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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI H. S. SIDHU & SHRI L.P. SAHU
01.06.2015 – “an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the Principal Commissioner or Commissioner(a) the order is passed without making inquiries or verification which should have been made.”
9.2 In view of the above, it is very much obvious that the A.O. didn't make any enquiry/verification of the sources of cash deposits appearing in the bank accounts, so the assessment order passed by him has become erroneous and pre-judicial-to the interest of the Revenue. Accordingly, the Ld. Pr. CIT has rightly set-aside the assessment order dated 12.08.2013 passed by the A.O. in this case and directs the A.O. to do the assessment afresh after considering all the facts/issues discussed above.
Further the A.O. was also directed to allow reasonable opportunities of being heard to the assessee before passing the assessment order in this case, vide order dated 04.02.2016 passed u/s. 263(1) of the Act.
In the background of the aforesaid discussions and precedents, we are of the view that the AO was found to be erroneous and prejudicial to the interest of revenue since at the time of the assessment the AO was duty bound to call for such details and examine/ verify them. We also find that in the case of M/s Malabar Industries, the Hon’ble Apex Court has held that incorrect assumption of facts or incorrect application of law will satisfy the requirement of the order being erroneous. We further note that in the same category fall order passed without applying the principles of natural justice or without application of mind. We are of the view that it is incumbent on the officer to investigate the facts stated in the return, when circumstances would make such an enquiry prudent and the word ‘erroneous’ in section 263 includes the failure to make such an inquiry.
The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated there are assumed to be correct. In view of the foregoing observations and the precedents, we are of the considered opinion that the assessment framed by the Assessing Officer was erroneous and prejudicial to the interests of revenue. Accordingly, Ld. Pr. CIT has passed a well reasoned revisional order u/s. 263(1) which does not need any interference on our part, hence, we uphold the same and dismiss the Appeal of the Assessee.
In the result, the Appeal filed by the assessee stands dismissed.
Order pronounced in the Open Court on 18/10/2017.