Revision: Scope: Section 263: A. Y. 2006-07: CIT feeling inquiry inadequate: CIT must make enquiry and show that assessment order was erroneous: CIT has no power to remand and direct AO to conduct enquiry:

For the A. Y. 2006-07, the assessment was completed u/s. 143(3) r/w. section 147, making enquiry as regards the consideration on sale of the four plots. Subsequently, exercising powers u/s. 263 of the Act, the Commissioner held that the enquiry made by the Assessing Officer was inadequate and therefore directed the Assessing Officer to make fresh enquiry and pass a fresh order of assessment. The Tribunal cancelled the order of the Commissioner passed u/s. 263.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under: “
i) Revisionary power u/s. 263, is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/ investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken.

ii) In cases where there is inadequate enquiry but not lack of enquiry, the Commissioner must record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. An order of remit cannot be passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous.

iii) Inquiries were certainly conducted by the Assessing Officer. It was not a case of no inquiry. The order u/s. 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries and details should have been called for. The inquiry should have been conducted by the Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the inquiry. iv) We do not think any substantial question of law arises for consideration. The appeal is dismissed.”