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Commissioner of Income Tax-II Visakhapatnam Versus Shri Varanasi Khanta Rao, Prop. Sri Sai Srinivasa Modern Rice Mill

2015 (5) TMI 359 - ANDHRA PRADESH HIGH COURT

Revision u/s 263 - whether ITAT Visakhapatnam, is justified in holding that the CIT(A) did not exercise his jurisdiction under Section 263 properly? - Held that:- A perusal of the order of the Assessing Officer would show that the return of income filed by the assessee was accepted and the tax was finalized. From the order of the Assessing Officer, one cannot deduce whether the errors pointed out by the Commissioner of Income Tax were considered by the Assessing Officer or not. The Commissioner .....

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of de novo enquiry, to consider whether the explanation offered by the assessee to the points raised by the Commissioner is proper or not. When once the Commissioner has got power to point out the errors which had the effect on the revenue, the Tribunal cannot sit as an appellate authority on the order of the Commissioner passed under Section 263 of the Act. If the power exists in the Commissioner and is exercised by him after satisfying himself on the facts of the case, it is not for the Tribun .....

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ded a further probe by the Assessing Officer.

In the facts and circumstances of the case, we are satisfied that the order passed by the Commissioner is proper and validly exercised as per the powers conferred on him under Section 263 of the Act and we, accordingly, set aside the order of the Tribunal. - Decided in favour of the Revenue. - I.T.T.A. No. 36 of 2004 - Dated:- 31-3-2015 - Dilip B. Bhosale And Sri A. Ramalingeswara Rao,JJ. For the Petitioner : Sri S. R. Ashok For the Respon .....

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jurisdiction? (b) Whether the observations of the Appellate Tribunal with regard to jurisdictional constraints u/s.263 are not based on statutory language employed in Sec.263 of I.T.Act? (c) Whether the Appellate Tribunal is justified in holding that cancellation of assessment by the Commissioner and ordering fresh enquiry is beyond the jurisdiction of the Commissioner U/s.263? (d) Whether the Appellate Tribunal is justified in entering into merits of the case and recording findings on the factu .....

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ts and in the circumstances of the case, the Income Tax Appellate Tribunal, Visakhapatnam, is justified in holding that the Commissioner of Income Tax did not exercise his jurisdiction under Section 263 of the Income Tax Act properly? The assessee is a Proprietor of Sri Sai Srinivasa Modern Rice Mill, Srikakulam, and he completed the construction of rice mill by March 1999. He filed return of income for the assessment year 1999-2000 declaring the income of ₹ 4,60,960/-. It was processed un .....

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d U/s.143(1). This case is connected case to Sri Venkata Santhamani Modern Rice G.N.Oil Mill where in Survey under Section 133A was conducted. Hence it has been taken up for scrutiny and notices U/s.143(2) have been issued. In response there to the assessee and his Authorised Representative appeared and discussed about the case. As the assessee has filed return of income by admitting income and paid the taxes as agreed at the time of survey, the assessment is completed by accepting the returned .....

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t was erroneous in so far as it was prejudicial to the interests of revenue on the following grounds: i) There was a short accounting of yield of finished rice to the extent of 18% of total paddy consumed which amounted to 5653.95 quintals of finished rice, and it resulted in short charge of tax of about ₹ 19,04,535/-; ii) As per the tax audit report, the valuation of closing stock was not made at the cost price of the paddy purchased during the financial year 1998-1999; iii) There was a d .....

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ars was not verified by the Assessing Officer; vi) The deduction of interest liability towards other concerns was not properly examined, and vii) The rebate under Section 88 of the Act should not have been allowed for NSC deposit of ₹ 11,000/-. A show cause notice was issued to the assessee requiring him to submit clarification or explanation to the above issues and also to show cause why the assessment made under Section 143(3) of the Act dated 15.03.2000 should not be set aside. The asse .....

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ected to initiate fresh assessment proceedings and carry out necessary enquiries/cross verification in respect of the various points stated in the show-cause notice served u/s.263 of the I.T.Act, 1961 and provide reasonable opportunity to the assessee to produce its regular books of accounts/bills and vouchers/documents which he may choose to rely upon for substantiating his own claim. During the fresh assessment proceedings, the A.O should call for the minimum support of price fixed by State Go .....

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cation may be carried out before allowing the assessees claim. The complete details of sundry creditors amounting to ₹ 33,60,999/- as on 31.03.99 should be cross verified from the creditors concerned including subsequent date of payment of such credit liabilities to each creditor concerned after 31.3.99. Thereafter a fresh assessment order may be passed in accordance with the relevant provisions of law. While coming to the said conclusion he relied on the decisions of the Supreme Court in .....

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sment proceeding erroneous and prejudicial to the interests of the revenue. The Tribunal further held that after an agreed assessment is completed on the basis of discussion and deliberations made with the assessee and his authorized representative by the Assessing Officer, the Commissioner of Income Tax is not supposed to raise the issue again and step into the shoes of the Assessing Officer like an appellate authority. After holding so, the Tribunal concluded as follows: After all his powers a .....

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l fitness of things and in all fairness the legislatures intention has to be properly understood and the supervisory power of the CIT should not be misused simply because the order passed by the AO was a cryptic one as has been in the impugned case. Hence in our considered view when the issue raised by the CIT in the show cause notice in pursuance to invoking of Section 263 in no way are fatal to the interest of the Revenue when the assessee has already disclosed income at the time of survey u/s .....

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contemplated u/s.263 (i.e., erroneous and prejudicial to the interest of the Revenue); hence in our considered opinion in the present facts and circumstances of the case assumption of jurisdiction u/s.263 by the CIT does not stand on a sound footing. We therefore, set aside the order of the CIT and restore the order of the AO. Against the said finding recorded by the Tribunal, the present appeal is filed by the Revenue. It is contended by the learned Counsel for the Revenue that the assessment .....

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nquiry in exercise of his powers under Section 263 of the Act. Section 263 of the Act reads as follows: Revision of orders prejudicial to revenue. 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after makin .....

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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, National Tax Tribunal, the High Court or the Supreme Court On a reading of the above provision it is clear that the only precondition for revising the order of Assessing Officer is that the order of the Assessing Officer should be erroneous in so far as it is prejudicial to the interests of the reve .....

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he first case is Rampyari Devi Saraogi (supra) decided by the Supreme Court. In the said case the appellant, who was an assessee, was sent a notice by the Commissioner of Income Tax, West Bengal, under Section 33B of the Income Tax Act, 1922, proposing to pass an order under Section 33B of the said Act and, accordingly, giving an opportunity to her. The Tax Consultant, on behalf of the assessee, wrote a letter to the Commissioner stating that the show cause notice was bad in law, illegal, void a .....

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e was challenged before the High Court of Calcutta under Article 226 of the Constitution of India, and the Division Bench of the High Court dismissed the Writ Petition. While upholding the order of the Division Bench of the High Court, the Supreme Court, speaking through the three Judge Bench, held as follows: It is not necessary to further detail the reasons given by the Commissioner because on the face of the record the orders were prejudicial to the interest of the revenue, and even if the fa .....

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assed was correct or not. The said decision was followed by another three Judge Bench of Supreme Court in Smt.Tara Devi Aggarwal (supra). On a perusal of the above two judgments, we have no doubt that the Commissioner of Income Tax followed the ratio laid down in the above decisions and exercised his powers under Section 263 of the Act. In Malabar Industrial Co.Ltd. v. Commissioner of Income Tax (2000) 2 SCC 718 the scope of the revisional power of the Commissioner was examined. It was held that .....

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of law will satisfy the requirement of the order being erroneous. It was also held that the order passed without applying the principles of natural justice or without application of mind fall under the said category. The phrase prejudicial to the interests of the revenue was explained as follows: 8. 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 conferred to loss .....

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venue. 9. Mr. Abaraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Company v. Commissioner of Income-tax [(1987) 163 ITR 129 (Mad)] interpreting "prejudicial to the interests of the revenue". The High Court held: "In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income-tax Officer, .....

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son, it will certainly be prejudicial to the interests of the Revenue. 10. The phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views .....

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nterests of the Revenue. (See Rampyari Devi Saraogi v. Commissioner of Income tax [(1968) 67 ITR 84 (SC)] and in Smt. Tara Devi Aggarwal v. Commissioner of Income-tax, West Bengal. [(1973) 88 ITR 323 : (1973) 3 SCC 482 : 1973 SCC (Tax) 318] In the instant case, a perusal of the order of the Assessing Officer would show that the return of income filed by the assessee was accepted and the tax was finalized. From the order of the Assessing Officer, one cannot deduce whether the errors pointed out b .....

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