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TMI Blog2012 (1) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... income which fall part of total turnover and the consequential TDS claimed in Canada and Thailand cannot be allowed in India when computing the total deduction. 3. Whether the Tribunal committed an error in holding that the judgment of the Hon'ble Supreme Court in the case of HindWire Industrial Ltd cannot be made applicable when jurisdiction under Section 263 of the Act is invoked." 2. However, Sri Indrakumar, learned Senior Counsel appearing on behalf of the revenue submits at the time of argument that, it is not necessary for this Court to go into questions 2 and 3 for the purpose of deciding these two appeals as answering the first question alone is sufficient to dispose of these appeals. 3. Submission recorded and therefore, we are confined our examination only in respect of the first question. 4. The brief facts leading to these appeals are that the assessee, an Indian Limited Company, while filing its returns for the assessment years 1995-96 and 1996-97 had claimed certain deductions towards its tax liability, the amounts as had been deducted by way of TDS in respect of payments received by its business activities in Canada and Thailand as under :- D.T.A. re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en independently disposed of in ITA No.5099/05, the revenue had filed these appeals. 6. As indicated earlier while Mr. Indrakumar, learned counsel for the Revenue, has confined his submission only on the first question and this is not opposed to by the learned counsel for the assessee, the other two questions are deleted and we have heard the learned counsel on the first question in some detail. 7. Mr. Indra Kumar, mainly submits that the Tribunal has committed an error in law in taking the view that the Commissioner was acting beyond the limits of section 263 of the Income Tax Act, 1961 [for short, the Act] because the Tribunal thought the Commissioner had another point of view other than what the Assessing Authority had and therefore, set aside the order passed by the Commissioner. It is submitted that the view of the Tribunal about the Commissioner directing the Assessing Authority to redo the entitlement of the assessee for claiming a benefit in terms of Double Taxation Avoidance Agreements with Canada and Thailand, is virtually a situation where the Tribunal proceeded on an assumption that the commissioner is not enabled to exercise the revisional jurisdiction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall he excluded: and submits that the concepts of change of opinion and the Commissioner taking a different view of point docs not come into picture within section 263 of the Act that the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitlement with reference to the enabling provision and in the absence of such examination being not made explicit in the order and if the Commissioner considers that, to be a situation as one capable of causing prejudice and also at the same time capable of resulting in an erroneous order, it cannot be said that the Commissioner has not shown his awareness to the requirement of the order being erroneous and prejudicial to the interest of revenue and if the matter is remanded to the Assessing Authority for re-examination only on this aspect and to pass order afresh, the assessee cannot be said to have been aggrieved and the Tribunal assuming that in a situation of this nature the Commissioner has acted without jurisdiction is an error in law committed by the Tribunal and that requires correction. 8. In this regard Mr. Indra Kumar has drawn our attention to the corresponding provision in the Income Tax Act, 1922 namely Section 33(B) of that Act which had come in for Interpretation before the Supreme Court in the case of Commissioner of Income Tax v. Electro House [1971] 82 ITR 824 (SC) and in particular following the passage: Section 33B(1) reads: "The Commissioner may call for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we refrain from spelling out what principles of natural justice should be observed in an enquiry under section 33B. This court in Gita Devi Aggarwal v. Commissioner of Income-tax ruled that section 33B does not in express terms require a notice to be served on the assessee as in the case of section 34. Section 33B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under section 34 cannot, therefore, be applied to a proceeding under section 33B. For the reasons mentioned above, we allow Civil Appeal Nos. 1168 to 1171 of 1971, discharge the answer given by the High Court to the question set out earlier and answer that question as follows: The notice issued did not contravene section 33B and the Commissioner validly exercised his jurisdiction under section 33B. But as the High Court has not considered the other questions referred to it, these cases will now go back to the High Court for considering those questions. and with reference to the above observations and interpretation of the statutory provisions by the Supreme Court, submits that Section 263 of the Act virtually is in pari materia with Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner can exercise jurisdiction under Section 263 of the Act only when the order is both erroneous and prejudicial to the interest of the revenue: that it should be demonstrable that not only the order passed by the lower authorities, which is sought to be revised, is erroneous, in the sense it is in contravention or at variance with any statutory provisions, but also that it should have resulted in a prejudice to the interest of the revenue and while the first part of this twin requirements should be made good with reference to any statutory provisions, the second part, which has come in for interpretation, is a phrase which is not merely one of a possible loss of revenue, but a situation where it is a definite loss of revenue, in the sense, that on the possibility of a particular liability being fastened and that having not been done by the order or proceeding under revision, it has resulted in some loss of revenue, is a situation which cannot qualify for revision under Section 263 of the Act; that judicial opinion is to the effect that a mere alternative view being possible in respect of a particular statutory provision or a situation cannot be brought within the scope of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner can revise the assessment order if the twin conditions provided in the Act are fulfilled, that is that the assessment order is not only erroneous hut is also prejudicial to the interest of the Revenue. The fulfilment of both the conditions is an essential prerequisite. (See Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). (iii) An order is erroneous when it is contrary to law or proceeds on an incorrect assumption of facts or is in breach of the principles of natural justice or is passed without application of mind, that is, is stereo-typed, inasmuch as the Assessing Officer, accepts what is stated in the return of the assessee without, making any enquiry called for in the circumstances of the case, that is proceeds with "undue haste". (See Gee Vee Enterprises v. Addl. CIT [1975] 99 TTR 375 (Delhi)). (iv) The expression "prejudicial to the interest of the Revenue" while not to be confused with the loss of tax will certainly include an erroneous order which results in a person not paying tax which is lawfully payable to the Revenue. (See Malabar Industrial Co. Ltd. [2000] 243 1TR 83 (SC)). (v) Every loss of tax to the Revenue cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by any prior requirement; that it is sufficient if he is of the view or he considers that the subject order requires to be revised within the scope of Section 263 of the Act. 17. Insofar as the facts of the present case are concerned, it is not at all in dispute that certain deductions in the nature of tax relief had been claimed by the assessee for the two assessment years in question and with reference to double taxation avoidance agreements in existence between the countries of India and Canada on the one hand and India and Thailand on the other, the assessing authority allowed deductions as claimed. It is true that the order of the commissioner does not make it any explicit as to the manner in which it is either erroneous or prejudicial in so far as the actual amount of deduction is allowed and this is the thrust of the argument on behalf of the assessee and therefore the order of the commissioner is beyond the scope of Section 263 of the Act. 18. We have already noticed the statutory provisions of Section 263 of the Act. Section 263 is a section which enables the commissioner to have a look at the orders or proceedings of the lower authorities and to effect a correction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interests of the revenue. The phrase "prejudicial to the interests of the Revenue" has to he read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of 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. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). In the instant case, the Commissioner noted that the Income-tax Officer passed the order of nil assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the view taken by the assessee to the effect that the authority taking the view that the assessee was entitled for deduction in full, but the commissioner doubting that, that in itself does not become a situation of the order being erroneous, the question is not one of the order being erroneous directly with reference to the specific statutory provision but could be on a procedural aspect also. 21. In the present case, while there is no doubt that the assessee is entitled to claim deduction in terms of Articles 23(3)(a) and 23(4) of the agreements between India with Canada and Thailand respectively. the question is one of what exactly the entitlement? In the absence of any discussion either in the assessment order or in the computation claim, particularly as the extent of relief that can be claimed under these two articles is only after a specific exercise and though Sri Sarangan has very vehemently urged that it is not necessary for the assessing authority to make all these things explicit, so long as he is satisfied, on the strength of the authority of the Supreme Court not only in the ease of Electro House (supra) and to more so on the basis of the observations and law as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied that the law declared by the Supreme Court not only in the case of Electro House (supra) and also in the case of Malabar Industries Co. (supra) fully covers the situation, no further need to discuss with any greater elaboration on the view expressed by the Bombay and the Delhi High Courts. 24. In the present situation, the Commissioner having only directed the assessing authority to compute it or recompute it and make it explicit as to the entitlement of the assessee, an order of this nature, in fact, could not have been contended as detrimental to the interest of the assessee, as it was always open to the assessee to justify the claim in terms of the double taxation avoidance agreements. In a situation of this nature, we are also of the opinion that it was not a case which warranted interference by the tribunal, more so for setting aside the order of the commissioner and for ensuring that the order passed by the assessing authority was left in tact. 25. One should bear in mind that a relief which is required to be given to any litigant in any given case should be commensurate to the gravity of the situation, to the needs and necessity of the situation and warranting such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely constitutes an order not merely erroneous but also prejudicial to the interest of the revenue and therefore while the commissioner was justified in exercising the jurisdiction under Section 263 of the Act, the tribunal was definitely not justified in interfering with this order of the commissioner in its appellate jurisdiction. 29. Therefore, we answer the question posed for our answer in the negative and against the assessee. Both appeals are allowed. Parties to bear their respective cost. Re: ITA Nos. 588 & 589 of 2006 30. These two appeals are a sequel to the remand order passed by the commissioner, in the sense, the commissioner by exercising his revisional jurisdiction had directed the assessing authority to redo the computation relating to the relief that the assessee was entitled to in respect of the tax paid in the foreign countries and in terms of the provisions of double taxation avoidance agreements for the two assessment years viz., 1995-96 and 1996-97. 31. It is submitted at the Bar that the assessing authority, in fact, had redone the computation pursuant to the remand orders passed by the commissioner and that resulted in some reduction of tax relief that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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