TMI Blog2015 (11) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... ole hence the order was no more amenable to revisional jurisdiction of the Commissioner of Income- tax in view of Explanation (c) of section 263 of the Act and to that extent we are not agreeing with the order of the Commissioner of Income-tax passed under section 263 of the Act. It is mentioned in Form 10 that amount would be accumulated till the previous year ending March 31, 2008. The assessee was required to utilise the accumulated amount during such period. In case of non-application of the said accumulated sum for the purpose specified in Form 10, section 11(3) gets triggered and it would be taxed in the next year in which such period expired. But in this case, the Assessing Officer has failed to examine this aspect. There was no enquiry with regard to this issue. The order of the Assessing Officer is "erroneous" and "prejudicial to the interests of the Revenue" on the reason that there is wrong assumption of facts. We are inclined to agree with the findings of the Commissioner of Income-tax that the Assessing Officer is required to examine this issue afresh and gave a finding on this. Accordingly, to this extent, we confirm the order of the Commissioner of Income-tax. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of the hon'ble High Court in the assessee's own case in Director of Income-tax (Exemptions) v. Willington Charitable Trust [2011] 330 ITR 24 (Mad), wherein it was observed that section 11(4A) of the Act does not exclude section 11(4). The exemption under section 11(4A) would be available only when the business was incidental to the attainment of the object of the trust. Therefore, the matter is to be remitted to the Assessing Officer to decide as to whether the said business income is used for the object, in accordance with law. 5. He also submitted that the Assessing Officer has adopted one course of possible view under law when two views are possible. Learned counsel submitted that the Commissioner of Income-tax is not right when he held that the assessment order is both erroneous and prejudicial to the interests of the Revenue . He relied on the various judgments for this proposition especially in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). He submitted that merely because the assessee earned profits, it would not be a deciding factor to conclude that the assessee was engaged in trade, commerce or business. According to him, before denying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that does not conform to objec tive reality ; a brief that what is false is true or that what is true is false'. At page 649/650 in P. Ramanatha Aiyer's Law Lexicon Reprint 2002, the word 'error' has been defined to mean- 'Error : A mistake in judgment or deviation from the truth in matters of fact, and from the law in matters of judgment 'error' is a fault in a judgment, or in the process or proceeding to judgment or in the execution upon the same, in a Court of Record ; which in the Civil Law is called a nullitie (Terms de la Ley). Something incorrectly done through ignorance or inadvertence section 99 Civil Procedure Code and section 215 Criminal Procedure Code. Error, fault, error respects the act ; fault respect the agent, an error may lay in the judgment, or in the conduct, but a fault lies in the will or intention. 8. At page 650 of the aforesaid Law Lexicon, 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 or misconception ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but calls for further enquiry. He must discharge both roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The scheme of assessment has undergone radical changes in recent years. It deserves to be noted that the present assessment was made under section 143(3) of the Income-tax Act. In other words, the Assessing Officer was statutorily required to make the assessment under section 143(3) after scrutiny and not in a summary manner as contemplated by sub-section (1) of section 143. Bulk of the returns filed by the assessees across the country is accepted 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 shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice or without application of mind. 12. In our humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under section 264 or through appeals and other means of judicial review, the prejudice caused to the State exchequer can also be corrected by invoking revisional jurisdiction of the Commissioner under section 263. Arbitrariness in decision-making causing prejudice to either party cannot therefore be allowed to stand and stare at the legal system. It is difficult to countenance such arbitrariness in the actions of the Assessing Officer. It is the duty of the Assessing Officer to adequately protect the interest of both parties, namely, the assessee as well as the 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 Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier taken by the hon'ble Supreme Court in Siemens Engg. and Mfg. Co. Ltd. v. Union of India AIR 1976 SC 1785. It is settled law that while making assessment on assessee, the Income-tax Officer acts in a quasi-judicial capacity. An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under sections 263 and 264. Therefore, a reasoned order on a substantial issue is legally necessary. The judgments on which reliance was placed by learned counsel for the assessee also points to the same direction. They have held that orders, which are subversive of the administration of the Revenue, must be regarded as erroneous and prejudicial to the interests of the Revenue. If the Assessing Officers are allowed to make assessments in an arbitrary manner, as has been done in the case before us, the administration of the Revenue is bound to suffer. If without discussing the nature of the transaction and materials on record, the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer to pass a fresh order considering these issues raised by the Commissioner of Income-tax. In our view, the assessee should have no grievance in the action of the learned Commissioner in exercising the jurisdiction under section 263 of the Income-tax Act with reference to this issue. 16. It was however contended by learned counsel that the Assessing Officer had taken a possible view in accepting the return of the assessee with reference to the issue raised by the Commissioner of Income-tax and hence, the Commissioner was not justified in assuming the revisional jurisdiction under section 263. We have given our thoughtful consideration to the aforesaid submissions. As already stated earlier, an order becomes erroneous because inquiries, which ought to have been made on the facts of the case, were not made and not because there is anything wrong with the order if all the facts stated or the claims made in the return are assumed to be correct. Thus, it is mere failure on the part 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 interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interests of the Revenue as there is no revenue loss to the Department. Moreso, the Commissioner of Income-tax in his order commenting on the order of the Commissioner of Income-tax (Appeals) for the same assessment year stating the Commissioner of Income-tax (Appeals) is not justified in granting exemption under section 11 of the Act. In our opinion, the Commissioner of Income-tax (Administration) cannot sit on the order of the Commissioner of Income-tax (Appeals) to decide the same issue differently. If the Department is having any grievance it would have filed an appeal before the higher forum. It is not appropriate to the Commissioner of Income-tax (Administration) to comment on the order of the Commissioner of Income-tax (Appeals). In our opinion, the issue relating to treating the income from kalyanamandapams, auditoriums, working hostel is subject-matter of appeal by the assessee before the Commissioner of Income-tax (Appeals). The said issue in assessment order merged with the order of the Commissioner of Income-tax (Appeals) as a whole hence the order was no more amenable to revisional jurisdiction of the Commissioner of Income- tax in view of Explanation (c) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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