TMI Blog2011 (10) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... d in initiating proceedings U/s. 263 when the assessment was completed after due enquiry and in accordance with law. 3. For that the Ld. C.I.T erred in setting aside the assessment when the order passed by the AO was neither erroneous nor prejudicial to the interest of revenue and both the conditions to invoke sec. 263 were not present. 4. For that the Ld. C.I.T erred in holding that receipt of share capital was not properly investigated when the AO duly examined the capital and the Ld. CIT cannot impose his own view of the manner in which enquiry was to be conducted. 5. For that the Ld. C.I.T erred in holding that the assessee was not entitled to the credit u/s. 88E while determining tax liability U/s. 115JB when the same was correctly allowed by the AO in accordance with law and in any case two views were always possible with regard to the allowability thereof. 6. For that the Ld. C.I.T erred in invoking provisions of sec. 263 for payment of the staff salary when the salary paid was quite fair and reasonable considering the volume of the business and even otherwise the same was duly certified by the Auditor to have been incurred for business purposes and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration. 3. Expenditure on account of staff salary, bonus and allowances has been increased to ₹ 2,16,000/- as on 31/03/2006 from ₹ 1,08,000/- as at 31/03/2005. Further, it was noted that you have paid ₹ 2 lakhs or more for purchase of Mutual Funds from - (i) Sundaram BNP Paribas Mutual Fund; and (ii) ICICI Prudential Mutual Fund. The CIT, Kol-II noted that Assessing Officer has not verified the source of funds in respect of the abovementioned investment during the course of assessment proceedings and inaction on the part of Assessing Officer rendered the impugned assessment order erroneous and prejudicial to the interest of revenue. In respect to first show cause notice, the assessee replied that the assessee is eligible for rebate or deduction of tax u/s. 88E of the Act even though income is computed under provisions of MAT u/s. 115JB of the Act. He stated that section 88E of the Act provides that the assessee shall be entitled to deduction from the amount of income tax on such income which arises from profits and gains from business or profession on account of security transaction. He stated that section 88E of the Act simply allows credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer to redo the same after providing reasonable opportunity of being heard to the assessee. 5. We find that the issue of rebate/deduction u/s. 88E of the Act in respect to credit for Security Transaction Tax while computing income being MAT provisions of section 115JB of the Act, the issue is squarely covered in favour of assessee and against revenue by the decision of Bangalore Bench in the case of M/s. Horizon Capital Limited (supra), wherein the Tribunal vide para 6 has held as under: 6. Having heard both the parties and having considered the rival contentions, we find that the only dispute is whether the rebate of STT paid by the assessee is allowable from the income tax computed against the total income computed under section 115JB of the Income Tax Act, 1961. The term total income has been defined under the Income Tax Act, 1961 as the total amount of income referred to in section 5, computed in the manner laid down in this Act. Section 5 of the Income Tax Act, 1961 defines the scope of the total income of a resident or a non-resident person. The total income of the assessee has to be computed under the regular provisions of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 263 of the Act. 6. In respect to increase in share capital during the relevant year, the assessee company claimed that it has furnished complete names, addresses, cheque nos. name of bank of the prospective shareholders to prove the identity of shareholders as well as genuineness of transactions entered into. We find from paper book filed before us that the Assessing Officer has issued verification notices u/s. 133(6) of the Act to (i) Bothra Finvest Pvt. Ltd., (ii) B. S. Promoters Pvt. Ltd., (iii) Zipper Mercantiles Private Ltd., (iv) Midpoint Marketing Pvt. Ltd., (v) Nihar Viniyod Private Limited, and (vi) Nandan Mercantiles Pvt. Ltd. and all of them submitted information u/s. 133(6) of the Act to Assessing Officer as is evident from the letters available on record. Even the Assessing Officer in his assessment order recorded fact that Notices u/s. 133(6) of the I. T. Act, 1961, were issued to various parties for verification of share capital introduction. Replies received from them are test checked and kept on record. 7. We find that CIT has given reasoning for revision in assessment framed by Assessing Officer u/s. 143(3) that mere issue of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must further be shown that the order was prejudicial to the interests of the revenue and it is not each and every order passed by the Assessing Officer which can be revised under section 263 of the Act. A bare reading of section 263(1) makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the AO is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied with twin conditions, namely, (i) the order of the AO 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 AO 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). This view is taken by Hon ble Apex Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83, 87 (SC). Accordingly, in the present case before us, the assessment framed by AO is neither erroneous nor prejudicial to the interest of revenue and this is clearly demonstrated by facts discussed by AO in his order and documents produced before us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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