Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Wednesday, 19 August 2015 20:30

Section 263 - AO failed to make inquiry on important issues and thus order is erroneous and prejudicial to interest of Revenue - CIT's action u/s 263 justified - Delhi Tribunal

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AO passed one page assessment order u/s 143(3) without making inquiry on important issues. Assessment order is thus erroneous and prejudicial to the interest of the Revenue. Action of the CIT u/s 263 is justified.


1. Assessment was completed u/s 143(3) without making any additions and passing a one page order

2. Case was picked up by CIT and notice u/s 263 was issued

3. CIT passed the order setting aside the assessment order on three issues as under -

a) Proportionate disallowance on interest paid by the assessee of interest free advances for non business purposes

b) Verification of TDS on certain payments

c) Exclude income on sale of shops and FDR interest from business income for the purpose of calculation of deduction u/s 80IB(7A) of the Act

4. Assessee moved to Tribunal

5. Tribunal held that order of the AO is not only erroneous but also prejudicial to the interest of Revenue

6. Assessee's appeal dismissed and decided in favour of Revenue


If we analyise facts and circumstances of the present case, wherein the Assessing Officer conduct the assessment proceeding and passed impugned assessment order accepting the return of income of the assessee we clearly observe that the Assessing Officer has not made inquiry on the issue of interest free advances and proportionate disallowance of interest thereon, on the issue of verification on TDS and on the claim and calculation of the assessee for the purpose of deduction u/s 80IB(7A) of the Act specially on the issue of exclusion of income/receipt on sale of shop and FDR interest. In this situation, we have no hesitation to hold that the order of the AO which is apparently very precise and cryptic, was not passed after due examination and verification of certain or issue and therefore, there was an error on the part of AO which leads to a correct conclusion of the CIT with the order of the AO is not only erroneous or also prejudicial to the interest of Revenue. We may further point out that the assessment order suffers lack of necessary enquiry on certain important issues which have been raised by the CIT in the notice issued to the assessee and impugned order u/s 263 of the Act. Therefore, we reach to a conclusion that the assessment order is not sustainable and in accordance with the provisions of the Act which is not only erroneous but also prejudicial to the interest of the Revenue.

Hence, we are inclined to hold that the issuance of notice u/s 263 of the Act and impugned order passed by the CIT u/s 263 of the Act is validly assumed jurisdiction of revisional powers u/s 263 of the Act which cannot be alleged as invalid assumption of jurisdiction or bad in law and we confirm the same.
Cases Referred to

PFH Mall & Retail Management Ltd. vs. ITO (2008) 110 ITD 337
CIT vs. Goetze (India) Ltd. (2014) 361 ITR 505 (Del)
CIT vs. Nagesh Knitwears P. Ltd. (2012) 345 ITR 135 (Delhi)
CIT vs. Anil Kumar Sharma (2011) 335 ITR 83 (Delhi)
CIT vs. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi)
Ram Pyari Devi Sargosi 67 ITR 84 (SC)
ITO vs. DG Housing Projects Ltd. (2012) 343 ITR 329 (Delhi)
Gee Vee Enterprises vs. Additional Commission of Income-Tax, Delhi-I, (1975) 99 ITR 375
Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC),
Gabriel India Ltd. [1993] 203 ITR 108 (Bom)
Parashuram Pottery Works Co. Ltd. vs. ITO [1977] 106 ITR 1 (SC)
CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)
Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC)
Nabha Investments Private Limited vs. Union of India, (2000) 246 ITR 41 (Delhi)

Additional Info

Read 4686 times Last modified on Saturday, 13 February 2016 16:19
Deepak Kumar

A Post Graduate and Chartered Accountant Deepak Sinha is a member of Taxpundit's core team. An analytical, result oriented professional with more than 10 years of combined experience in industry and consultancy.

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1 comment

  • Comment Link Anil Thursday, 20 August 2015 13:16 posted by Anil

    What type of an assessment order is this...? For a limited company a single page order is passed without asking any questions to the assessee...?

    Though this is not illegal but atleast some inquiry and investigation is expected from the AO at 143(3) assessment proceedings. The AO has to apply his mind to protect the interest of the revenue but in this particular case he failed to do so.

    We are always of the opinion that CIT, in normal circumstances, should not be invoking section 263 but here this was unavoidable. When the AO is not even making any inquiry on the important issues...

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