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2015 (9) TMI 332 - HC - Income TaxRevision u/s 263 - Rectification of mistake - Entitlement for interest exemption under Section 10(15)(iv)(e) allowed but claim of such amount under Section 80HHC denied - AO disallowing the interest exemption contending that on the basis of the direction of CIT(A) the issue being a legal matter, the error was being rectified under Section 154 of the Act as a mistake apparent from the record.whether Tribunal was not justified in setting aside the order of the Commissioner under Section 263 of the Act, inasmuch as, the assessment order was inconsistent with the direction of the Tribunal passed in the earlier round of litigation? Held that:- AO while passing a fresh assessment order on 29.12.2008 considered the directions of the Tribunal and also considered the provisions of Section 10(15)(iv)(e) of the Act in detail and, after considering the evidence that was brought on record, came to the conclusion that conditions prescribed under Section 10(15)(iv)(e) of the Act are satisfied and that the assessee was entitled for exemption on interest received. In our view, such finding of the assessing officer, assuming it to be erroneous cannot be rectified in proceedings under Section 154 of the Act on the ground that a mistake apparent on the face of the record had occurred in the assessment order inasmuch as the assessment order was passed by a process of reasoning and after applying its mind. Once an order has been given by a process of reasoning and assuming that two views are possible it still cannot be treated as a mistake apparent from the record. We also find that the order under Section 154 of the Act has been passed by the assessing officer on the dictates of the Commissioner. The assessing officer is a quasi-judicial authority and is required to apply its own mind and cannot function on the dictates and directions of another authority. Consequently, on this ground also, the order of the assessing authority under Section 154 of the Act cannot be sustained. In so far as the appeal filed by the Department is concerned, we are of the opinion, that the Commissioner of Income Tax had no jurisdiction to pass an order under Section 263 of the Act. The Commissioner of Income Tax assumes jurisdiction under Section 263 of the Act when it issues a notice to the assessee under Section 263 of the Act to show cause as to why the order of the assessing authority should not be set aside on the ground that the assessment order was pre-judicial to the interest of the revenue. On this aspect, the assumption of jurisdiction takes place when a notice is issued under Section 263 of the Act. This notice under Section 263 of the Act was issued by the Commissioner on 18.3.2011 much after the assessment order dated 29.12.2008 was modified by an order dated 9.2.2010 under Section 154 of the Act. Once the assessment order dated 29.12.2008 merged with the order dated 9.2.2010 passed under Section 154 of the Act, the notice under Section 263 of the Act questioning the veracity and legality of the original assessment order dated 29.12.2008 was patently erroneous and invalid and, consequently, all the proceedings initiated pursuant to the said notice including the order dated 30.3.2011, passed under Section 263 of the Act, was also invalid and was rightly set aside by the Tribunal though for different reasons.
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