov.in/public/files/upload/1765777582-sAPEEf-1-TO.pdf

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