2022 (11) TMI 476 - AT - Income Tax
Revision u/s 263 by CIT - Whether PCIT has failed to give any plausible reasons ‘as to how’ the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue? - HELD THAT:- It is a well settled principle of law by the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT]. where it has been held that the phrase ‘prejudicial to the interest of the Revenue u/s.263 of the Act’, has to be read in conjunction with the expression erroneous order of the AO. Further the Courts observed that every loss of Revenue as a consequent of an order of the AO, cannot be treated as prejudicial to the interest of the Revenue.
We find that four issues questioned by the PCIT in their show cause notice issued u/s.263 of the Act, has been thoroughly examined by the AO during the course of assessment proceedings, which is evident from notice issued by the AO and reply furnished by the assessee. Even during revision proceedings, the PCIT did not specify’ how and why’ the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue.
Further, if you go by the observations of the PCIT, it is abundantly clear that the PCIT has set aside the assessment order for further verification which in our considered view is not permissible u/s.263 of the Act, even after insertion of Explanation (2) to sec. u/s.263 - Therefore, we are of the considered view that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue and thus, we quashed the order passed by the PCIT u/s.263. Appeal filed by the assessee is allowed.