TMI Blog2013 (10) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... officer should be a judicial view consciously based upon proper inquiries and appreciation of all the relevant factual and legal aspects of the case – If the view taken by assessing officer is erroneous view, then the case will be amenable to revisional jurisdiction under Section 263 – Secondly, if the Assessing officer has not taken any view then also the case falls under the jurisdiction of section 263 – But, if the view taken by assessing office is view in vaccum and not based upon the proper enquiry, then the matter to be restored to the assessing officer for proper enquiry – Reliance has been placed upon the case of Sun Minerals [2012 (12) TMI 195 - ITAT HYDERABAD]. - ITA No. 1056/HYD/2011, ITA No. 1057/HYD/2011 - - - Dated:- 1-2-2013 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For the Appellant : Shri P. Murali Mohana Rao For the Respondent : Shri M. Ravider Sai ORDER Per Asha Vijayaraghavan, J.M. Both these appeals filed by different assessees are directed against the respective orders of CIT-III, Hyderabad dated 30/03/2011 passed u/s 263 of the IT Act, for the assessment year 2006-07. Since identical issue is involved in both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated on par with capital subsidy, which reduces the cost to the assessee of the fixed assets. In this connection, the CIT placed reliance on Apex Court's decision in the case of M/s Sahni Steel Press Works Ltd. Vs. CIT, 228 ITR 253 (SC). 5. During the course of hearing, on being asked by the CIT to the assessee to show reason why the said benefit accrued to the assessee should not be taxed as its profit, in its reply dated 06/01/2011, it was argued by the assessee that entire principal amount of loan had been transferred to capital reserve account and principal amount of loan is out of purview of section 41(1). Similarly, it was argued that provisions of section 28(iv) are not applicable to the case and the assessee relied on the following case-laws: 1) D.S. Narayana Co. Vs. ITO, [1987] 27 TTJ(Hyd) 179 2) IFB Securities Ltd. Vs. ITO [2006] 101 TTJ (Kol) 829 3) Mindtech (India) Ltd. Vs. ITO [2009] 124 TTJ (Mum) 830 6. The CIT held that there was no merit in the assessee's contentions and that case-laws relied upon by the assessee were not applicable to the facts of the case. Accordingly, the CIT held that an amount of Rs. 3,83,98,703 received by the assessee as loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has made thorough enquiry and, to this effect, the AO issued a questionnaire asking for the information to be furnished, which is extracted below:- " i) During the year the assessee effected exports to the tune of Rs. 35,14,32,807/- which earned an amount of Rs. 85,44,794/- towards export benefits receivable. Show cause why this amount of Rs. 85,44,794/- being the export benefits receivable, should not be treated as income. ii) It is noticed from the statements filed that the assessee had invested an amount of Rs. 16,05,93,500/- in the equity shares of Shri Vasavi Holdings Investment Ltd and the assessee has incurred a liability of Rs. 85,77,810/- as interest on working capital besides interest to others of Rs. 1,02,45,869/- and interest on term loans at about Rs. 4 crores. Please show cause why the interest attributable to the investment of Rs. 16,05,93,500/- should not be disallowed u/s 14A of the IT Act. iii) It is noticed from the statements filed, that during the year the assessee transferred an amount of Rs. 38,65,66,297/- to capital reserve under the item interest waiver and term loan and WCDL. As per schedule 18 to the balance sheet it is found that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion where in it was held that the assessment order passed by the Assessing Officer u/s 143(3) dated 31/12/2008 was erroneous in so far as it relates to the reduction of the assessee's liability under OTS scheme. He directed to pass order giving effect to the order u/s 263 dated 30/03/2011 where in it was held that the assessment order need to be revised by deducting the principal waiver amount from cost of fixed assets. The assessee company has got waiver from a State Bank of India and IDBI of Rs. 4249.66 lakhs consisting of Rs. 3865.66 lakhs of interest and 383.98 lakhs of principal and the interest portion of Rs. 3865.66 lakhs was debited to profit and loss account and disallowed u/s 43B in the assessment years 2003-04 to 2005-06. 16. It was argued by the learned counsel for the assessee that with regard to principal portion amounting to Rs. 383.98 lakhs cannot be considered as income u/s 41(1) and also u/s 28(iv). Because the waiver obtaining/applying is not the business of the assessee by any stretch of imagination be said to be a benefit of the assessee which arises from business. 17. Further, the learned counsel has relied on the decision of Gujarat High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1). 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests 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 High Court of Calcutta in Dawjee Dadabhov Co.v. S.P. Jain [1957] 31 ITR 872, the High Court of Karnataka inCITv. T. Narayana Pai[1975] 98 ITR 422, the High Court of Bombay in CITv. Gabriel India Ltd.[1993] 203 ITR 208 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that will take the matter under the scope of Section 263. The view taken by the Assessing Officer should not be a mere view in vacuum but a judicial view. It is well established that the Assessing Officer being a quasi-judicial authority cannot take a view, either against or in favour of the assessee / revenue, without making proper inquiries and without proper examination of the claim made by the assessee in the light of the applicable law. As already stated earlier, we are not able to appreciate on what material was placed before the Assessing Officer at the assessment stage to take such a view. The assessee has also not been able to lead enough evidence to show to us that any inquiry was made by the Assessing Officer in this regard. Therefore mere allegation that the Assessing Officer has taken a view in the matter will not put the matter beyond the purview of Section 263 unless the view so taken by the Assessing Officer is a judicial view consciously based upon proper inquiries and appreciation of all the relevant factual and legal aspects of the case. The judicial view taken by the Assessing Officer may perhaps place the matter outside the purview of Section 263 unless it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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