TMI Blog2014 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions to have been omitted to be considered by the Assessing Officer. - contentions of the assessee rejected - Decided against the assessee. It would have definitely be an erroneous procedure adopted by the AO, wherein the entire materials available to the Department had not been taken into account, resulting in prejudice to the interests of the revenue – Commissioner has not attempted a substitution of his opinion to that of the AO, but has taken cognizance of the 'lack of enquiry' with respect to certain transactions as distinguished from 'insufficient enquiry'- this reveals clear non-application of mind by the AO – Relying upon [M/s. Appollo Tyres Ltd. Versus The Deputy Commissioner of Income Tax 2013 (10) TMI 1233 - KERALA HIGH COURT] - no interference can be made at the stage of show cause notice - assessee would have their remedies before the CIT, who shall definitely consider the objections placed before him and pass reasoned orders as is mandated u/s 263 - With respect to the power of the Commissioner u/s 263 to issue a show cause notice in the nature of the orders in the writ petitions, it was perfectly proper and legal and within the powers of the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hearing the assessee and pass reasoned orders. But, however, only and only if the jurisdictional foundation to invoke such powers are satisfied. For such jurisdictional foundation to be available, the two essential elements, specifically mandated by the words employed in Section 263, being the erroneous nature of the orders, resulting in prejudice to the revenue, should exist together. No proceedings could be taken only on either of the aforesaid reasons being available and the jurisdictional foundation presupposes the existence of both. 4. The learned counsel places reliance on the decision of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [(2000) 243 ITR 83 (SC) to buttress the aforesaid contention. The meaning of erroneous is urged before this Court placing reliance on CIT v. Gabriel India Ltd. [(1993) 203 ITR 108 (Bom) and C.I.T. v. Mehrotra Brothers [(2004) 270 ITR 157 (M.P.)]. The learned counsel has also placed reliance on C.I.T. v. EIMCO-K.C.P. Limited [(1984) 147 ITR 603 (Mad.], Rajendra Singh v. Superintendent of Taxes [(1990) 79 STC 10], Jindal Photo Films Ltd. v. Deputy Commissioner of Income Tax [(1998) 234 ITR 170 (Delhi)], CIT v. Sunbeam A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a revision made by the Commissioner under Section 263 of the Act. The brief facts were that the assessee, having entered into an agreement for sale of an estate, was paid compensation by the purchaser, who was not able to satisfy the terms of payment; of consideration. The compensation paid was claimed as a deduction, since it was in lieu of loss of agricultural income. The claim having been allowed by the Assessing Officer, the Commissioner sought to revise the same. The Hon'ble Supreme Court, as pointed out by the learned counsel for the petitioner, found that to invoke Section 263, necessary ingredients are the erroneous nature of the order and that it caused prejudice to the interests of the revenue and it was categorically declared that existence of one such reason would not clothe the authority with the power under Section 263. However, it was declared that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous (sic). Orders which are passed without applying the principles of natural justice or without application or mind were also held to be falling within the category of erroneous orders. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63, the Division Bench clearly said so: It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste . The decision of the Gauhati High Court in Rajendra Singh (supra) is a verbatim reproduction of the above principle, but relating to a revision under the sales-tax enactment. 10. Mehrotra Brothers (supra) was a case in which the Assessing Officer had considered the records, the evidence produced and expressed satisfaction about the genuineness of a cash credit transaction. The order passed under Section 263, on the vague ground that the Assessing Officer did not make a proper enquiry, was set aside by the Tribunal, which was confirmed by the High Court of Delhi. 11. EIMCO-K.C.P. Limited (supra) considered the question whether the pendency of an appeal by the assessee before the first Appellate Authority would disentitle the Commissioner from exercising power under Section 263. The Court found the power under Section 263 does not in any manner conflict with the appellate power. 12. The Delhi High Court in Sunbeam Auto Ltd. (supra) looked at an order under Section 263 seeking t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eview to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the Assessing Officer to initiate the proceedings under sections 147/148 of the Act . 15. That the power under Section 263 is available to the Department only on the order being erroneous in so far as it is prejudicial to the interests of the revenue , calls for no debate or argument. Section 263 provides for the Commissioner to call for and examine the record of any proceedings under the Act and in the event of there being any error which results in prejudice to the interest of the revenue, it also confers the power to revise the order passed by the Assessing Officer either by enhancing or modifying or cancelling assessment or directing a fresh assessment to be made. The proceedings under Section 263, as rightly pointed out by the learned Senior Counsel, along with the powers for rectification and re- pening under Section 154 and 147, are powers available to the Department and its officers to ensure that the entire tax is assessed as levied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t required to make a roving enquiry item-wise, while accepting the returns of the assessee, was found to be not sustainable. 18. In the present case, one of the contentions raised is that the assessment order has been passed after 21 months and the same was finalised after discussion with the Commissioner of Income Tax. The petitioner relies on Exhibit P3 and P4 to contend that the same would clearly reveal that consultation was made with the Commissioner of Income Tax by the Assessing Officer prior to the finalisation of the same. This Court, however, on Exhibit P3 and P4 alone is not to assume that such consultation had been made. The quasi-judicial authorities under the enactment will have to act within the jurisdiction conferred by the statute and independently as also not under dictates of the superior officers. But for Exhibits P3 and P4 there is nothing on record to show that Exhibit P1 has been passed after consultation with the Commissioner, who has passed the impugned orders, Exhibit P7; nor is it pleaded that there is any such office procedure available. 19. The next contention urged by the learned counsel appearing for the petitioners is that a revision under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and English Indian Clays Ltd. (both supra). 21. On the strength of the above findings, this Court is of the definite opinion that no interference can be made at the stage of show cause notice. The petitioners would have their remedies before the Commissioner of Income Tax, who shall definitely consider the objections placed before him and pass reasoned orders as is mandated under Section 263. With respect to the power of the Commissioner under Section 263 to issue a show cause notice in the nature of the orders impugned in the writ petitions, this Court is of the opinion that it was perfectly proper and legal and within the powers of the Commissioner under Section 263 of the Act to have issued such notices. In the result, the writ petitions shall stand dismissed; declining invocation of the extra-ordinary powers under Article 226. However; making it clear that this Court has not looked at any of the additions, or materials which are the basis of the revision notified by the Commissioner, as noticed in the impugned orders, the sustainability of which is open to challenge by the petitioners herein, before the Commissioner. The parties are directed to suffer their respective co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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