Sec. 263 Revision Justified as AO Failed to Verify Audit Party’s Objections on MF/Share Investments | HC

Case Details: Principal Commissioner of Income-tax-2 vs Kirti Anand - [2025] 170 taxmann.com 585 (Punjab & Haryana)

Judiciary and Counsel Details

• Sanjeev Prakash Sharma & Sanjay Vashisth, JJ.
• Yogesh Putney & Vaibhav Gupta, Srs. Standing Counsels for the Appellant.
• Divya Suri, Adv. for the Respondent.

Facts of the Case

The Assessing Officer (AO) passed the assessment order. After the assessment order was passed, audit objections were raised with regard to the inquiry said to have been conducted by the AO. The audit party recorded several major audit objections regarding the assessee’s investment in mutual funds/shares. No verification was done by the AO during the assessment proceedings relating to the assessee’s explanation.

The Commissioner invoked revision jurisdiction under section 263 and set aside the assessment order passed by the AO. The Tribunal quashed the order passed under section 263 by the Commissioner. The matter reached the High Court.

High Court Held

The High Court held that the sine-qua-non for interference by the Commissioner under section 263 to the assessment order passed by the AO is the satisfaction of certain conditions, i.e. the order passed by the AO is erroneous, and secondly, the order results in prejudice to the revenue.

After the assessment order, audit objections were raised regarding the Assessing Officer’s inquiry, with major concerns over the assessee’s investment in mutual funds/shares. The Assessing Officer did not verify the explanation provided by the assessee during the assessment proceedings.

Therefore, the order passed by the Commissioner under section 263 in the facts and circumstances of the case cannot be said to be such that it was to be interfered with by the Tribunal. Accordingly, the appeal of the revenue was allowed.

List of Cases Reviewed

• B & A Plantation and Industries Ltd. v. CIT 2007 (290) ITR 395 [Para 8] – distinguished.

List of Cases Referred to

• B & A Plantation & Industries Ltd. v. CIT [2007] 290 ITR 395 (Gauhati) (para 8) audit objections.
• In CIT v. P.V.S. Beedies Pvt. Ltd. 1998 (9) SCC 272 (para 8).