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Facts
The assessee filed a return declaring income. During limited scrutiny, the AO alleged cash payment for property acquisition. The PCIT initiated proceedings under section 263, holding the assessment order erroneous due to lack of inquiry. The assessee appealed this order.
Held
The Tribunal observed that the assessment order u/s 143(3) was passed without proper inquiry or investigation into the alleged cash payment for property, especially when the Faceless AO had requested legible copies of the investigation wing's material. The Tribunal found no error in the PCIT's direction to the AO to re-examine the records.
Key Issues
Whether the PCIT's order u/s 263 was justified given the perceived lack of proper inquiry in the original assessment, and whether the assessment order was erroneous and prejudicial to revenue.
Sections Cited
263, 143(3), 132, 153C
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Income Tax Appellate Tribunal, DELHI “A” BENCH: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL
ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by assessee against the order dated 28.03.2025 by Ld. Pr. Commissioner of Income Tax, Faridabad [“Ld. PCIT”] passed u/s 263 of the Income Tax Act, 1961 [“the Act”] pertaining to Assessment Year 2020-21.
Brief facts of the case are that the assessee is an individual and filed his return of income, declaring total income at INR 27,12,580/-. The case was selected for limited scrutiny and during the course of assessment proceedings, the Faceless AO asked the JAO to provide legible copies of the documents relied upon by the Investigation Wing to allege that assessee has made cash payment of INR 44,68,000/- [wrongly mentioned as INR 48,64,000/-] in acquisition of property. However, as the legible copy could not be provided therefore, Faceless AO has passed the assessment order u/s 143(3) accepting the income as declared by the assessee. Thereafter, Ld. PCIT in terms of notice issued u/s 263 dated 15.01.2025 initiated the proceedings u/s 263 by holding the assessment order as erroneous and pre-judication to the interest of Revenue as no enquiry or investigation was carried out nor any additions with respect to the cash payment made on the purchase of property was made in the hands of the assessee.
Against the said order, assessee filed an appeal before the Tribunal by taking following grounds of appeal:-
1) “The Ld. PCIT has erred in law while passing the order dated 28-03-2025 u/s. 263 of the Act by Ld. PCIT, Faridabad has been made without satisfying the statutory pre conditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2) The Ld. PCIT has erred in law that initiation of proceedings u/s. 263 of the Act on the basis of statements recorded and material / evidences/information gathered during Search action u/s 132, as the remedy for this never lies u/s 263. 3) The Ld. PCIT has erred in law and assuming the jurisdiction on the basis of factually misconception of the facts and on the basis of erroneous assessment order, in which Ld AO considered the information collected in search action. 4) The Ld. PCIT has erred in law that initiation of proceedings u/s. 263 of the Act which depends on possibility or guess work, but it should actually be an error either of fact or of law; as providing of cross examination either at assessment state (u/s 143(3)) or at the time of revisionary exercise is against the principles of natural justice. 5) The Ld. PCIT has erred in law that action u/s. 263 of the Act is otherwise too inapplicable on the factual matrix of the facts of the instant case since it is not a case of "lack of enquiry" or "lack of investigation" and therefore the invocation u/s. 263 of the Act is not in accordance with law. 6) The Ld. PCIT has erred in law that has also failed to appreciate that, u/s. 263 of the Act, an order of assessment cannot be set aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable. 7) That the Appellant prays for the grant of permission to add, alter, delete, modify, any or all of the grounds of appeal at any time on or before or during the time of hearing before the Hon'ble ITAT.”
Before us, in support of all the grounds of appeal, ld.AR for the assessee submits that assessment in the case of assessee was completed u/s 143(3) wherein addition was proposed on the basis of documents found and seized during the course of search however, as neither the copy of the documents seized during the survey containing the notings of cash payment was provided nor any opportunity to cross-examine the witnesses was provided. Ld. further, submitted that a search in the case of M/s. Sweta Group of cases were carried put where the alleged documents were found and seized, and since the search was carried out prior to 01.04.2021, therefore, proceedings in the case of the assessee should have been initiated u/s 153C of the Act. Regarding enquires, ld. AR submits that FAO requested the JAO to provide assessee the legible copies of the documents and also provide an opportunity to cross examine the witness however, when the AJO has failed to do so, the assessment order was passed by accepting the income declared by the assessee. Thus, as per ld. AR the assessment order so passed is neither erroneous nor prejudicial to the interest of revenue and requested that the same be quashed.
5. On the other hand, ld. CIT DR for the Revenue vehemently supported the order of ld. PCIT and submits that from the perusal of the assessment order, it is evident that despite of request by the FAO, the JAO has failed to make any inquiry or investigation on the basis of information found during the course of search that the assessee has made cash payment in the acquisition of property and source of which is not explained. He thus submits that the assessment order lacks enquires and investigations and thus is erroneous and prejudicial to the interest of revenue and requested for the confirmation of the revision order of ld. PCIT.
Heard the contentions of both parties and perused the material available on record. In the present case, from the grounds of appeal taken before us, it is observed that assessee has not challenged the legality of the assessment order passed u/s 143(3) of the Act. Further, it is further observed that no proper enquiries or investigation was made before passing the assessment order. The AO should have made independent inquiry/verification with respect to the alleged cash payment of INR 44,68,000/- made by the assessee for the purchase of property more particularly when the Faceless AO had specifically asked the Jurisdictional AO to provide the legible copies of all the material supplied by the Investigation Wing. Under these circumstances, in our considered opinion, the assessment order so passed, is without proper investigation and inquiries on the material available on record in the shape of the report of the Investigation Wing, suggesting that cash payment was made by the assessee for acquisition of the property. Accordingly, we find no error in the order of Ld. PCIT in directing the AO to pass the assessment order afresh after making inquiry/verification of the records available with respect to cash payment made by the assessee. Accordingly, all Grounds of appeal raised by the assessee are dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 06.02.2026.