TMI Blog2015 (4) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer is erroneous. Jurisdiction u/s 263 has been exercised on the basis that all expenses charged to the profit and loss account is attributable to the investment in shares. Once the assessing officer has examined the nature of all the expenses and given the finding that the expenses relates to the business. It cannot be said that the order passed by the assessing officer is erroneous. It is not a case of lack of inquiry and also not a case where the assessing officer has taken a view which is unsustainable in law. Even we noted in the order passed u/s 263, the CIT has not given specific finding that the order passed is erroneous but stated that the order passed is prima facie found to be erroneous.Even we may mention that where there are two views possible as to the interpretation of any transaction and the Assessing Officer has taken one of the view favourable to the assessee, the order cannot be said to be erroneous unless the view taken by the Assessing Officer is unsustainable in law.Same view has been taken by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME Court]. Section 263 does not empower the CIT to thrus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee filed return declaring total loss at ₹ 1,80,88,960/-. The assessment u/s 143(3) was passed on 30.9.2011 at a loss of ₹ 1,78,57,950/-. On a proposal being received from the assessing officer the CIT called for the record and issued show cause notice to the assessee in accordance with the provisions of section 263 which read as under :- 2. In this case, in the AY 2009-10, you have earned ₹ 23,10,010/- as interest on fixed deposits. All expenses charged to the profit and loss account is attributable to investment in shares Paradeep Phosphates Ltd (PPL) amounting ₹ 294,50,00,000/-. The income arises from the investment is claimed to be exempt u/s 10 of Income Tax Act 1961. Thus, all administrative expenses incurred are attributable to that income and accordingly required to be disallowed. Under the provisions of the Income-Tax Act, 1961, any expenditure exclusively incurred for the purpose of the business is an allowable deduction. Since the expenditure is not incurred of for the purpose of business, as there is no business activity but only investment activity, the expenditure is not an allowable expenditure. Failure to do so has resulted in ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. After considering overall facts of the case, I am of the opinion that the AO has not properly examined the issue that when there is no business activity whether the expenses are legally allowable as deduction in the assessment ? The interest income has been assessed by the AO as income from other sources. That being so, there is no business income and as a matter of principle, the expenses are then not allowable. Therefore, prima-facie, the order u/s 143(3) is found to be erroneous and prejudicial to the interest of revenue. I therefore set aside the assessment order for the Asst. Year 2009-10 passed by the AO u/s 143(3) of the IT Act, 1961 on 30.09.2011 read with order u/s 154 dated 30.03.2012. The AO is suggested to call for and examine assessee s explanation / contention, verify the Memorandum and Articles of Association of the company, nature of receipts and expenses and finally decide whether the expenses debited into P L account are allowable as business expenditure or not. Accordingly, the AO is directed to pass fresh order after giving the assessee reasonable opportunity of being heard. The AO should verify the claim of the assessee in respect of allowability of expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 be excluded. 7. From the perusal of the aforesaid section, it is apparent that there are four main features of the power of revision to be exercised u/s 263 by the Commissioner of Income-tax. Firstly, the Commissioner may call for and examine the records of any proceedings under the Act and for this purpose he need not to show any reason or record any reason to believe. It is a part of his administrative power to call for the record and examine them relating to any assessee. Secondly he may consider any order passed by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the order passed is erroneous as well as prejudicial to the interest of the Revenue and once he forms an opinion, he has to give an opportunity to the assessee of being heard and after making or causing the enquiry he can pass an order. Moreover the inquiry is conducted once the CIT forms an opinion on the basis of record that the order passed is erroneous and prejudicial to the interest of Revenue. The word record has been defined under Explanation (b) of Section 263 to mean that the record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner. The examination of the record is to be carried by the Commissioner prior to the forming an opinion that the order is erroneous and prejudicial to the interest of the Revenue. Once the record is examined and the CIT on the basis of examination of the record forms an opinion that the order is erroneous and prejudicial to the interest of the Revenue, he is empowered after giving the opportunity to the assessee, to make such enquiry as he may deem necessary. Therefore, the enquiry to be conducted by the CIT is an act once the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s 263, the CIT has not given specific finding that the order passed is erroneous but stated that the order passed is prima facie found to be erroneous. Even we may mention that where there are two views possible as to the interpretation of any transaction and the Assessing Officer has taken one of the view favourable to the assessee, the order cannot be said to be erroneous unless the view taken by the Assessing Officer is unsustainable in law. Same view has been taken by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. Commissioner of Income-tax 243 ITR 83. We noted on the basis of the evidence and the facts on record and the order of CIT passed u/s 263, the assessing officer duly inquired of about the allowability of the expenditure and he allowed all the expenditure under the head income from business by taking a view that the expenditure incurred for the purpose of carrying on the business. On this basis itself, in our opinion, the order passed by the CIT does not have any leg to stand and is liable to be annulled. Section 263 does not empower the CIT to thrust upon his view on the Assessing Officer. Revision u/s 263 is possible only if both the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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