The Calcutta High Court said that the Commissioner of Income Tax (CIT) while exercising power under Section 263 of the Income Tax Act, 1961 (ITA), must record a specific finding that the case is of no enquiry.

The Court was dealing with an appeal filed by the revenue under Section 260A of ITA against the order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2009-2010.

A Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya noted, “In the preceding paragraphs, we have noted as to the exercise conducted by the assessing officer in the scrutiny assessment which was examined by the tribunal and found that the due enquiry conducted by the assessing officer and after perusal of the documents, stock register etc. the assessment was completed. The tribunal also re-appreciated the factual position and found that the CIT while exercising power under Section 263 of the Act has not recorded a specific finding that it is as case of no enquiry by the assessing officer rather the observation was there could be a possibility of understatement of the closing stock.”

Senior Standing Counsel Soumen Bhattacharjee represented the appellant while Senior Advocate S.S. Surana represented the respondent.

In this case, the scrutiny assessment for the year under consideration was completed by an order determining the total income of the assessee at Rs. 3,19,86,520/-. The CIT invoked his powers under Section 263 of ITA, alleging that the assessing officer completed the assessment in hasty manner and accepted the return of income without making necessary enquiry and verification and hence, the order was prejudicial to the interest of revenue.

Therefore, a show cause notice was issued to the assessee to answer few issues and the assessee submitted reply. However, the CIT rejected the contention raised by the assessee and affirmed the proposal in the show cause notice and directed the assessing officer to make necessary investigation on the said issues and pass orders as per law. Aggrieved by this, the assesse preferred appeal before the tribunal which allowed the same. Hence, the matter was before the High Court.

The High Court in the above context of the case observed that the Tribunal rightly interfered with the order passed by the CIT and allowed the appeal of the assessee.

Accordingly, the Court dismissed the appeal and answered the substantial questions of law against the revenue.

Cause Title- Commissioner of Income Tax, Kolkata - XII v. Gopal Sharma


Appellant: Senior Standing Counsel Soumen Bhattacharjee

Respondent: Senior Advocate S.M. Surana and Advocate Bhaskar Sengupta.

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