MUHAMMAD ZAMEER QURESHI,BAREILLY V. PR. CIT, BAREILLY

ITA 344/LKW/2024

AI Insights

The case involves Shri Muhammad Zameer Qureshi, who was assessed for the year 2012-13 under section 147 read with section 144B of the Income Tax Act, 1961, following the reopening of his assessment due to substantial credits in his bank accounts. The AO initially added a commission of 1% on these credits as income. The PCIT later issued a show cause notice under section 263, leading to a revision of the assessment order, which the assessee contested. The Tribunal examined whether the PCIT's actions were justified under section 263, focusing on the adequacy of the AO's inquiries and the nature of the credits in the assessee's accounts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705762 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. Vam Resorts & Hotels Pvt. Ltd., Smt. Renuka Philip vs. Income Tax Officer, Business Ward-XV(2), Chennai, Heritage Housing Development vs. ACIT, CIT vs. Sunbeam Auto Ltd., Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, CIT vs. Vikas Polymers
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJ KUMAR
• Assessee Lawyers: P.K. KAPOOR
• Keywords: Set aside; Business income; Revenue expenditure; Unexplained cash credit; Capital expenditure
• Section: 147; 148; 142(1); 263; 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.344/LKW/2024 Assessment Year: 2014-15 Shri Muhammad Zameer Qureshi 180, Azam Nagar Bareilly v. The PCIT Bareilly TAN/PAN:AACPZ6783H (Appellant) (Respondent) Appellant by: Shri P. K. Kapoor, C.A. Respondent by: Shri Neeraj Kumar, CIT(DR) O R D E R PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the assessee against order dated 22.03.2024, passed by the Ld. Principal Commissioner of Income Tax, Bareilly (PCIT) under section 263 of the Income Tax Act, 1961 (hereinafter called “the Act’) for Assessment Year 2012-13. 2.0 The brief facts of the case are that the assessee filed his return of income for the year under consideration under section 139(4) of the Act on 30.03.2015, declaring total income of Rs.2,19,810/-. The Income Tax Department was in possession of information that during the year under consideration, the assessee had received huge credits, totaling to Rs.61,63,31,042/- ITA No.344/LKW/2024 Page 2 of 22 in his Bank Accounts No. 019205004909, maintained with ICICI Bank, Bareilly, No. 205010200009737, maintained with Axis Bank Ltd. and No. 07485800000444, maintained with Yes Bank Limited. The Assessing Officer (AO) reopened the case of the assessee under section 147 of the Act after issuing notice under section 148 of the Act. In response to notice under section 148 of the Act, the assessee filed return of income, declaring total income of Rs.2,19,810/- i.e. the same income as returned under section 139(4) of the Act on 30.03.2015. The assessment in the case of the assessee was completed under section 147 read with section 144B of the of the Act, assessing the total income of the assessee at Rs.63,83,310/- after making an addition of Rs.61,63,310/- being Commission @ 1% on total credits of Rs.61,63,31,042/-. 2.1 Thereafter, the Ld. Principal Commissioner of Income Tax (PCIT) initiated revisionary proceedings under section 263 of the Act by issuing a Show Cause Notice (SCN) dated 25.01.2023. The Ld. PCIT noted that in paragraph 6 of the assessment order, the Assessing Officer (AO) stated that the replies of the assessee during the proceedings are not acceptable and that despite being provided with several opportunities, the assessee had failed to offer a valid explanation with respect to the credits. The Ld. PCIT further noted that the AO, inspite of such observations, had ITA No.344/LKW/2024 Page 3 of 22 made an addition of only 1% of total receipts, without giving any basis of the same. The Ld. PCIT held that the total credits of Rs.61,63,31,042/- in assesse's bank account remained unexplained and were liable to be added under section 69 of the Act. It was further held by the Ld. PCIT that during the assessment proceedings, the AO had not examined/enquired into the details of facts of the case and, therefore, the order of the AO was prejudicial and erroneous to the interest of the Revenue. The Ld. PCIT, exercising his power under section 263 of the Act, set aside the assessment order and directed the AO to conduct the enquiry on the following points: 1. The AO during the course of proceedings must ensure that evidence regarding purchase of livestock is obtained from assessee. 2. The AO during the course of proceedings must ensure that evidence regarding payment made to the farmers for purchase of livestock is obtained and placed on record. 3. The bills and vouchers or any other evidence regarding transportation of livestock is to be brought on record. 4. The bills and vouchers or any other evidence regarding supply of livestock to slaughter house or any other entity is to be brought on record. 5. The AO shall conduct enquiry whether amount withdrawn from bank account was actually used for payment to farmers for purchase of livestock. ITA No.344/LKW/2024 Page 4 of 22 2.2 Aggrieved by the impugned order of the Ld. PCIT, the assessee is in appeal before us. The assessee has raised the following grounds of appeal: 1. The order passed under section 263 of the Income-tax Act, 1961 (the Act) by Ld. Pr. CIT is violation of clause (c) of Explanation 1 of sub section (1) of section 263 of the Act. 2. The order passed under section 263 of the Income-tax Act, 1961 (the Act), by Ld. Pr. CIT holding that the Assessment Order passed by the Ld. AO u/s.147/144B dated 28.03.2022 of the Act is erroneous and prejudicial to the interest of the revenue is bad in law and ultra vires. 3. That the appellant craves leave to add, amend or alter any of the grounds of appeal. 3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the revisionary proceedings initiated under section 263 of the Act were legally incorrect inasmuch as the issues pointed out in the show cause notice issued under section 263 of the Act were identical to the reasons for which the assessment were reopened under section 147/148 of the Act and that further, when the appeal of the assessee was pending before the Ld. First Appellate Authority, the show cause notice under section 263 of the Act was issued by the Office of the Ld. PCIT which was against the mandate of law. The Ld. A.R. drew our attention to the copy of show cause notice issued under section 263 of the Act, placed at page 113 of the paper book filed by the ITA No.344/LKW/2024 Page 5 of 22 assessee, wherein, it has been stated that the assessee’s case was reopened after recording reasons under section 147 of the Act for the reason that there was information that the assessee had entered into financial transactions in the Bank Account with the ICICI Bank, Bareilly, wherein, total debit and credit transactions were Rs.20.58 crores and 20.58 crores respectively and that further during the assessment proceedings, it was found that the total debit and credit entries were to the tune of Rs.61,57,28,756/- and Rs.61,63,31,042/- respectively and that the AO had made a total addition of Rs.61,63,310/- being 1% Commission on the total credits, since the assessee had not produced any evidence regarding purchase of livestock, payment to farmers, transport of livestock, supply of livestock to slaughter house, etc. The Ld. A.R. submitted that as per the SCN, the AO had only added 1% of the total receipts without giving any basis and, therefore, the order passed by the AO was deemed to be erroneous insofar as being prejudicial to the interest of the Revenue. 3.1 The Ld. A.R. submitted that this show cause notice under section 263 of the Act was issued on 25.01.2023 and at that point of time, the assessee was already in appeal, vide Acknowledgement No.597995830260422 dated 26.04.2022, before the Ld. First Appellate Authority, challenging the ITA No.344/LKW/2024 Page 6 of 22 estimation of income @1% of the total credits,. The Ld. A.R. submitted that the Hon'ble Allahabad High Court (being the Jurisdictional High Court for the assessee) in the case of CIT vs. Vam Resorts & Hotels Pvt. Ltd., vide order dated 20.08.2019 in ITA No. 107 of 2015 has held in paragraph 25 of the said order that clause (c) of Explanation 1 to section 263 of the Act provides that when an appeal is pending before the Commissioner (Appeals), the exercise of jurisdiction under section 263 of the Act by the CIT is barred. The Ld. A.R. pointed out that in this case, the Hon'ble Allahabad High Court went on to hold that the CIT had wrongly exercised jurisdiction under section 263 of the Act by remanding back the matter to the Assessing Authority on 25.03.2013 while the appeal was decided by the Ld. First Appellate Authority on 05.06.2015. It was submitted that the facts of the present appeal are identical and are, thus squarely, covered by the order of the Hon'ble Jurisdictional High Court and, therefore, the proceedings under section 263 of the Act in the case of the assessee deserves to be quashed. 3.2 The Ld. A.R. further submitted that similar view has also been taken by the Hon'ble Madras High Court in the case of Smt. Renuka Philip vs. Income Tax Officer, Business Ward-XV(2), Chennai reported in [2018] 409 ITR 567 (Chennai). ITA No.344/LKW/2024 Page 7 of 22 3.3 The Ld. A.R. submitted that for this reason alone the proceedings under section 263 of the Act were bad in law and deserved to be quashed. 3.4 On merits of the case, the Ld. A.R. argued that the issue before the AO during the course of re-assessment proceedings was to examine the nature and source of credit entries in the Bank Accounts of the assessee and in this regard, the AO had duly raised queries by issuing statutory notices under section 142(1) of the Act. Our attention was drawn to copy of notice dated 16.12.2021 and another notice dated 02.02.2022 and it was submitted that vide these two notices, the assessee was required to explain the source of cash deposits with documentary evidence, cash flow statement, copy of cash book, etc. and the assessee vide reply dated 08.02.2022 had filed detailed reply/requisite documents before the AO, which are placed at pages 37 to 81 of the paper book filed by the assessee vide reply dated 08.02.2022 and again from pages 87 to 96 of the paper book, wherein another reply was filed along with Annexures on 15.03.2022. 3.5 The Ld. A.R. submitted that, apart from furnishing bank account statements, the assessee had specifically answered AO’s query regarding source of credits, wherein, it was submitted that ITA No.344/LKW/2024 Page 8 of 22 his main source of income was from Commission and Brokerage from M/s Globe Consultants, New Delhi and M/s Vision Enterprises, New Delhi and it was further stated that the assessee did not purchase or supply any livestock on his own account and that he had acted as an Agent only, wherein, he used to procure livestock from farmers as an Agent for the Principals for whom he acted only as a Commission Agent. The Ld. A.R. further submitted that in the said reply before the AO, the assessee had also submitted that a Commission of Rs.6/- per livestock was charged from the Principals and the assessee had also filed Confirmation Certificates from M/s Globe Consultants, New Delhi and M/s Vision Enterprises, New Delhi, wherein, both the parties had categorically confirmed that the assessee was only a Commission Agent, who procured livestock on their behalf. The Ld. A.R. further submitted that the assessee had also submitted before the AO that the credits in the bank accounts of the assessee were from the above two mentioned parties, which were transferred to the assessee for purchase of livestock on their behalf and, therefore, the credits of Rs.61,63,31,042/-, as appearing in the bank accounts, did not pertain to the business of the assessee. 3.6 Our attention was also drawn to the Certificates issued by M/s Globe Consultants, New Delhi and M/s Vision ITA No.344/LKW/2024 Page 9 of 22 Enterprises, New Delhi in this regard, which are placed at pages 92 and 93 of the paper book confirming that the assessee was acting in the capacity of their Agent. Our attention was further drawn to the Agreement dated 05.05.2009 between the assessee and M/s Vision Enterprises, New Delhi for supply of livestock and placed at pages 94 to 96 of the paper book. The Ld. A.R. submitted that, thus, the AO had made due enquiries before reaching the conclusion that the assessee had not been able to substantiate his claim and had thereafter, proceeded to assess Commission @ 1% of gross receipts and, therefore, even on merits of the case, the proceedings under section 263 of the Act were bad in law inasmuch as although the AO might not have stated in his order in as many terms of the various enquiries he had made and the various replies to the queries furnished by the assessee, there was due application of mind by the AO before the AO had proceeded to complete the assessment in a particular manner and, therefore, it could not be said that the assessment order was erroneous as being prejudicial to the interest of the Revenue. The Ld. A.R. submitted that the view taken by the AO was a plausible and possible view (although the assessee was in appeal against that order) and that the Ld. PCIT was trying to impose his view on the AO by means of action initiated under section 263 of the Act which was not permissible in eyes of law. ITA No.344/LKW/2024 Page 10 of 22 3.7 The Ld. A.R. further submitted that it is also to be noted that the Ld. PCIT had not made any independent enquiries on his own before setting aside the assessment order whereas it was incumbent upon him to do so and, thus, for this reason also the proceedings under section 263 of the Act stand vitiated. 3.8 The Ld. A.R. also drew our attention to various case laws on validity of proceedings under section 263 of the Act placed in the paper book at pages 170 to 228 and prayed that the proceedings under section 263 of the Act be quashed. 4.0 In response to the submissions of the Ld. A.R., the Ld. CIT(DR) filed written submissions and stated that the facts of the case would show that the issue, on which the Ld. PCIT had invoked the jurisdiction under section 263 of the Act, was not the subject matter of appeal before the Ld. First Appellate Authority. The Ld. CIT(DR) argued that the assessee had filed appeal before the Ld. First Appellate Authority against the re-assessment order, wherein, addition @1% of the total receipts had been made whereas the proceedings under section 263 of the Act were initiated on an entirely different set of issues. It was submitted that a perusal of the impugned order would show that the Ld. PCIT has directed the AO to conduct enquiries in respect of nature and source of receipts by conducting enquiries in respect ITA No.344/LKW/2024 Page 11 of 22 of claim of cash purchase of livestock, evidence regarding transportation of livestock, evidence regarding supply of livestock to slaughter house and also to conduct enquiry on the issue as to whether the amount withdrawn from Bank Account was actually used for payment to farmers for purchase of livestock. The Ld. CIT(DR) placed reliance on Third Member order passed by ITAT Mumbai ‘H’ Bench in the case of Heritage Housing Development vs. ACIT in ITA No.6484/Mum/2009, wherein, vide order dated 01.06.2012, the Co-ordinate Bench of the Tribunal had held that only that part of the order of the AO merges with that of the ld. CIT(A) which has been considered and decided upon by the latter. If the ld. CIT(A) does not apply his mind on a particular aspect, the jurisdiction of the Commissioner under section 263 of the Act cannot be ousted. The Ld. CIT(DR) submitted that a perusal of Form 35 filed by the assessee before the Ld. First Appellate Authority would show that the assessee has only objected to estimation of business income @ 1% of the total receipts, whereas the proceedings under section 263 of the Act have been initiated on the issue of assessment having been completed without duly examining the required documents. 4.1 On merits of the case, the Ld. CIT(DR) placed strong reliance on the observations of the Ld. PCIT as contained in the impugned order and emphasized that the AO had failed to make ITA No.344/LKW/2024 Page 12 of 22 proper enquiries on the nature of huge credit appearing in the Bank Accounts of the assessee. The Ld. CIT(DR) submitted that re-assessment order passed by the AO was passed without proper application of mind and without appreciating the material submitted by the assessee. The Ld. CIT(DR) argued that since the AO had failed to arrive at a logical conclusion, the order passed by the AO was erroneous insofar as being prejudicial to the interest of the Revenue and, therefore, the Ld. PCIT had rightly set it aside. 5.0 We have heard both the parties and have perused the material on record. We have given due consideration to the factual matrix of the case. The facts are undisputed. Re- assessment proceedings were initiated for the reason that there were unexplained credits in the bank accounts of the assessee. The assessee’s explanation during the course of re-assessment proceedings was that he was working as Commission Agent for procuring livestock and supplying it to slaughter houses and that the credits pertained to receipts from the Principals for purchasing livestock on their behalf and the debits pertained to amounts withdrawn while making payments to the suppliers of livestock. Although, the AO did not accept this explanation of the assessee and pointed out various issues which could not be explained to his satisfaction by the assessee, he proceeded to tax ITA No.344/LKW/2024 Page 13 of 22 the entire receipts by applying a rate of 1% as Commission. Thus, in our considered opinion, the AO took a view on the record before him and made an assessment which, in our opinion, was one of the possible views. In such a situation, in view of the settled law, we observe that where the AO has taken one of the possible views, his judgment cannot be substituted by that of the Ld. PCIT and that the Ld. PCIT cannot direct the AO to revise the assessment in a particular way merely because the Ld. PCIT may be having a different opinion in the matter. As far as the allegation of lack of inquiry is concerned, record shows that the AO had issued detailed query letter and the assessee had partly responded to such queries. So it is not a case of ‘no enquiry’ and the same is very much evident from record. Further, the moment the AO exercised his right to reject the explanation of the assessee and completed the assessment by making an addition (although estimated), it cannot be alleged that the AO had failed to apply his mind to the record before him. It is settled poisition of law that where the AO, while making an assessment, examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself, the judgment of the AO cannot be substituted by that of the Ld. PCIT although the latter might be of the ITA No.344/LKW/2024 Page 14 of 22 opinion that the estimate made by the AO was on the lower side and left to him, he would have estimated the income at a figure higher than the one estimated by the AO. 5.1 One may, at this juncture, refer to the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) wherein the Hon'ble Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held as under:- \"We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue ITA No.344/LKW/2024 Page 15 of 22 expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between \"lack of inquiry\" and \"inadequate inquiry\". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of \"lack of inquiry\" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner:- \"... From a reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue\". It is not an arbitrary or unchartered power, it can be exercised only on fulfillment of the requirements laid down in subsection (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already ITA No.344/LKW/2024 Page 16 of 22 concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR I ( S C ) at page 10) ... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher ITA No.344/LKW/2024 Page 17 of 22 figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion ... There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed ... We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income- tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income- tax Officer cannot be held to be erroneous\" simply because in his order he did not make an elaborate discussion in that regard.\" 5.2 Further, in cases where there is alleged inadequate enquiry but not lack of enquiry, again the Ld. PCIT must give and record a finding that the order/inquiry made is erroneous. This can happen only if an enquiry and verification is conducted by the Ld. PCIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order ITA No.344/LKW/2024 Page 18 of 22 unsustainable in Law. In most cases of alleged \"inadequate investigation\", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without Ld. PCIT conducting some verification/inquiry himself. The order of the Assessing Officer may be or may not be wrong. 5.3 Further, the assessment order must both be erroneous as well as prejudicial to the interest of Revenue. It is in this context that the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase “prejudicial to the interest of Revenue\" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the Ld. PCIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In the present appeal before us, it cannot be said that the order passed by the AO is unsustainable in law ITA No.344/LKW/2024 Page 19 of 22 and, therefore, the twin conditions of the order being erroneous as well as being prejudicial to the interest of Revenue are not met. 5.4 One may also refer to another judgment of the Hon'ble Delhi High Court in the case of CIT vs. Vikas Polymers (2012) 341 ITR 537 (Del) wherein the Hon'ble Delhi High Court made extensive references to the judgments of other Hon'ble Courts on the powers of the Commissioner vested under section 263 of the Act. The same are being reproduced hereunder: “Para 9. Before we undertake the exercise of answering the reference, it is deemed expedient to reiterate the governing principles laid down by Courts with regard to the exercise of power by the Commissioner under the provisions of section 263 of the Act. The power of suo motu revision exercisable by the Commissioner is undoubtedly supervisory in nature. The opening words of section 263 empowers the Commissioner to call for and examine the record of any proceedings under the Act. A bare reading of section 263 also makes it clear that the Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of them is absent if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue-recourse cannot be had to section 263(1) of the Act [See The Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). ITA No.344/LKW/2024 Page 20 of 22 Para 10. As regards the scope and ambit of the expression \"erroneous\", a Division Bench of the Bombay High Court in CIT v. Gabriel India Ltd. [1993] 203 ITR 108, held with reference to Black's Law Dictionary that an \"erroneous judgment\" means \"one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles\" and thus it is clear that an order cannot be termed as \"erroneous\" unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as \"erroneous\" by the Commissioner simply because, according to him, the order should have been written differently or more elaborately. The section does not visualize the substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is not in accordance with law. Para 11. Then again, any and every erroneous order cannot be the subject matter of revision because the second requirement also must be fulfilled. There must be material on record to show that tax which was lawfully exigible has not been imposed [See Gabriel India Ltd.'s case (supra)]. However, the expression \"prejudicial to the interest of the revenue\", as held by the Supreme Court in the Malabar Industrial Co. Ltd.'s case (supra) is not an expression of art and is not defined in the Act and, therefore, must be understood in its ordinary meaning. It is of wide import and is not confined to the loss of tax [see Dawjee Dadabhoy & Co. v. S.P. Jain [1957] 31 ITR 872 (Cal.), CIT' v. T. Narayana ITA No.344/LKW/2024 Page 21 of 22 Pai[1975] 98 ITR 422 (Kar.), Gabriel India Ltd.'s case (supra) and CIT v. Smt. Minalben S. Parikh[1995] 215 ITR 81 (Guj.). Para 12. At the same time, the words \"prejudicial to the interest of the revenue\", as observed in Dawjee Dadabhoy & Co.'s case (supra), can only mean that \"the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized.\" Thus, the Commissioner's exercise of revisional jurisdiction under the provisions of section 263 cannot be based on whims or caprice. It is trite law that it is a quasi-judicial power hedged in with limitation and not an unbridled and unchartered arbitrary power. The exercise of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material, to justify the Commissioner's finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue.” 5.5 When the above judicial precedents are applied to the facts of the present case, we reach the conclusion that the assumption of jurisdiction under section 263 of the Act was bad in law inasmuch as the Ld. PCIT was attempting to substitute the judgment of the AO with his own judgment under the garb of revisionary proceedings and, therefore, respectfully following the ITA No.344/LKW/2024 Page 22 of 22 judicial precedents, as enumerated above, we hold the impugned proceedings under section 263 of the Act as bad in law and we set aside the same. 5.6 As far as the assessee’s line of arguments with respect to the validity of proceedings initiated under section 263 of the Act during the pendency of appeal before the ld. CIT(A) is concerned, these arguments become academic in nature since we have already granted relief to the assessee by setting aside the revisionary proceedings in the preceding paragraphs. 6.0 In the final result, the appeal of the assessee stands allowed. Order pronounced in the open Court on 30/06/2025. Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:30/06/2025 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR By order Assistant Registrar/DDO "