TMI Blog2014 (11) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to the fundamental issue which has been raised while exercising jurisdiction u/s 263 - the requirement of Section 263 has been established and the Commissioner was justified in coming to the conclusion that the order passed by the AO without application of mind was both erroneous and prejudicial to the interests of the revenue - The Tribunal has manifestly acted in excess of its jurisdiction in interfering with the order of the Commissioner - The Commissioner has, while exercising jurisdiction u/s 263, directed the AO to modify his order by adding a sum obtained through the loans – thus, the matter is required to be remitted back to the AO to enable him to scrutinize the nature and source of the loans so as to furnish the assessee a prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of evidence produced by the assessee during the course of assessment proceedings and, therefore, did not make any addition ignoring the fact that the Assessing Officer is not only an adjudicator but is also an investigator and it is his duty to ascertain the truth. The appeal is admitted and, by consent, is taken up for hearing and final disposal at this stage. The assessee filed a return of income on 29 March 2004 and disclosed a total income of ₹ 1,56,210/-. The return was initially processed under Section 143 (1) but, later on, the case was selected for scrutiny. The Assessing Officer completed the assessment under Section 143 (3) and accepted the income as returned in the amount of ₹ 1,56,210/-. The Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted statement. The Commissioner observed that the persons who were advancing the gifts or the interest free loans were individuals with a marginally taxable income, whereas the assessees were persons with a high income and substantial assets. The ultimate conclusion was that the loans/gifts were orchestrated to deposit moneys in family concerns or for investment in property. The CIT made a reference to the entries in the bank accounts and noted that balances were built up mostly in the form of cash and were taken out instantaneously by cheques and drafts which was a symptom of a hawala transaction. Hence, it was held that the identity and capacity of as many as 12 lenders were not established and the Assessing Officer was directed to modify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing 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. Hence, it is well settled that every loss of revenue in consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Assessing Officer adopts one of the courses permissible in law or where two views are possible of which the Assessing Officer has taken one view, the Commissioner cannot exercise jurisdiction under Section 263 me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion with the assessee's counsels, the income returned, as declared at ₹ 1,56,210/- is accepted. Assessed accordingly. Issue notice of demand. A plain reading of the order would indicate that there has been no application of mind by the Assessing Officer. There is nothing to indicate from the order that the Assessing Officer had brought his mind to bear upon the identity and capacity of the alleged lenders who had furnished loans to the assessee in the amount of ₹ 61,00,000/-. This, indeed, is a material circumstance which would have a bearing on the applicability of the provisions of Section 68 of the Act. In the present case, it could not be deduced merely on the basis of the order sheets of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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