TMI Blog2001 (4) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... not paid by the assessee before filing the returns. It was further noticed by the CIT that assessee has claimed deduction @ 18% on account of provision of interest on belated payment of excise duty payable to the concerned department. These defects were noted by the CIT in these three years, i.e., assessment years 1986-87 to 1988-89. The CIT issued notices under section263 on23-1-1991,28-1-1991and29-1-1991 for three years respectively. The assessee was required to explain that why the amounts of excise duty collected, which was not paid, be not added to the total income of the assessee as also the claim of the provision of interest be not disallowed, as no interest has been paid by the assessee. Detailed reply was filed and after considering the reply, the CIT was not satisfied with the explanation filed by assessee. The case laws relied upon before him were also considered and in view of the CIT, they were not applicable on the facts of the present case. The CIT was of the view that the excise duty collected by the assessee is trading receipt. While holding so the CIT placed reliance on the decision of Chowringhee Sales Bureau (P.) Ltd v. CIT[1973] 87 ITR 542 (SC), wherein it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both sides and perusing the orders of the authorities below, the Bench was of the view that the matter should be refer-red to the President, ITAT for constituting a Special Bench. It was argued before the Bench that the issue is covered in favour of assessee for assessment year 1984-85. A copy of the same was also filed. The reliance was also placed on various other case law. It was also submitted that CIT has no jurisdiction to assume the jurisdiction by issuing notice under section 263 against the orders under section 143(1)(a). It was further stated that there is a limited scope for Assessing Officer to make any addition while passing assessment under section 143(1)(a) and this limited scope cannot be enlarged by assuming jurisdiction under section 263 of the Act. Various decisions were also cited in regard to this submission. However, the Bench was of the view that the provisions of section 43B of the Income-tax Act, 1961 are clearly attracted to the facts of the present case. The reliance was placed on Chowringhee Sales Bureau (P.) Ltd.'s case and Sinclair Murray Co. (P.) Ltd.'s case. It was further observed by the Bench that there are also divergence of views of different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and documents, if any, accompanying it, and for the purposes of the adjustments referred to in sub-clause (iv) of clause (b), also with reference to the record of the assessments, if any, of past years, and determine the sum payable by the assessee or refundable to him on the basis of such assessment. (b) In making an assessment of the total income or loss of the assessee under clause (a), the Income-tax Officer shall make the following adjustments to the income or loss declared in the return, that is to say, he shall,-- (i) rectify any arithmetical errors in the return, accounts and documents, referred to in clause (a); (ii) ** (iii) ** (iv) give due effect to the allowance referred to in sub-section (2) of section 32, ......" (2) Where a return has been made under section 139, and-- "(a) ** (b) whether or not an assessment has been made under sub-section (1), the Income-tax Officer considers it necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assessee or the production of evidence in this behalf, the Income-tax Officer shall serve on the assessee a notice requiring him, on a date to be therein specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly he completed the assessments for these three assessment years under section 143(1)(a) of the Income-tax Act. The Commissioner of Income-tax, as already stated above, was not satisfied with the assessments passed by the Assessing Officer as, in his view the orders of the Assessing Officer were erroneous and prejudicial to the interests of the revenue. Accordingly he took action by invoking the provisions of section 263 and the Assessing Officer was directed to enhance the income as per his directions given in order under section 263. 10.1 In our considered view, the CIT has exceeded his jurisdiction by invoking the provisions of section 263 of the Act. Before passing an order under section 263, the CIT has to establish that twin conditions are fulfilled, those twin conditions are, (i) that order of the Assessing Officer should be erroneous, and (ii) it is prejudicial to the interest of revenue. The scope of assessment under section 143(1)(a) is very limited, as the Assessing Officer is empowered only to rectify the arithmetical mistakes etc. Assessing Officer further can make the prima facie adjustment on account of short deduction or excess deduction claimed under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for scrutiny and investigations of larger cases. In such cases CIT should only inform Audit that the cases are completed under the Summary Assessment Scheme.' The above observations of the Member (R A) reflect the views of the Board on the subject and are being brought to the notice of all the Commissioners of Income-tax for their information and guidance. Yours faithfully, Sd/- V.K Sachdeva Director of Inspection (Audit) New Delhi." 11. This circular is binding on the revenue authorities. Sub-clause (3) of section II 9 clearly says that the instruction issued by Director of Inspection is binding on the revenue authorities. The circular issued by Director of Inspection was as per the observation of the Member (R A) and the observation of the Members (R A) reflects the views of the Board on the subject. These instructions were made after due deliberation amongst the Members of the Board. Therefore, they are binding on the revenue authorities of the department. The circulars of the Board being benevolent in nature, were binding on the tax authorities, including the Commissioner of Income-tax, as the same was issued by the Director of Inspection. Complete audited account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted.' It is further held by the Hon'ble Supreme Court that, "every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." 14. In the present case also the Assessing Officer completed the assessments under section 143(1)(a) having viewed himself that there is no defect in the returns or in the audited balance-sheets filed by the assessee. Therefore, it cannot be said that the orders of the Assessing Officer were erroneous and, thus, prejudicial to the interests of the revenue. 15. In the case of Modi Xerox Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were different as the facts here before us. In this case the assessment was completed under section 143(1). Before completion of assessment the Assessing Officer made a reference to the Valuation Officer, but without waiting for report, he completed the assessment under section 143(1) of the Act. Therefore, it was held that when Assessing Officer was not satisfied with the return filed by assessee and he made a reference to the Valuation Officer because he doubted the correctness of the figure of investment in the construction and without waiting for the report he completed the assessment under section 143(1) accepting the return. Then on this very basis the order of the Assessing Officer was set aside by the Commissioner of Income-tax under section 263. Then it was held that the action of the CIT was correct, as the order of the Assessing Officer was erroneous and prejudicial to the interest of revenue. It was clearly stated by the Tribunal that on the facts of the present case the Board Circular would not come in the way because the Assessing Officer himself made a reference to the Valuation Cell. 19. Here before us the facts are entirely different. The Assessing Officer comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there was no defect in the finding of the Tribunal. Accordingly the order of the Tribunal was confirmed. 22. The facts here before us are also similar and the ratio of the decision of the Hon'ble Allahabad High Court is squarely applicable. Now the Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. has put the issue at rest by holding that twin conditions i.e., (i) erroneous and (ii) prejudicial to the interest of revenue should be fulfilled. If one of the conditions is absent, even then the order of Assessing Officer cannot be set aside. Here in the present case before us these twin conditions, which are necessary for setting aside the orders of Assessing Officer, are missing. 23. In view of the foregoing discussion and having discussed the ratio of the various decisions, we are of the considered view that the CIT was not correct in invoking the provisions of section 263, as the orders of the Assessing Officer cannot be said to be erroneous as there was a limited scope with the Assessing Officer while passing the assessments under section 143(1)(a). If he would not have been satisfied, then he could have resorted to the provisions of section 143(2)(b), which he di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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