TMI Blog2011 (9) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to the rate of rent being linked to the quantity of stock and not fixed monthly rent. Further the assessee is to keep the godown in its perfect condition as the said premises are being used for storing perishable items, which require an extra care The Hon'ble Supreme Court in CIT VS. Ralson Industries Ltd. [2007 (1) TMI 184 - SUPREME Court] have laid down the proposition that the initiation by the CIT of proceedings for revision u/s 263 of the Act cannot be held to have become bad only because an order for rectification was passed by the Assessing Officer u/s 154 of the Act. The learned D.R. for the Revenue had placed reliance on the above said proposition laid down by the Apex Court. However, we find that the learned A.R. for the assessee had referred to the proceedings of rectification u/s 154 of the Act under which reply was given by the assessee which in turn becomes record for the purpose of explanation to section 263 of the Act. In view of explanation filed by the assessee in reply to the notice, we find merit in the alternate plea raised by the assessee that in view of the information being available on record, the CIT could not exercise the jurisdiction u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrict Moga. The assessee claims to have also filed copy of agreement executed between the assessee and M/s Punjab State Warehousing Corporation, which are enclosed at pages 46 to 50 of the Paper Book. 6. The assessment in the case was completed u/s 143(3) of the Act vide order dated 21.4.2008 after making an addition of ₹ 50,000/-. The copy of the assessment order is available on record. The assessee had declared similar income in the earlier year i.e. assessment year 2005-06 and the assessment was completed u/s 143(3) of the Act and copy of the assessment order is placed at page 38 of the Paper Book. Thereafter notice u/s 154 of the Act was issued by the Assessing Officer to the assessee , copy of which is placed at pages 53 and 54 of the Paper Book. As per the audit objection received in the case of assessee it was proposed that the income received by the assessee be assessed under the head income from house property . The reply of the assessee dated 28.10.2009 is placed at pages 55 to 59 of the Paper Book in which it was pointed out that the assessee was not receiving constant income from rent but was receiving warehousing charges which in turn were linked to the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT thus held the order of the Assessing Officer to be erroneous. Because of under-assessment of income, the order was held to be prejudicial to the interest of the Revenue. The Assessing Officer was directed to recompute the income after consideration of the deduction u/s 23 and 24 of the Act . 10.The assessee is in appeal against the aforesaid directions of the CIT. The learned A.R. for the assessee after taking us through the factual aspects of the issue pointed out that during the course of assessment proceedings the issue was elaborately considered by the Assessing Officer and detailed questionnaire was issued and was replied to. It was also pointed out that even the assessment relating to present year i.e. assessment year 2005-06 was completed u/s 143(3) of the Act and the nature of business of the assessee was enquired into. As per the learned A.R. for the assessee the said order of the Assessing Officer had been based on the basis of detailed enquiries and there was application of mind to the facts of the case and the decision was taken as per law, there is no merit in the exercise of jurisdiction by the CIT. The learned A.R. for the assessee further pointed out that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.The learned A.R. for the assessee in rejoinder pointed out that every loss of revenue was not prejudicial to the interest of Revenue and there was no merit in invoking of jurisdiction by the CIT. The learned A.R. for the assessee also pointed out that the CIT has not commented upon the aspect of receipt of subsidy in the show cause notice and hence the CIT could not travel beyond the jurisdiction invoked by way of show cause notice. 13.We have heard the rival contentions and perused the record. The CIT under section 263 of the Act is empowered to revise such order/s passed by the Assessing Officer which are erroneous and prejudicial to the interest of Revenue. The twin conditions of the order being erroneous and prejudicial to the interest of Revenue are to be satisfied simultaneously for the CIT to exercise his powers u/s 263 of the Act. If either of the conditions are not satisfied, then the CIT cannot take recourse to section 263 of the Act. 14.The Hon'ble Supreme Court in Malabar Industries Company Ltd v CIT [243 ITR 83 (SC)] held as under:- There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 15.Further, the Hon'ble Supreme Court in Max India Ltd [295 ITR 282 (SC)] upheld the judgment of the Hon'ble Punjab Haryana High Court in the said case, wherein it was held that if the view expressed by the Assessing Officer was a possible view, the CIT would have no jurisdiction to interfere by with such a view exercising the power u/s 263 of the Act. The Hon'ble Supreme Court in the said case further clarified that where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, the order of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of Revenue, unless the view taken by the Assessing Officer was unsustainable. 16. The Hon'ble Delhi High Court in the CIT Vs. Honda Siel Power Products Ltd. reported in [(2010) 41 DTR (Del) 353] had exercised his jurisdiction u/s 263 of the Act in respect of deduction claimed u/s 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer had not applied his mind to the said provisions. As pointed out in Kelvinator of India (supra), when a regular assessment is made under Section 143(3), a presumption can be raised that the order has been passed upon an application of mind. No doubt, this presumption is rebuttable, but there must be some material to indicate that the Assessing Officer had not applied his mind 17.The Hon'ble Court further held as under:- 22. From the decisions cited by the learned counsel for the revenue, it is apparent that failure to make an enquiry on the part of the Assessing Officer would be a ground for invoking the powers under Section 263. The Supreme Court in Malabar Industrial Company Ltd (supra) also noted that the cases which fell in the category of non-application of the principles of natural justice or non-application of mind would also satisfy the requirement of the order being erroneous and would, therefore, be amenable to correction under the revisional jurisdiction of Section 263 of the said Act. In the case of Gee Vee Enterprises [99 ITR 375 (Del), the Assessing Officer‟s order was held to be erroneous because the relevant enquiry was not made. Again, in Mala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also true that the validity of an order under Section 263 has to be tested with regard to the position of law as it exists on the date on which such an order is made by the Commissioner of Income-tax. From the narration of facts in the Tribunals order, it is clear that on the date when the Commissioner of Income-tax passed his orders under Section 263, the view taken by the Assessing Officer was in consonance with the views taken by several benches of the Income-tax Appellate Tribunal. Therefore, the conclusion of the Tribunal that the Commissioner of Income-tax could not have invoked his jurisdiction under Section 263 of the said Act was correct. As a result, we answer the question against the revenue and in favour of the assessee by holding that the Income-tax Appellate Tribunal was correct in law in cancelling the order passed by the Commissioner of Income-tax under Section 263 and in restoring the order of the Assessing Officer by holding that the Assessing Officer had taken a possible view at the relevant point of time. The appeals are accordingly dismissed 18.In the facts of the present case the assessment in this case was completed u/s 143(3) of the Act. During the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the order passed by the Assessing Officer in the present case was both the erroneous and prejudicial to the interest of Revenue. The Assessing Officer having taken plausible view in the matter which in turn is supported by the assessment order passed for assessment year 2005-06, we cancel the invoking of jurisdiction u/s 263 of the Act by the CIT and also cancel the order passed u/s 263 of the Act. 22.Further the Hon'ble Punjab Haryana High Court in CIT Vs. Sohana Woolllent Mills (supra) had laid down the proposition that mere audit objection and merely because of different view could be taken, were not enough to show that the order of the Assessing Officer was erroneous and prejudicial to the interest of Revenue . The Tribunal in the case of Shri Rajiv Nanchahal Vs. ITO (supra) in respect of what constitute records of any proceeding as defined by explanation to section 263 of the Act had held as under : 17.Under the provisions of Section 263 of the Act, the CIT is to form his opinion whether order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue, after calling for and examining the record of any proceedings under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy from NABARD in the warehousing activities carried out. Admittedly, no subsidy is receivable where the assessee has rented out its premises and the income is assessable as income from property. Only in case as the assessee is engaged in the business activities, there is a question of liability of subsidy of carrying out such prescribed business activities. Further we find that warehousing charges received by the assessee were not constant but were variable depending upon the quantity of stock stored in its premises. Even the lease agreement referred to the rate of rent being linked to the quantity of stock and not fixed monthly rent. Further the assessee is to keep the godown in its perfect condition as the said premises are being used for storing perishable items, which require an extra care 24.The Hon'ble Supreme Court in CIT VS. Ralson Industries Ltd. [(288 ITR 322 (SC)}(supra) have laid down the proposition that the initiation by the CIT of proceedings for revision u/s 263 of the Act cannot be held to have become bad only because an order for rectification was passed by the Assessing Officer u/s 154 of the Act. The learned D.R. for the Revenue had placed reliance on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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