Section 263 of the Act invests a power of revision in a superior officer and therefore, by the very nature of the power, does not allow for supplanting or substituting the view of the AO.
There was an interesting judgement in the case of PCIT Vs Brahma Centre development Private Limited by Delhi High court. It was pertaining regarding the enquiry made by the AO during the course of Assessment & whether it has any value for the purpose of initiating proceedings u/s 263 and connected issues.
The matter related to the treatment of interest on fixed deposits which were credited by the Company to the inventory instead of crediting to the profit and loss account and the proceedings initiated by the PCIT u/s 263. The court found that during the course of assessment queries were made by the AO and were replied also by the Assessee on this issue.
The court noted that the fact that the AO has not given reasons in the assessment order is not indicative, always, of whether or not he has applied his mind.
Therefore, scrutiny of the records is necessary and while scrutinising the record the Court has to keep in mind the difference between lack of enquiry and perceived inadequacy in enquiry .
Inadequacy in conduct of enquiry cannot be the reason based on which powers under Section 263 of the Act can be invoked to interdict an assessment order.
The court relied on Commissioner of Income-tax vs. Sunbeam Auto Ltd.[2011] 332 ITR 167 (Delhi).
The court also noted that Section 263 of the Act invests a power of revision in a superior officer and therefore, by the very nature of the power, does not allow for supplanting or substituting the view of the AO.
The appreciation of material placed before the AO is, exclusively within his domain which cannot be interdicted by a superior officer while exercising powers under Section 263 of the Act only on the ground that if he had appraised the said material, he would have come to a different conclusion.
The judgment of Parashuram Pottery Works Co. Ltd. v. ITO, [1977] 106 ITR 1 (SC) was also referred.
On these facts the appeal of the department was dismissed.
This judgement would be helpful in all those cases where revision has been initiated for lack of inquiry/ inadequate inquiry or change of opinion. The copy of the order is as under:
