TMI Blog2006 (5) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... s adjourned to 17-1-2005. On this date also, the counsel was directed by the CIT, Amritsar, to see the ITO (Judicial). The learned CIT passed the order under section 263 on 18-2-2005 without hearing/discussing the case with the"counsel for the assessee. Not only this, the learned CIT, Amritsar, while passing the order under section 263 also covered the ground which was not raised in the show-cause notice issued under section 263 of the Act. In support of these averments, the counsel for the assessee, Sh. Jagdish R. Gupta, also filed an affidavit dated 31-1-2006. 3. Since the assessee had made serious allegations against the CIT, the affidavit of the counsel was referred to CIT, Amritsar, for comments. The CIT has sent the comments vide letter dated 17-4-2006 through Departmental Representative denying the charges made against him. He has stated that after discussing the matter with ITO (judicial), the counsel came along with no (Judicial) and case was discussed with him. He has also stated that during the course of hearing case records of Sant Stone Crusher (P.) Ltd. for the assessment year were also shown to him. The CIT has also enclosed the report of ITO (Technical), Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was asked to explain the reasons for claiming the huge expenses of Rs. 5,74,537 as compared to last year. No further inquiry/investigation was made by the Assessing Officer. ( iii )In similar case of Sant Stone Crusher (P.) Ltd., Assessing Officer after making detailed analysis of sale/production/electricity, wages, diesel, labour, etc. came to the conclusion that every rupee spent on electricity is capable of generating sale/production of Rs. 12.83. By applying the same yardstick, the difference in production worked out to more than Rs. 90 lakhs in the two stone crushers owned by the assessee. In fact, while selecting the case, the Assessing Officer had mentioned the GP rate in such cases worked out to 50 per cent. 7. In response to show-cause notice, the assessee submitted a detailed reply vide letter dated 25-11-2004. It was submitted that assessee had debited an amount of Rs. 5.93,100 to capital account as against cost of land of Rs. 5,82,000. The remaining amount withdrawn was utilized for registration fee and other expenses. Thus, it was contended that excess withdrawals over the cost of land did not warrant any addition. It was further submitted that electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,516/3,34,568Rs. 3.35Rs. 13,90,225/5,74,537Rs. 2.42 From the above data it is apparent that every rupee spent on electricity is generating sale/production of Rs. 3.35 in the case of Vishwakarma Stone Crushing Company and Rs. 2.42 in the case of Vishwakarma Industries and by applying the same ratio of production of Rs. 3.35 in the case of Vishwakarma Industries, the production should have been shown at Rs. 19,42,028 (574537 x 3.35) whereas production has been shown at Rs. 13,90,225 only which is also to be verified. As already mentioned, this lower ratio of production on the basis of per rupee consumption of electricity as compared to Rs. 12.83 in the case of Sant Stone Crushing Crusher (P.) Ltd., has to be verified. In view of the above facts and circumstances of the case, I find that the above said order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue and therefore assessment is cancelled and the Assessing Officer is directed to make fresh assessment in this case." The assessee is aggrieved with the order of the CIT, Amritsar. Hence, this appeal before us. 8. The learned counsel for the assessee drew our attention to pp. 3-4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires to be decided is whether the CIT was justified in law to exercise his powers vested under section 263 of the Act in setting aside the assessment completed by the Assessing Officer. Before dealing with the merits of the case, it would be relevant to reproduce herein the main provisions of section 263 of the Act which reads as under : "263. (1) The CIT may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation. For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, ( a )** ** ** ( b ) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. CTT [2000] 243 ITR 83 (SC), where it was held that pre-requisite for the exercise of jurisdiction by the CIT is that the twin conditions must be satisfied i.e., ( i ) the order of the Assessing Officer sought to be revised is erroneous and ( ii ) it is prejudicial to the interests of the revenue. The Apex Court observed that if one of these conditions is absent i.e., if the order of Assessing Officer is erroneous but is not prejudicial to the revenue, recourse cannot be had to section 263 of the Act. The same view has been held by the various other judgments relied upon by the learned Authorised Representative and as summarized above. 10.1 Now, the aspect that requires to be considered by this Bench is whether both the conditions laid down under section 263 can be said to have been fulfilled in this case. In order to answer this issue, we have to first find out the meaning of expressions an assessment order being erroneous and prejudicial to the interests of the revenue . This issue was also considered by the Hon ble Supreme Court in the aforesaid case of Malabar Industrial Co. Ltd. ( supra ). The Hon ble Apex Court held that the expression erroneous would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mport and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is loosing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. 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 ITO adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has token one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law." [Emphasis Supplied] From a bare reading of the above judgment, it is clear that the order could be considered as prejudicial to the interests of the Revenue, if the same has not been passed in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the assessment order show that during the course of assessment proceedings, books of account were produced, examined and test checked. The Assessing Officer also mentioned that separate books of account had been maintained for each unit. Copies of electricity bills and other documents in support of income and expenses wore called for and checked. Copies of salary bills and copier; of accounts of the creditors were received and placed on record. He also observed that each item of income and expenditure was duly discussed with the assessee. Thus, the charge that Assessing Officer completed the assessment without making any inquiry is not; Dome out from record. In fact, the assessment order further shows that notices under section 143(2) were issued on 30-10-2002, 19-2-2003 and the questionnaire was issued on 4-3-2003. The assessment was completed on 31-3-2003. These facts further show that the assessment was not completed by the Assessing Officer in undue haste and without examining the various aspects of the case. As regards the case of M/s. Sant Stone Crusher (P.) Ltd., referred to by the CIT in the show-cause notice, the assessee has placed a copy of the assessment order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n denied by CIT in the impugned order. There is nothing in the impugned order to show as to how the learned CIT came to the conclusion that assessment was made without making proper enquiry. The issue whether the Assessing Officer made an enquiry or not could not be decided on the basis of addition made. Even after making an enquiry, the a edition may not be warranted by the facts. But, it does not mean that assessment was made without making proper investigation. Thus, the learned CIT was not justified in coming to the conclusion that assessment order passed by the Assessing Officer was without making any inquiry and, therefore, was prejudicial to the interest of the revenue. On the contrary, the facts placed on record do show that the Assessing Officer had examined these aspects at the time of completing the assessment. The very fact that some other Assessing Officer had made the addition in the case of some other assessee does not warrant the conclusion that similar addition was called for in all such cases, moreso, when the assessee had pointed out several cases where lower results were shown. In the case of Malabar Industrial Co. Ltd. ( supra ), the Hon ble Apex Court has he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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