Order cannot be called as Erroneous for mere change of opinion: Income Tax Appellate Tribunal

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The Income Tax Appellate Tribunal ruled that the order cannot be called as erroneous for mere change of opinion. 

Background 

The assessee deposited Rs.12 lac in different dates during the demonetisation period in her bank account from dated 18.11.2016 to 21.11.2016 in different dates each amount of Rs.2 lac. The assessment was selected for “limited scrutiny” under CASSconsidering the large value of cash deposits during the demonetisation period. 

The information was called for by the AO. After the detailed examination by issuing notice u/s 142(1) the assessing authority was satisfied & had completed the scrutiny with Nil demand. 

After the order of ld. AO u/s 143(3), the PCIT had issued the notice u/s 263 for incomplete verification during assessment related to deposit of cash during demonetisation period. 

Considering the assessment order as erroneous, the PCIT had set aside the order of AO and directed for fresh assessment. 

Arguments 

The CIT DR argued and relied on the order of the PCIT. 

He further argued that the order which was passed by the ld. AO is a very cryptic order. The verification was not done completely. The source of cash deposited was not verified. So, the entire order of the AO is erroneous and prejudicial to the interest of the revenue.

Decision 

The division bench of M. L. Meena, accountant member and Justice Anikesh Banerjee, Judicial member earlier noted that the Pr. CIT can revise the order only if it is shown that the assessment order is erroneous in so far as prejudicial to the interests of the revenue.  

The bench said that the law interpreted by the High Courts make it clear that the PCIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous, the PCIT should have shown that the view taken by the AO is unsustainable in law.

The tribunal stated that the PCIT has failed to do so and has simply expressed the view that the assessing officer should have conducted enquiry in a particular manner as desired by him. 

“Such a course of action of the PCIT is not in accordance with the mandate of the provisions of sec. 263 of the Act. The Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. The said explanation was inserted by Finance Act 2015. If that be the case, then the PCIT can find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law and order for revision” the tribunal added. 

The bench observed that he can also force the AO to conduct the enquiries in the manner preferred by PCIT, thus prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings.

The tribunal viewed that what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying out enquiries or verification, which a reasonable and prudent officer would have carried out or not. 

It was further observed that it is the responsibility of the PCIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquiries or verification that would have been carried out by a prudent officer.

The bench said that mere change of opinion and order cannot be called erroneous.

The tribunal directed that the order passed by the PCIT is unjust.

Case title: Leela Gupta v/s Pr. Commissioner of Income Tax-1

Citation: I.T.A. No.75/Asr/2022 

Click here to read the Order/Judgment

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