TMI Blog2008 (2) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has not discussed anything. Therefore, it clearly shows non-application of mind on the part of the Assessing Officer. The Apex Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [ 2007 (5) TMI 197 - SUPREME COURT] after considering the provisions of section 143(1)(a), found that when the return was processed under section 143(1) of the Income-tax Act, it cannot be said that the Assessing Officer has taken any view on the claim made by the assessee. Therefore, it is very clear that when the Assessing Officer has not applied his mind and made proper enquiry with regard to the claim of the assessee, the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. In those circumstances, we may not be able to say that the Assessing Officer has taken one of the views permissible under law. Thus, we do not find any infirmity in the order of the lower authority. In the result, the appeal of the assessee stands dismissed. - PRADEEP PARIKH VICE PRESIDENT AND N. R. S. GANESAN JUDICIAL MEMBER For the Appellant : V. Prabhakar For the Respondent : D. D. Goel ORDER N.R.S. GANESAN, JUD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law as it stood on the date when the Commissioner passed the order in exercise of his power under Section 263 of the Income-tax Act has to be taken into account. The learned Counsel very fairly submitted that a Special Bench of this Tribunal at Chennai in the case of ACIT v. Rogini Garments (2007) 294 ITR (AT) 15 (Chennai) (SB), has considered this issue elaborately and found that the deduction allowed under Section 80-IA has to be deducted while computing the eligible profit for the purpose of deduction under Section 80HHC. However, the law laid down by the Special Bench of this Tribunal was not available when the CIT exercised his power under Section 263 of the Income-tax Act. Therefore, according to the learned Counsel, when the Commissioner exercised the power under Section 263 of the Income-tax Act, there were two views possible; therefore, the order of the AO cannot be considered to be erroneous and prejudicial to the interests of the Revenue. 3. On the contrary, Shri D.D. Goel, learned departmental representative, submitted that the AO accepted the return of income while processing the same under Section 143(1) of the Income-tax Act. However, subsequently, the AO found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order can be termed as erroneous and prejudicial to the interests of the Revenue. The learned departmental representative again placed his reliance on the judgment of the Delhi High Court in the case of Consolidated Photo and Finvest Ltd. v. ACIT [2006] 281 ITR 394, and submitted that when the order passed by the AO is silent as to the reasons, it can well be said that the assessing authority has not applied its mind to the issue before it formed any opinion. Therefore, the question of forming any opinion does not arise for consideration. The learned departmental representative further submitted that when the assessment order has not addressed itself to the claim made by the assessee, it clearly shows non-application of mind by the Assessing Officer. Therefore, to protect the interests of the Revenue, it is the duty of the Commissioner of Income-tax to exercise his power under Section 263 of the Income-tax Act. According to the learned departmental representative, the CIT has rightly exercised his power. Referring to the merits of the appeal, the learned departmental representative submitted that a Special Bench of this Tribunal at Chennai in the case of Rogini Garments ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Brokers Ltd. (2007) 291 ITR 500, after considering the provisions of Section 143(1)(a), found that when the return was processed under Section 143(1) of the Income-tax Act, it cannot be said that the AO has taken any view on the claim made by the assessee. In those circumstances, it may not be correct to say that the AO has taken one of the possible views. In the reassessment proceedings under Section 147, the issue was regarding application of Explanation (baa) to Section 80HHC with regard to rental and interest income. Admittedly, no other issue was discussed by the AO. 5. We have carefully gone through the judgment of the Rajasthan High Court in the case of Emery Stone Mfg. Co. (supra). In the case before the Rajasthan High Court, the Inspecting Assistant Commissioner allowed the claim of the assessee towards depreciation on the basis of the market value as claimed by the assessee without any discussion. However, the Commissioner of Income-tax, in exercise of his power under Section 263 of the Income-tax Act, set aside the order of the IAC with a direction to work out the capital cost of asset to the firm after applying the provisions of Section 43(1) read with Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge or not to charge interest under Section 139, the provisions of Section 263 were not applicable; hence the order passed by the CIT was without any jurisdiction. On reference to the Bombay High Court, It was held that the Income-tax Officer was bound to charge interest under Section 139(8) of the Income-tax Act. The AO also had the power to waive or reduce the interest. The AO did not consider the question of interest as he was obliged to do. His order was silent on the point of interest. Therefore, his order was erroneous and prejudicial to the interests of the Revenue. Therefore, the High Court reversed the order of the Tribunal and answered the question referred in favour of the Revenue. 8. From the above decisions, it is very clear that when the Assessing Officer has not made any proper enquiry, there is an error in the order of the AO to that extent. The AO also has to record the reason why he is taking a particular view. In the absence of such reason recorded in the assessment order, the failure of the AO would make the assessment order erroneous and prejudicial to the interests of the Revenue. In this case, admittedly, the claim of the assessee under Section 80HHC wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the interests of the Revenue. The Apex Court found that when the AO adopted one of the courses permissible in law and it resulted in loss of revenue and where two views are possible and the AO has taken one view with which the Commissioner did not agree, it cannot be treated as erroneous and prejudicial to the interests of the Revenue. The Apex Court further held that the AO accepted the statement of account filed by the assessee in the absence of supporting material and without making any further enquiry. Therefore; the conclusion of the AO was erroneous and prejudicial to the interests of the Revenue. In fact, the Apex Court observed as follows at pages 88 and 89 of the report: The phrase prejudicial to the interests of the 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, it was held that when two views were possible on the date when the Administrative Commissioner exercised his jurisdiction, the order of assessment cannot be said to be erroneous and prejudicial to the interests of the Revenue. In this case, as we have already discussed, the AO had not taken any view which was possible on the facts and in law, available on the date on which he passed the assessment order. The AO without making any enquiry accepted the claim of the assessee. Furthermore, the AO had not recorded any reason at all. The assessment order is in fact silent with regard to the issue raised by the Administrative Commissioner. The AO has not examined the provisions of Section 80-IA(9). Therefore, we may not be able to say that the AO had taken one of the permissible views in accordance with law. In fact, the AO had not taken any view, as held by the Apex Court in the case of Rajesh Jhaveri Stock Brokers Ltd. (supra), and in the case of Malabar Industrial Co. Ltd. (supra), therefore, in our pinion, the judgment of the Apex Court in the case of Max India Ltd. (supra) is not applicable to the facts of this case. The judgment of the Apex Court in the case of Max India Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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