TMI Blog2014 (12) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transaction and materials on record, the AO had made certain addition to the income of the assessee, the same would have been considered erroneous by any appellate authority as being violative of the principles of natural justice which require that the authority must indicate the reasons for an adverse order. The AO does not show any application of mind on his part - He simply accepted the income declared by the assessee - This is a case where the AO mechanically accepted what the assessee wanted him to accept without any application of mind or enquiry - The evidence available on record is not enough to hold that the return of the assessee was objectively examined or considered by the AO - It is because of such non consideration of the issues on the part of the AO that the return filed by the assessee stood automatically accepted without any proper scrutiny - The assessment order placed is clearly erroneous as it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee - it was a fit case for the Commissioner to exercise his revisional jurisdiction u/s 263 which he rightly exercised by cancelling the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011. On examination of the assessment records, the CIT noticed that the assessee had income under the heads Yoga, Ayurveda and other programmes etc. These were construed as business expenses. The objects and activities of the assessee fall under advancement of any other object of general public utility, thereby attracting the provisions of section 2(15) of the I.T. Act. The assessee was, however, allowed exemption u/s. 11 of the Act. The then CIT vide proceedings dated 04/03/2011 had withdrawn the registration u/s. 12A granted to the assessee. Thereafter a notice was issued to the assessee on 09/01/2011 proposing to revise the assessment order by CIT u/s. 263 of the I.T. Act. 4. The Ld. AR submitted before the CIT that the Assessing officer had completed the assessments for the earlier years by taking a consistent view that it was a charitable trust. According to the Ld. AR, the main object was establishment of training centres, for propagating, teaching and practicing yogic culture, philosophy and yogic practices including the treatment under Ayurveda and other systems of medicines also. The Ld. AR took objection in taking a different view over the view taken by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rammes conducted by the assessee are imparted by charging fees and therefore, the declared objects and actual activities of the trust could not be construed as education for the purpose of sec. 2(15) and can be categorized only under the head general public utility . 7. Regarding exemption of medical relief, the CIT observed that yoga has not recognized system of medicine and does not figure in the approved list nor is there any scientific body of evidence to establish that yoga is a medical science which would provide medical relief. Yoga is only supplementary and therapeutic in value and cannot be considered as a system of treatment for diseases by itself. The assessee was not able to establish with evidence that they were engaged in providing medical relief. Thus as both medical relief and education are not applicable, the assessee qualified for exemption only under the head general public utility category. 8. Regarding the issue of depreciation allowance, the CIT observed that this issue was not considered by the Assessing officer and there was no evidence of such consideration. Thus, according to the CIT, the ratio of Malabar Industrial Co. Ltd., cited supra will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the scope of Error, Mistake, Blunder, and Hallucination has been explained thus: An error is any deviation from the standard or course of right, truth, justice or accuracy, which is not intentional. A mistake is an error committed under a misapprehension of misconception of the nature of a case. An error may be from the absence of knowledge, a mistake is from insufficient or false observation. Blunder is a practical error of a peculiarly gross or awkward kind, committed through glaring ignorance, heedlessness, or awkwardness. An error may be overlooked or atoned for, a mistake may be rectified, but the shame or ridicule which is occasioned by a blunder, who can counteract. Strictly speaking, Hallucination is an illusion of the perception, a phantasm of the imagination. The one comes of disordered vision, the other of discarded imagination. It is extended in medical science to matters of sensation, whether there is no corresponding cause to produce it. In its ordinary use it denotes an unaccountable error in judgement or fact, especially in one remarkable otherwise for accurate information and right decision. It is exceptional error or mistake in those otherwise not likely to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted by the Department under Section 143(1) without any scrutiny. Only a few cases are picked up for scrutiny. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. He should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of that is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State. If he fails to discharge his duties fairly, his arbitrary actions culminating in erroneous orders can always be corrected either at the instance of the assessee, if the assessee is prejudiced or at the instance of the Commissioner, if the revenue is prejudiced. While making an assessment, the ITO has a varied role to play. He is the investigator, prosecutor as well as adjudicator. As an adjudicator he is an arbitrator between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court as follows: Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y appellate authority as being violative of the principles of natural justice which require that the authority must indicate the reasons for an adverse order. We find no reason why the same view should not be taken when an order is against the interests of the revenue. As a matter of fact such orders are prejudicial to the interests of both the parties, because even the assessee is deprived of the benefit of a positive finding in his favour, though he may have sufficiently established his case. 15. In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases: (i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it. (ii) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law. In the same category fall orders passed without applying the principles of natural justice or without application of mind. (iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer to make the necessary inquiries or to examine the claim made by the assessee in accordance with law, which renders the resultant order erroneous and prejudicial to the interest of the revenue. Nothing more is required to be established in such a case. One would not know as to what would have happened if the Assessing Officer had made the requisite inquiries or examined the claim of the assessee in accordance with law. He could have accepted the assessee's claim. Equally, he could have also rejected the assessee's claim depending upon the results of his enquiry or examination into the claim of the assessee. Thus, the formation of any view by the Assessing Officer would necessarily depend upon the results of his inquiry and conscious, and not passive, examination into the claim of the assessee. If the Assessing Officer passes an order mechanically without making the requisite inquiries or examining the claim of the assessee in accordance with law, such an order will clearly be erroneous in law as it would not be based on objective consideration of the relevant materials. It is therefore, the mere failure on the part of the Assessing Officer in not mak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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