ITAT rules on inquiry by the revisional authority

ITAT rules on inquiry by the revisional authority

The tribunal stated that the department could not act merely by pointing out the shortcomings

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that if the Income Tax department viewed that the assessing officer (AO) had not undertaken any inquiry, it becomes incumbent on the Revisional Authority to conduct an inquiry to invoke the Income Tax Act, 1961.

The assessee, a society, had filed an Income Tax Return (ITR) declaring income at NIL for the Assessment Year 2015-16. After conducting the inquiry, the AO accepted the income as NIL. However, the Commissioner of Income Tax (Exemption) invoked provisions of Section 263 of the IT Act.

The Coram of Judicial Member Anubhav Sharma and Accountant Member RK Panda observed that under the IT Act, the conclusion that the order of the AO was erroneous and prejudicial to the interest of the revenue, should have led to an inquiry.

The tribunal stated, "If the Revisional Authority does not conduct such a basic exercise, then he is not justified in setting aside the order under the IT Act."

ITAT quashed the impugned order, and ruled, "Reliance can be placed on the judgment of the Delhi High Court in the 2017 order as relied on the Coordinate Bench of Delhi ITAT in a previous case. In the present case, the Ld Revisional Authority has done no homework on its end but merely on the basis of a letter of the JCIT pointing shortcomings, held that the inquiry done by Ld. AO was not satisfactory."

It added, "If the Revisional Authority intended to set aside the assessment order for lack of inquiry, the direction in the order exercise of the authority should set or indicate the possible and prospective path of inquiry that the AO should follow further. This was not done."