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2016 (7) TMI 684 - ITAT CHENNAI

2016 (7) TMI 684 - ITAT CHENNAI - TMI - Revision u/s 263 - CIT(A) directing the AO to consider the fair market value of the properties as on 1.4.1981 at ₹ 40 per sq.ft. instead of ₹ 300/- as claimed by the assessee - Held that:- Assessing Officer cannot take a view either against or in favour of the assessee without making proper enquiries and without proper examination of the claim made by the assessee in the light of applicable law. In the present case, the Assessing Officer consid .....

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terial on record, in our opinion, it cannot be said that exercise of jurisdiction by the CIT u/s.263 of the Act, is bad in law. Accordingly, we uphold the order of the CIT to the extent that the Assessing Officer is not justified in considering the FMV as on 1.4.1981 at ₹ 300 per sq.ft.. However, the CIT cannot determine the FMV of the property, himself. In the present case, the CIT, himself fixed the FMV of the properties as on 1.4.1981 at ₹ 40 per sq.ft., which is not correct. Acco .....

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RU RL REDDY, JUDICIAL MEMBER For The Appellants by : Shri T. Vasudevan, Advocate For The Respondent by : Shri A.V.Sreekanth, JCIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER These appeals by different assessees are directed against different orders of the Commissioner of Income-tax passed under sec.263 of the I.T. Act, 1961 for the assessment year 2010-11. 2. The crux of the ground raised by the assessees is that the Commissioner of Income-tax erred in directing the AO to consider the fair mark .....

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hority. According to the ld. AR, the exercise of jurisdiction is bad in law and the order of the CIT to be quashed in both the cases. 4. On the other hand, the ld. DR submitted that there is no application of mind by the AO rather than wrongly accepted the fair market value of the property at ₹ 300/- per sq.ft. without any basis and it is only estimation, which cannot be sustained. Further, the ld. DR submitted that as per the letter dated 11.2.2013 by the Joint Sub-Registrar, District Reg .....

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ial 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 officer, the Revenue is losing tax lawfully payable by a person, it will certainly .....

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tion) 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 defined to mean- Error: A mistaken judgement or deviation from the truth in matters of fact, and from the law in m .....

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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, a mistake is from insufficient or false observation. Blunder is a practical error of a peculiarly gross or awkward kind, committed through glaring .....

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enotes 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. 7. In order to ascertain whether an order sought to be revised under Section 263 is erroneous, it should be seen whether it suffers from any of the aforesaid forms of error. In our view, an order sought to be revised under Section 263 would be erroneous and fall in the aforesaid cat .....

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r. 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 an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the .....

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ere 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. 8.1 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 .....

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n 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 to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated a .....

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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 and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. In taking the aforesaid .....

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hat 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 correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provi .....

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ifficult 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 instance of the assessee, if the assessee is prejudiced or at the instance of the Commissioner, if the revenue is prejudiced. While making an .....

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;ble Supreme Court as follows: 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 administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording o .....

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ctions 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 consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original s .....

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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, 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, a .....

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t 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. 11. In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases .....

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he requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the case. 12. We shall now turn to the facts of the case to see whether the case before us is covered by the aforesaid principles. Perusal of the assessment order passed by the Assessing Officer does not show any application of mind on his part. He simply accepted the income declared by the assessee. This is a case where the Assessing Officer mechanically accepted what the assessee wanted h .....

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r enquiry or verification or objective consideration of the claim made by the assessee. The Assessing Officer has completely omitted to examine the issues in question from consideration and made the assessment in an arbitrary manner. His order is a completely non-speaking order. In our view, it was a fit case for the learned Commissioner to exercise his revisional jurisdiction under section 263 which he rightly exercised by cancelling the assessment order and directing the Assessing Officer to p .....

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