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Revisionary proceedings can be quashed if AO passes assessment order after due application of mind and proper enquiries
Let us have a short overview of the case:
In this case, the assessee had filed return for relevant Assessment year along with the computation of income showing Salary Income, Income from House Property, Short term capital gain on sale of gold coin and on the sale of shares of ‘Spice Jet Ltd.’, Long term gain on transfer of eligible equity shares of Virtual Global Education Ltd.
Based on computation of Income, the AO issued a notice u/s 142(1) along with a detailed questionnaire and in response thereto the assessee had filed a detailed reply.
The AO passed an assessment order.
However, later on PCIT in exercise of power u/s 263 set aside the assessment order.
Aggrieved assessee filed appeal before Tribunal. The key issue placed for consideration was whether revisionary proceedings can be quashed if AO passes assessment order after due application of mind and proper enquiries?
AO asked the assessees to furnish the relevant details relating to Long Term Capital Gain, Short Term Capital Gain, exemption u/s 10(36) of the Act, deduction u/s 57 of the Act and unsecured loans and the assessees furnished all the relevant documents which were examined by the AO who has taken a possible view.
Therefore, there was a due application of mind on the part of the AO in all the four cases and adequate and proper enquiries had been conducted by the AO in this regard.
Therefore, the orders passed u/s 263 of the Act have no feet to stand on.
Agree with Counsel that in the cases of Sanjay Jain & Sons and Shri Tarun Jain no show cause notice u/s 263 was issued on account of unsecured loan and hence the PCIT could not have exercised his jurisdiction to set aside the case on the issues of unsecured loan in these two cases.
Accordingly, hold that the proceedings u/s 263 of the Act were bad in law in all the captioned four appeals and quash the revisionary proceedings for the reason that the AO had made adequate enquiries is all the four cases and further the PCIT had not conducted any independent enquiry on his own before coming to an incorrect conclusion that the assessment orders were erroneous as being prejudicial to the interest of the revenue and were liable to be set aside.