TMI Blog2006 (12) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... unting. The assessee had filed detailed explanation along with supporting documents with regard to its claim of bad debts, which was allowed by the Assessing Officer after taking into consideration the explanation of the assessee. In the assessment order, though it was noted that the assessee is carrying on the business of financing and bill discounting, an elaborate discussion was not made on the assessability under different head of income. The claim of bad debts against such income was considered during the course of assessment, but no discussion was made in the assessment order. Such an order cannot be called erroneous. The CIT can exercise the jurisdiction u/s 263 of the Act only after holding that the assessment order passed by Assessing Officer is both erroneous and prejudicial to the interest of revenue. Thus, the exercise of jurisdiction by the CIT u/s 263 of the Income-tax Act in setting aside the assessment is incorrect. Hence, the grounds of appeal raised by the assessee are allowed. In the result, the appeal filed by the assessee is allowed. - S.C. TIWARI AND MS. SUSHMA CHOWLA, JJ. F.V. Irani for the Appellant. K.C. Sarangi for the Respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 3. The present appeal was filed on 11-3-2003 i.e., after a delay of 298 days. The assessee has moved an application for condonation of delay in furnishing the present appeal by way of an affidavit filed by the assessee herein. It has been stated by the assessee that in the aforesaid order under section 263 of the Income-tax Act, the CIT had set aside the order of the Assessing Officer with the direction to pass a speaking order after affording a reasonable opportunity of hearing to the assessee. The assessee further states that on the advise of his Chartered Accountant M/s. H.F.K. Madan Co., no appeal was filed to the Tribunal against the said order as he was made to understand that he would have full opportunity of presenting his case before the Assessing Officer. The proceedings were taken up in January and February, 2000 by the Assessing Officer. Simultaneously, legal advise was sought from another Counsel who in turn advised that in addition to making representations before the Assessing Officer, an appeal should be preferred to the Tribunal against the order of CIT. The present appeal was filed on 11-3-2003 though the limitation to filing the present appeal expired o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed unpaid by the Bank. Efforts were made for the recovery and even a suit to recover the bad debts was filed in the Court. Since the assessee had lend the money and lost the same in the course of his business of banking or money lending, a claim was made for the deduction of the said bad debts under the provision of section 36(2)( i ) of the Income-tax Act. 8. The CIT after examining the facts of the case observed that since the assessee had shown the income from interest on bill discounting under the head Income from other sources , the claim of bad debts under section 36(2)( i ) of the Act was not allowable against income from other sources. Consequently, the order of the Assessing Officer was set aside with a direction to pass speaking order fresh after examining the issue of claim of bad debts against income from other sources. The assessee is aggrieved by the said direction of CIT and hence this appeal. 9. The ld. AR for the assessee stated that the CIT had initiated the proceedings under section 263 of the Income-tax Act as according to him the claim of the assessee for deduction of Rs. 50,00,000 as allowable under section 36(2)( i ) of the Income-tax Act is not corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing and bill discounting". [Emphasis supplied]. 10. The ld. AR further stated that the CIT has initiated the proceedings under section 263 of the Act only on the point of disallowance of claim of bad debts as the income from bill discounting was shown under wrong head. Ld. AR further submitted that it is an established principle that while completing the assessment. The Assessing Officer is duty bound to assess the income declared by the person under the correct head of income. Reliance was placed on the decision of Hon ble Supreme Court in Bihar State Co-operative Bank Ltd. v. CIT [1960] 39 ITR 114 . The ld. AR further stated that the nature of receipts in the hands of the assessee is business income as is clear from the details of interest received on bill discounting totalling Rs. 59,14,771 furnished along with the return of income. Reference was drawn to the letter furnished before the Assessing Officer during the course of assessment proceedings wherein it was categorically mentioned that the assessee was carrying on the business of bill discounting and financing against which it had claimed the deduction of its claim of bad debts which was duly allowable under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead Income from other sources . The assessee had further claimed the deduction of bad debts on loans for bill discounting amounting to Rs. 50,00,000 against the said income of bill discounting. The perusal of statement of interest received on bill discounting filed along with the return of income reflects that the assessee had received the aforesaid bill discounting charges from several parties during the year under consideration. It is the claim of the assessee that similar bill discounting charges have been received by the assessee from year to year for the proceeding several years, which have been accepted in entirety in the past. It was only during the year under consideration that the assessee had claimed bad debt of Rs. 50,00,000 which was on account of money lent to M/s. Western India Financing Services Ltd. for re-discounting of bill of M/s. Tiruvillar Multipurpose Workers Co-operative Society Ltd. The said bill of the Co-operative Society was the primary security with the assessee. On maturity of the bill, same was presented for payment and the cheque deposited for payment was returned unpaid by the bank. Series of correspondence between the parties resulted in no repayme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is accepted, no comments about the same are usually found in the body of the assessment order, though in cases wherein if disallowance of a particular claim is made by the Assessing Officer, the observations to that effect are incorporated in the body of the order. 13. The power of revision under section 263 of the Income-tax Act being a Supervisory Jurisdiction conferred on the Commissioner of Income-tax is to be exercised with due care. In order to exercise the power under section 263 of the Income-tax Act, two conditions are prescribed i.e., the order of the Assessing Officer should be erroneous and also prejudicial to the interest of revenue. Both the conditions have to be simultaneously fulfilled before invoking the jurisdiction under section 263 of the Income-tax Act. Their Lordships of Hon ble Bombay High Court in Gabrial India Ltd. s case ( supra ) had held as under: "If an Income-tax Officer acting in accordance with law makes 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 visualize a case of substitution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of bill discounting, does not render the order erroneous and prejudicial to the interest of revenue in order to empower the CIT to exercise his jurisdiction under section 263 of the Income-tax Act. Their Lordships of Hon ble Supreme Court in Bihar State Co-operative Bank Ltd. s case ( supra ) had held that in its return the appellant showed these various sums as other sources but nothing turns on the manner in which the appellant chose to show his income in his return. In the facts of that case exemption was provided to co-operative society on interest income received on short-term deposits under the head Business income . The assessee therein had declared the interest income under the head Other sources which was not exempted from tax. The assessment of the case was completed under the head Income from other sources . Their Lordships of Hon ble Supreme Court held the interest derived from deposits as arising from the business of the bank and therefore falling within the income exempted under the notification, nothing turned on to manner in which the appellant chose to show this income in its return. 15. In the facts of the present case, enquiries were made by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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