TMI Blog2008 (12) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... and after examining gift from Manisha Goyal resident of Shivpuri, the Assessing Officer completed the assessment on 16-12-2005 under section 143(3) of the Act on the same income as disclosed by the assessee. The Assessing Officer examined this gift and found it to be genuine in the same manner as a cash credit is examined. He accepted the gift as genuine. Later on, ld. CIT (Admn.) called for and examined the records of this case and after giving notice under section 263 revised the assessment order in question. The averments of the notice dated 20-3-2008 read as under : "In your case assessment under section 143(3)/147 of the Income-tax Act, 1961 for the above assessment year was completed on 16-12-2005 by the ITO, Shivpuri. The order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue on the following points : 1.Before accepting the gift the Assessing Officer has not examined the identity, creditworthiness and genuineness of the gift of Rs. 2,00,000 received by the assessee from Kumari Manish Goyal D/o Shri Om Prakash Goyal. 2.The Assessing Officer has failed to obtain the details of bank accounts of the donors and the donee. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received a sum of Rs. 2,00,000 as gift from Km. Manisha Goyal, Sister of Karta of the assessee HUF. Perusal of the assessment records revealed that while completing the assessment, the Assessing Officer has not discussed the facts regarding creditworthiness of donor and genuineness of the gift. The Assessing Officer did not obtain the copy of bank statement of the donor to verify her creditworthiness. Thus the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue. 3. Notice under section 263 of the Income-tax Act issued in this case on 20-3-2008 was duly served on 20-3-2008 fixing the case for hearing on 25-3-2008. The assessee has sent an application by post requesting for an adjournment for 10 days. Written submissions of the assessee have been received on 28-3-2008 which are placed on record and are duly considered. 4. As per the computation of income of the donor submitted during the course of assessment proceedings, the total income of the donor for the relevant assessment year was Rs. 18,741 only. Perusal of bank statement of the donor reveals that there is a deposit of equivalent amount in the bank account on the date of gift, and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the ld. D.R. Shri Ashok Misra, Sr. DR., has placed heavy reliance on the order of the ld. CIT and has strongly contended that the order is not only erroneous because proper investigation was not done by the ld. Assessing Officer, but is also, to the extent, prejudicial to the interest of the revenue and, therefore, he has justified the action of CIT taken under section 263 of the Act. 8. Having carefully examined the entire evidences available on the record in the light of the oral submissions of the parties, with reference to the provisions of law and the precedents relied before us and after giving anxious thought, in the light of the plain words used in section 263 of the Act and in the light of the ratio of the decision of the Hon ble Supreme Court rendered in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 and other relevant cases, we are of the considered opinion that this is not a fit case for revising the assessment order. The reasons for our above conclusion are that the twin conditions, viz., the assessment order should be erroneous insofar as it is prejudicial to the interests of revenue do not co-exist in this case. The Assessing Officer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st come to a firm conclusion on the point, that error in the order has resulted in, prejudice to the interests of the revenue. He has to apply his mind for coming to a firm conclusion which should be based on proper material and he must mention that material in his order. The Commissioner may under this section pass such an order as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment, or any other order to the detriment of the assessee. But a mistake or omission in the assessment order would not justify the setting aside of the whole order. 10. From the plain reading of the above provision it is manifestly clear that an order can be revised if and only if the twin conditions, viz., one that the order is erroneous and two that to that extent it is prejudicial to the interest of the revenue co-exist. Or in other words, an order can be revised if it is both erroneous as well as prejudicial to the interests of the revenue. An order, which is only erroneous but not prejudicial, cannot be revised. Likewise an order, which is only prejudicial to the interest of the revenue but n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of setting right distortions and prejudices caused to the revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the Commissioner under section 263 may be summarized below : ( i )The Commissioner must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the conditions must be fulfilled. ( ii )Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. ( iii )An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being erroneous. ( iv )If the order is passed without application of mind, such order will fall under the category of erroneous order. ( v )Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the creditworthiness of the donor as well as the genuineness of gift were filed and were examined by the Assessing Officer, the ld. CIT has mentioned in his order that the Assessing Officer has not discussed the facts regarding the creditworthiness of the donor and the genuineness of the gift and that the Assessing Officer did not obtain a copy of bank statement of the donor to verify her creditworthiness. 13. From the records submitted before the ld. Assessing Officer, the identity of donor was found to be not at all in doubt. Whatever documents ld. CIT has referred to were produced before the ld. Assessing Officer. The main gist of testing a gift to be genuine or not is to verify the creditworthiness and the genuineness of gift transaction. The creditworthiness of the donor was proved on record from the statement of account along with the narration of relevant entries. The donor is assessed to tax. The Bank accounts of both the donor and donee were got verified by ld. Assessing Officer. There is a relation of brother and sister between the donor and the donee. The donor had a capacity to donate Rs. 2 lakhs to the assessee. This is a fairly gift. The capital of the donor h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not valid. The Hon ble jurisdictional High Court has rendered this decision after considering the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi) and others. The same Hon ble High Court has taken a similar view while deciding another case of CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (MP). It has been held therein that when the assessee had filed requisite information and the ITO had completed the assessment after considering all of them, the order cannot be revised under section 263 of the Act on the ground that no proper enquiries were made by the ld. Assessing Officer. Reliance was also placed on the decision of Hon ble Bombay High Court in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108 in which case it has been held that the Commissioner cannot revise the order merely because he disagrees with the conclusion arrived at by the ITO. It has been also held in this case that the decision of the ITO could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. In the given case also, the ld. Commissioner has not given any finding as to why the finding of the ld. ITO is erroneous. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut application of mind. The phrase "prejudicial to the interest of the revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import 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 Income-tax Officer, the revenue is losing 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 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 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263. Revenue has not been able to bring out any material establish that the ld. CIT was pointing out mistakes or errors in the order of the Assessing Officer. The Assessing Officer had exercise the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the CIT was not fully satisfied with the conclusion - Revision was not justified, appeal of assessee is allowed." 17. The above decision was rendered after following the decision of jurisdictional High Court in Ratlam Coal Ash Co. ( supra ) referred to above. There are most of other decisions in this direction, which support our above findings. Recently, Hon ble M.P. High Court has taken the decision on similar lines while deciding the case of Smt. Urmila Gupta ( supra ) which has confirmed the view taken by the Tribunal in IT Appeal No. 4/Agra/2005 (Agra Bench) referred to above. In that case, the objection of the ld. CIT was that the Assessing Officer has not examined the genuineness of the sundry creditors to the tune of Rs. 2,00,000 and odd claimed by the assessee and also of Rs. 9,94,480. It was held that the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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