The Commissioner says the Assessing Officer's inquiry was not deep enough. Can he set the assessment aside and tell the officer to inquire further?
No. Where inquiry was made but the Commissioner thinks it insufficient, the Commissioner must conduct the inquiry himself and record a finding that the order is erroneous. He cannot remit the question of whether the order is erroneous to the Assessing Officer.
Decided by the High Court (Sanjiv Khanna J and Sanjeev Sachdeva J) on 2013-07-09, reported as Income Tax Appeal No. 267/2013 (Delhi High Court). It bears on section 263, section 147 of the Income Tax Act 1961, in Revision & Rectification and Charitable Trusts & Exemption matters.
This is the shortest and cleanest statement of the rule that defeats a large share of revision orders. Most section 263 orders in inadequate-inquiry cases end with 'set aside with a direction to the Assessing Officer to make enquiry'. That form of order is exactly what this judgment holds impermissible.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Jyoti Foundation is a charitable trust. For assessment year 2006-07 a reassessment notice under section 147 was issued following a complaint by one Jayant Pandey, to examine the sale consideration received on four plots of 500 square yards each at village Nangli, Sakarawati, Delhi. The trust had declared consideration of Rs. 4 lakhs each, Rs. 16 lakhs in all, while the complainant alleged the actual consideration was Rs. 84 lakhs. The Assessing Officer conducted inquiry, recorded statements of the purchasers and the seller, and made no addition. Summons issued to the complainant produced a copy of a bayana receipt, but he could not thereafter be served at the address given. The Director of Income Tax (Exemptions) issued a notice under section 263 and by order dated 30 March 2012 held that the Assessing Officer should have made further inquiries to locate the complainant and local inquiries as to the actual consideration, that the assessment had been framed in a hurried and casual manner without proper enquiries, set the assessment aside and directed the Assessing Officer to make inquiry from the complainant, obtain the original bayana receipt and pass a fresh assessment. The Tribunal struck down that order and the Revenue appealed.
The appeal was dismissed; no substantial question of law arose. Inquiries had certainly been conducted by the Assessing Officer and it was not a case of no inquiry. Where the revisional authority feels the inquiries were not sufficient, the inquiry should have been conducted by the Commissioner or Director himself in order 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 that inquiry (paras 5 and 6).
At para 4 the Court drew the governing distinction: orders passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue, but orders passed after inquiry or investigation on the question are not per se or normally treated as erroneous and prejudicial merely because the revisional authority feels that further inquiry or deeper scrutiny should have been undertaken. It then set out the reasoning in ITO v. D.G. Housing Projects Ltd., including the passage that the Assessing Officer is both investigator and adjudicator, the extract from Gee Vee Enterprises v. Addl. CIT (1975) 99 ITR 375 that the word 'erroneous' in section 263 includes the failure to make an inquiry which the circumstances make prudent, and the distinction drawn there between cases of total absence of inquiry, cases of incorrect findings after inquiry, and cases of failure to make proper or full verification. It reproduced the passage from CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) on the difference between lack of inquiry and inadequate inquiry, and the discussion in Gabriel India Ltd. quoted there. Applying all of that at para 5, the Court found that the revisional order itself recorded that the Director felt the inquiries were not sufficient and further details should have been called for, which placed the case squarely in the inadequate-inquiry category and required the Director to inquire and find the error himself rather than remit it.
In the present case, inquiries were certainly conducted by the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Projects Limited (supra), the inquiry should have been conducted by the Commissioner or 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 said inquiry.
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Handle my notice → Ask a CA on WhatsAppNo. Where inquiry was made but the Commissioner thinks it insufficient, the Commissioner must conduct the inquiry himself and record a finding that the order is erroneous. He cannot remit the question of whether the order is erroneous to the Assessing Officer. This was decided by the High Court (Sanjiv Khanna J and Sanjeev Sachdeva J) and bears on section 263, section 147 of the Income Tax Act 1961. It is reported as Income Tax Appeal No. 267/2013 (Delhi High Court). This is the shortest and cleanest statement of the rule that defeats a large share of revision orders. Most section 263 orders in inadequate-inquiry cases end with 'set aside with a direction to the Assessing Officer to make enquiry'. That form of order is exactly what this judgment holds impermissible. If it applies to you, the first step is this: Read the operative part of the section 263 order first. If it directs the Assessing Officer to make the inquiry, the Commissioner has not decided that the order is erroneous — say so as your first ground.
Jyoti Foundation is a charitable trust. For assessment year 2006-07 a reassessment notice under section 147 was issued following a complaint by one Jayant Pandey, to examine the sale consideration received on four plots of 500 square yards each at village Nangli, Sakarawati, Delhi. The trust had declared consideration of Rs. 4 lakhs each, Rs. 16 lakhs in all, while the complainant alleged the actual consideration was Rs. 84 lakhs. The Assessing Officer conducted inquiry, recorded statements of the purchasers and the seller, and made no addition. Summons issued to the complainant produced a copy of a bayana receipt, but he could not thereafter be served at the address given. The Director of Income Tax (Exemptions) issued a notice under section 263 and by order dated 30 March 2012 held that the Assessing Officer should have made further inquiries to locate the complainant and local inquiries as to the actual consideration, that the assessment had been framed in a hurried and casual manner without proper enquiries, set the assessment aside and directed the Assessing Officer to make inquiry from the complainant, obtain the original bayana receipt and pass a fresh assessment. The Tribunal struck down that order and the Revenue appealed. The matter was decided on 2013-07-09 by the High Court (Sanjiv Khanna J and Sanjeev Sachdeva J). On those facts the High Court held as follows. The appeal was dismissed; no substantial question of law arose. Inquiries had certainly been conducted by the Assessing Officer and it was not a case of no inquiry. Where the revisional authority feels the inquiries were not sufficient, the inquiry should have been conducted by the Commissioner or Director himself in order 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 that inquiry (paras 5 and 6).
At para 4 the Court drew the governing distinction: orders passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue, but orders passed after inquiry or investigation on the question are not per se or normally treated as erroneous and prejudicial merely because the revisional authority feels that further inquiry or deeper scrutiny should have been undertaken. It then set out the reasoning in ITO v. D.G. Housing Projects Ltd., including the passage that the Assessing Officer is both investigator and adjudicator, the extract from Gee Vee Enterprises v. Addl. CIT (1975) 99 ITR 375 that the word 'erroneous' in section 263 includes the failure to make an inquiry which the circumstances make prudent, and the distinction drawn there between cases of total absence of inquiry, cases of incorrect findings after inquiry, and cases of failure to make proper or full verification. It reproduced the passage from CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) on the difference between lack of inquiry and inadequate inquiry, and the discussion in Gabriel India Ltd. quoted there. Applying all of that at para 5, the Court found that the revisional order itself recorded that the Director felt the inquiries were not sufficient and further details should have been called for, which placed the case squarely in the inadequate-inquiry category and required the Director to inquire and find the error himself rather than remit it. In the words reproduced by the source cited on this page: "In the present case, inquiries were certainly conducted by the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Projects Limited (supra), the inquiry should have been conducted by the Commissioner or 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 said inquiry." The decision followed or applied ITO v. D.G. Housing Projects Ltd. (2012) 343 ITR 329 (Delhi) — followed; CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Delhi) — applied; CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom) — relied on through Sunbeam Auto; Gee Vee Enterprises v. Addl. CIT (1975) 99 ITR 375 (Delhi) — quoted with approval within the D.G. Housing Projects extract; not itself applied or distinguished by this Court.
It was decided by the High Court on 2013-07-09 and is reported as Income Tax Appeal No. 267/2013 (Delhi High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 263, section 147, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed; no substantial question of law arose. Inquiries had certainly been conducted by the Assessing Officer and it was not a case of no inquiry. Where the revisional authority feels the inquiries were not sufficient, the inquiry should have been conducted by the Commissioner or Director himself in order 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 that inquiry (paras 5 and 6). It arises in Revision & Rectification and Charitable Trusts & Exemption matters, on section 263, section 147 of the Income Tax Act 1961, and was decided by Sanjiv Khanna J and Sanjeev Sachdeva J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put on record every notice, questionnaire and reply that shows inquiry was in fact made, so the case is taken out of the 'no inquiry' category described in D.G. Housing Projects by reference to Rampyari Devi Saraogi and Tara Devi Aggarwal. Ask what inquiry the Commissioner himself conducted before forming his view, and what finding of error he recorded. Both absences are grounds. Note the limit of the case: it does not help where there was a total absence of inquiry by the Assessing Officer.
Still good law. A citedby search returns 130 later decisions, only two of them from High Courts, but the Tribunal applies it constantly and as binding. In Uma Glass Works v Pr.CIT-1, Agra (ITAT Agra, 2 November 2022) the Bench stated the ratio in its own reasoning at para 26 - 'The Hon'ble Delhi High Court in the case of DIT Vs. Jyoti Foundation held that where revisionary authority opined that further enquiry was required such enquiry should have been conducted by revisionary authority himself to record a finding that the assessment order passed by the AO was erroneous and prejudicial to the interest of Revenue' - and made it the operative ground: 'In view of the decision of the Hon'ble Delhi High Court in the case of DIT vs. Jyoti Foundation (supra), we hold that the Ld. PCIT should not have set aside the assessment order and directed the Assessing Officer to conduct enquiry', setting the s.263 order aside. The Lucknow, Kolkata, Indore, Cuttack and Delhi Benches apply it the same way. At High Court level the support is weaker: in CIT-1 Jaipur v Green Triveni Developer (Rajasthan High Court, 24 October 2017) it is among the respondent's authorities and the Bench answered in the assessee's favour without expressly adopting it, and in Kalinga Institute of Industrial Technology v ACIT (Orissa High Court, 31 July 2023) the Bench recorded the Tribunal's reliance on it and decided on Kelvinator and Rajesh Jhaveri. Nothing overruling, doubting or confining it was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment reproduces long passages from ITO v. D.G. Housing Projects Ltd. (2012) 343 ITR 329 (Delhi), and those extracts carry their own paragraph numbers (11 to 17) inside the quotation. The High Court's own paragraphs in this case run 1 to 6. Do not cite paragraph 16 or 17 as Jyoti Foundation; those are D.G. Housing Projects quoted within paragraph 4. The order under section 263 reproduced at paragraph 3 refers in places to assessment year 2007-08 while the appeal concerns 2006-07; that inconsistency is in the revisional order as quoted, not an error of transcription here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed; no substantial question of law arose. Inquiries had certainly been conducted by the Assessing Officer and it was not a case of no inquiry. Where the revisional authority feels the inquiries were not sufficient, the inquiry should have been conducted by the Commissioner or Director himself in order 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 that inquiry (paras 5 and 6).
TaxSphere, “DIT v Jyoti Foundation”, https://taxnotice.vittsphere.com/caselaw/case/dit-v-jyoti-foundation/ (validity last checked 2026-09-06)
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A reassessment was done in between. Does the two-year clock for s.263 restart from it?
The Assessing Officer passed the assessment after being told what to do by the Commissioner. What happens to that assessment, and to a later section 263 order on it?
I applied under s.144A and the Additional Commissioner directed the Assessing Officer in my favour. Two years later the department has issued a s.148 notice on exactly the same point. Can it do that?
Can the CIT(A) enhance my assessment by taxing a source the AO never looked at?
