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2016 (3) TMI 645 - ITAT CHENNAI

2016 (3) TMI 645 - ITAT CHENNAI - TMI - Revision u/s 263 - Held that:- There is no discussion of whatsoever in his assessment order. He accepted the return of income of ₹ 9,49,940/- as income determined by the assessee. We cannot say what enquiry the AO has made to accept the return of income as true and correct. There are no details what kind of enquiry AO has made, how he has formed the opinion to accept the return of income as filed by the assessee. Then, the CIT empowered to initiate t .....

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ication of mind by the AO. The Ld. CIT is justified in invoking the jurisdiction u/s.263 of the Act. Further, the CIT has not formed any opinion and he has cancelled the order of AO by directing to redo the assessment afresh after giving assessee a reasonable opportunity of being heard. Being so, we are of the opinion that the Ld. CIT is justified in invoking the jurisdiction u/s.263 of the Act. Since we have confirmed the invoking of jurisdiction u/s.263 of the Act, there is no finding by CIT o .....

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filed by the Assessee is directed against the order of the Learned Commissioner of Income Tax-I, Madurai dated 30.03.2015 pertaining to the assessment year 2010-11. The assessee also filed a Stay Petition (S.P) seeking stay of operation of the order of the Commissioner of Income Tax, Madurai passed u/s.263 of the Act. 2. The brief facts of the case are that the assessee company is engaged in the business of transportation and filed its return of income for assessment year 2010-11 on 18.12.2010. .....

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rovisions of the section 263 of the Act. The CIT observed that as the assessee has not complied with the provisions of the section 194C, then Sec.40(a)(ia) will be attracted and he directed the AO to invoking the provisions of the section 194C of the Act. Further, he observed that the AO had not made any verification or investigation relating to TDS on payment of lorry freight charges aggregating to ₹ 70,76,83,553/-. As these aspects were not verified while completing the assessment , the .....

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The A.R submitted that the original Assessment was completed under section 143 (3) dated 30/12/2012 accepting the Total Income returned and the CIT assumed jurisdiction under section 263 and issued show cause notice dated 1.3.2015 that no TDS was made on ₹ 70,76,83,553/ towards Lorry freight charges and no disallowance was made under section 40 (a) (ia) in the assessment made under section 143 (3). The Authorised Representative of assessee submitted that TDS was deducted on a sum of ₹ .....

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g to the A.R., no particulars were prescribed under section 194C (7) and hence CIT is not correct in assuming jurisdiction on a stated default which is not there and the CIT did not refer to default under section 194 C (7) in the show cause notice and cannot therefore pass any order thereon in proceedings under section 263. According to him, the CIT has also not identified what are prescribed under section 194 C (7) and how Assessee is in default. According to A.R., it is on record that, the Ass .....

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. 4. We have carefully considered the rival submissions in the light of material placed before us and also gone through all the judgements cited by the parties before us. First we take up the legal issue with reference to the jurisdiction of invoking the provisions of section 263 of the Act by the learned CIT. The scheme of the IT Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to erroneous order of the assessing offic .....

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ever defined at page 562 in Black's Law Dictionary (seventh Edition) thus'; 'erroneous, adj. Involving error, deviating from the law'. The word 'error' has been defined at the same page in the same dictionary thus: 'error No. 1 : A psychological state that does not conform to Objective 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 d .....

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gent, an error may lay in the judgement, or in the conduct, but a fault lies in the will or intention." 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 of misconception of the nature of a case. An error may be from the absence of knowledge, .....

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ination. It is extended in medical science to matters of sensation, whether there is no corresponding cause to produce it. In its ordinary use it denotes an unaccountable error in judgement or fact, especially in one remarkable otherwise for accurate information and right decision. It is exceptional error or mistake in those otherwise not likely to be deceived." 5. In order to ascertain whether an order sought to be revised under Section 263 is erroneous, it should be seen whether it suffer .....

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revenue. 6. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard .....

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h is apparently in order but calls for further enquiry. He must discharge both the 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. I .....

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es of scrutiny assessments. He should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected .....

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ries ought to have been made and the genuineness of the claim ought to have been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo-typed order which simply accepts what the assessee has stated in his return .....

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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 the orders passed without applying the principles of natural justice or without application of mind. In our humble view, arbitrariness in decision-making would always need corre .....

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ariness 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 the 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 insta .....

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ving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court that "Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an ad .....

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efore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consid .....

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It is settled law that while making assessment on assessee, the ITO 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 the learned Counsel for the assessee also points to the same direction. They have held that orders, which are subversive of the administration of revenue, .....

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f the principles of natural justice which require that the authority must indicate the reasons for an adverse order. We find no reason why the same view should not be taken when an order is against the interests of the revenue. As a matter of fact such orders are prejudicial to the interests of both the parties, because even the assessee is deprived of the benefit of a positive finding in his favour, though he may have sufficiently established his case. 9. In view of the foregoing, it can safely .....

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(iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he fails to make the requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the case 10. Coming to the facts of the present case, the order of the AO is very cryptic. There is no discussion of whatsoever in his assessment order. He accepted the return of income of ₹ 9,49,940/- as income determined by .....

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