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2015 (9) TMI 505 - KERALA HIGH COURT

2015 (9) TMI 505 - KERALA HIGH COURT - TMI - Revision u/s 263 - whether Tribunal holding that the order of the CIT(A) under section 263 satisfies the precondition of prejudice to the revenue is proper and correct? - Held that:- Commissioner held that the Assessing Officer has passed Annexure A order without any application of mind and without conducting any enquiry and also without even calling for or verifying the records. The Commissioner has also found that hire charges were paid but no tax h .....

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merit interference. - Decided in favour of revenue. - ITA. No. 85 of 2014 - Dated:- 12-8-2015 - Antony Dominic And Shaji P. Chaly, JJ. For the Petitioner : Sri M Pathrose Matthai (SR.), Smt Mariam Mathai And Sri Saji Varghese For the Respondent : Sri P K R Menon, Sr. Counsel, GOI(Taxes) And Sri Jose Joseph, SC, Adv. JUDGMENT Antony Dominic, J. 1. This appeal is filed by the assessee, impugning the order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA.No.342/Coch/2011. 2. Briefly .....

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s involved. Accordingly, fresh assessment was completed by Annexure C order, where the total income was assessed to be 'nil'. By the impugned order, appeal field against Annexure B order as ITA.342/11 was dismissed by the Tribunal. We are told that the appeal filed by the assessee against Annexure C order of assessment is pending consideration of the appellate authority. 3. In this appeal filed under section 260A of the IT Act, the main question of law framed is whether, on the facts and .....

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that to invoke the power under section 263 of the IT Act, the twin conditions, that the order of the Assessing Officer being erroneous and prejudicial to the interests of the Revenue, should be established. According to the learned counsel, in this case, this statutory requirement was not satisfied and therefore, the order passed by the Commissioner, as confirmed by the Tribunal, calls for interference. 6. On the other hand, learned senior standing counsel for the Revenue invited our attention .....

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efore, according to him, the order of the Commissioner as confirmed by the Tribunal did not merit interference. 7. We have considered the submissions made by both sides. Section 263(1) reads thus: "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 assesse .....

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on makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-Tax Officer is erroneous in so far as it is prejudicial 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 e .....

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neous. 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 and Co. v. P.Jain [1957] 31 ITR 872, the High Court of Karnataka in CIT v. T.Narayana Pai [1975] 98 ITR 42 .....

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e 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, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue administration." In our view, this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in .....

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e 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 are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court th .....

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recorded the finding that the Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant-company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the ab .....

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Court in the judgments referred to above, we shall now turn to Annexure B order passed by the Commissioner. In this order, the Commissioner has noticed thus: "Later examination of records showed that the assessee had debited ₹ 710.19 lakhs as extra ordinary items being the Pole Rental Charges payable to KSEB for the period from 2002-03 to 31.3.2005. This was allowed by the assessing officer while determining the loss. Further it was noticed that Bandwidth charges of ₹ 404.09 lak .....

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