TMI Blog2015 (8) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... , the revenue is entrusted with the levy and collection of tax in accordance with law. If due to an erroneous order of the Assessing Officer, the revenue is deprived of tax lawfully payable by an assessee, it would certainly be prejudicial to the interests of the revenue. The CIT had rightly invoked revisional power under Section 263 of the Act. The Tribunal while setting aside the revisional order passed by CIT has dealt with the scope of Section 263 of the Act in general without examining the details which had been examined by the CIT. Learned counsel for the respondent was unable to displace the discussion made by the CIT in the order passed under Section 263 of the Act. The Tribunal was, thus, in error in negating the order of CIT passed under Section 263 of the Act. - Decided in favour of revenue. - ITA No. 285 of 2009 (O&M) - - - Dated:- 31-7-2013 - MR. AJAY KUMAR MITTAL AND MR. JASPAL SINGH, JJ. Mr. Rajesh Katoch, Advocate for the appellant Mr. Rajiv Sharma, Advocate for Mr. S.K. Mukhi, Advocate for the respondent JUDGEMENT AJAY KUMAR MITTAL, J. 1. This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt only by making an addition of ₹ 98,500/- on account of inadmissible and unvouched expenses debited to profit and loss account for personal use. According to the learned counsel, the CIT while passing the revisional order under Section 263 of the Act after noticing and examining the assessment record had elaborately discussed the assessment order and held it to be erroneous and pre-judicial to the interest of the revenue. He relied upon the following findings of the CIT:- 8.2.2. On query it has been affirmed by the Income Tax Officer III (I), Ludhiana vide his office letter No. ITO/WIII( 1)/Ldh./nil dated 24.03.2008 that there was no other cover in respect of the assessee. In view of these facts it is clearly made out that at assessment stage AO has failed to apply his mind and compute total income in accordance with the provisions of the Income Tax Act, 1961 since detail of contracts/work done has not been filed before him, details of expenses and their genuineness has not been adjudged by the AO, source of various credits in the capital account and bank accounts have not been examined by the AO. 4. It was urged that the Tribunal without considering the specific po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue -- recourse cannot be had to Section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing 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. 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 confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy Co. Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material to justify the Commissioner s finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue. 13. It is also trite that there is a fine though subtle distinction between lack of inquiry and inadequate inquiry . It is only in cases of lack of inquiry that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. x x x x 10. Under Section 263 of the Act, the Commissioner is empowered to exercise jurisdiction where he is satisfied that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The object of the aforesaid provision is to correct an order passed by the Assessing Officer which is erroneous and prejudicial to the interests of the revenue as the department ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils in this regard to decide whether the same is a revenue or capital expenses or not. v) Assessee has debited an amount of ₹ 23,30,000/- on account of sub contract works. No reasonableness of such expenses has been investigated by the AO. 2. This is a case of a contractor having gross receipts of ₹ 5.36 crores. No detailed questionnaire has been issued. Only few questions have been asked vide order sheet entry dated 10.12.2007. On filing of reply on 13.12.2007, AO has finalized the assessment. As per his reply the assessee has filed various details i.e. copies of sundry creditors, debtors etc. but no such details are placed on record. The discrepancies in the capital accounts were also not scrutinized. The CIT has elaborately discussed the manner in which the Assessing Officer had passed the assessment order in a slip-shod manner without holding proper enquiry. It was under these circumstances that the CIT exercised revisional jurisdiction under Section 263 of the Act. 12. The Madhya Pradesh High Court in Deepak Kumar Garg's case (supra) examining the scope of Section 263 of the Act under similar circumstances had observed as under:- After hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order on merit. This adequately safeguards the interest of the assessee and would cause no prejudice. It seems that Tribunal was carried away by the first part of the order of CIT as a result the later part of the order escaped from the notice of the Tribunal and the Tribunal branded the order of the CIT as based upon probabilities, surmises and conjectures. 13. From the above, it clearly emerges that the Assessing Officer had failed to apply his mind to the case in all perspective and the order passed by him was erroneous. He had accepted the returned income by making an addition of ₹ 98,500/- in the absence of verification of the accounts, examining supporting material and without making any enquiry. The present is a case of lack of enquiry made by the Assessing Officer as has been recorded by the CIT in detail in his order passed under Section 263 of the Act. The irresistible conclusion on these facts would be that the assessment order passed by the Income Tax Officer was erroneous. According to the scheme of the Act, the revenue is entrusted with the levy and collection of tax in accordance with law. If due to an erroneous order of the Assessing Officer, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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