Whether mere fact that AO failed to make reference to disputed provisions in assessment order, would warrant invocation of revisionary powers u/s 263 when issues were duly enquired into – NO: HC

THE issue is – Whether the mere fact that the AO has not made any reference to the disputed provisions in the assessment order would make the order erroneous, leading to invokation of Section 263, when such issues were duly enquired into and the assessment was only passed after verifying the same. NO is the answer.

Facts of the case
The assessee filed its return declaring income of Rs.661.15 crore, after claiming deduction of Rs.11.41 crore u/s 80-I, Rs.8.62 crore u/s 80-IA and Rs.20.20 crore u/s 80-HH. During assessment, the AO assessed the income u/s 143(3) at Rs.814.66 crore and restricted the deduction. Subsequently, the CIT noticed on verification of the records that the expenditure having a bearing on the profits of the units had not been considered for allocation. He in his revisional jurisdiction u/s 263 found that in the exercise carried out by the AO, there was indeed an error and hence it was prejudicial to the interest of the Revenue. On appeal, the Tribunal observed that during the course of assessment, the AO made a specific query, which was with reference to the deduction u/s the three sections. It was further observed that assessee gave reply for each and every item qua this deduction which was enquired into by the AO and it was only thereafter that the AO accepted the claim of the assessee. Accordingly, the Tribunal reversed the order of the CIT.
Having heard the parties, the High Court held that,
++ in the present case, the concession of the assessee’s counsel apart, what the Tribunal found and on all the three items highlighted by Revenue’s counsel is that there were materials before the AO. The AO made enquiries about the above referred aspects and which have been noted by the CIT. The assessee made submissions by placing all relevant documents before the AO. The mere fact that the AO did not make any reference to these three issues in the assessment order cannot make the order erroneous when the issues were indeed looked into. The entire details were filed and the order itself indicates that it can be inferred that the AO not only made enquiries, but satisfied himself with the assessee’s replies furnished from time to time in support of its stand. When the Tribunal concludes in this manner and finally holds that the AO took a perfectly correct or a possible view, then, the order passed by him cannot be termed as erroneous insofar as it is prejudicial to the interest of the Revenue. The CIT was not, therefore, justified in invoking section 263. We are of the view that the Tribunal’s order and conclusions are essentially on facts. They cannot be termed as perverse and after it adverted to the rival contentions and all the materials on record. The Tribunal’s order cannot thus be held to be vitiated by an error of law apparent on the face of record so as to call for interference in our further appellate jurisdiction. The appeal, therefore, does not raise any substantial questions of law, but the attempt of the Revenue is to have a reappreciation and reappraisal of the same factual material. That is impermissible