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2023 (7) TMI 498 - AT - Income TaxRevision u/s 263 - Addition u/s 40A(2)(b) in respect of remuneration paid by the assessee company to one of its directors - as per CIT remuneration paid to another director was also excessive and the AO should have restricted the remuneration paid to him as done in the case of first director - distinction between lack of inquiry and inadequate inquiry - HELD THAT:- The order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the AO. It is AO’s prerogative to make inquiry to the extent he feels proper. CIT by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. This is not a case where there was an omission on part of the AO to examine this aspect of disallowance under section 40A(2)(b) of the Act at all. The AO had put a specific question before the assessee during the course of assessment and taken his reply on record. Further the assessing Officer had also discussed this aspect as part of assessment order. So, in our view, this is not a case where no enquiry has been made by the assessee officer during the course of assessment proceedings. Principal CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-visit the entire assessment and determine the income himself at a higher figure. We thus find no error in the order of Ld. AO so as to justify initiation of 263 proceedings by the Ld. Pr. CIT. - Decided in favour of assessee.
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