TMI Blog2016 (5) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... er is quashed. The appeal of the assessee is allowed. - ITA No. 210/Mum/2013 - - - Dated:- 19-5-2016 - Joginder Singh (Judicial Member) And Rajendra (Accountant Member) For the Assessee : R. S. Samria For the Revenue : M. Dayasagar ORDER Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 10/07/2012, of the Ld. Commissioner of Income Tax invoking revisional jurisdiction u/s 263 of the Income Tax Act, 1961 (hereinafter the Act). 2. However, there is delay of 252 days in filing the appeal before this Tribunal against the impugned order. The assessee has filed application for condonation of delay along with an affidavit in support of the application. The crux of argument advanced on behalf of the assessee is that pursuant to the decision from Hon ble Madras High Court, in identical matter in the own case of the assessee on the issue of Employee Stock Option Plan (hereinafter ESOP) confirming the order of the Tribunal in SSI Ltd. vs DCIT (2004) 85 TTJ (Chennai) 1049 holding that the assessee has to follow SEBI directions and by following such directions, the assessee claimed the ascertained amount as liability for deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, which is bona-fide one, and not due to negligence of the assessee, the delay needs to condoned in such cases. The expression sufficient cause is adequately elastic to enable the courts to apply law in a meaningful manner, which sub-serves the end of justice- that being the life purpose of the existence of the institution of the courts. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. This means that there should be no malafide or dilatory tactics. Sufficient cause should receive liberal construction to advance substantial justice. The Hon ble Apex Court in Collector, Land Acquisition vs Mst. Katiji Ors. (167 ITR 471) observed as under:- 3. The legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits. The expression sufficient cause employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, in the absence of detailed assessment order, prejudice has been caused to the Revenue. 3.2. We have considered the rival submissions and perused the material available on record. We find that in the assessment order (page-40 41 of the paper book), the facts have been mentioned that the assessee company is engaged in the business of mobile value, added services under the brand name Mauj, declared loss of ₹ 8,37,31,010/- in its return filed on 31/10/2007, which was processed u/s 143(3) on 27/02/2009. The case of the assessee was selected for scrutiny under CASS, therefore, notice u/s 143(2) of the Act was served upon the assessee. Thereafter notice u/s 142(1) along with questionnaire was issued to the assessee to which the assessee furnished the requisite details along with physical copy of e-filed return and the case of discussed, as is evident from page-1 of the assessment order. In para -3, the assessee has made discussion with respect to disallowance out of staff welfare expenses and at page-2(page-41 of the paper book), there is mention on examination of details filed by the assessee meaning thereby, the facts were duly examined by the Assessing Officer. Lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the assessee, he could not come to any conclusion that the expenditure was not revenue expenditure but expenditure of capital nature. He referred the matter back to the Income-tax Officer to examine the same and to decide afresh. The Tribunal did not approve such action of the Commissioner. Therefore, the question that arises for consideration is whether the Commissioner without arriving at a finding that the order in question was erroneous can set aside the assessment in exercise of power under section 263 of the Act. It may be expedient at this stage to set out section 263 of the Act. Section 263, so far as relevant, runs as follows : 263. Revision of orders prejudicial to Revenue. - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions erroneous , erroneous assessment and erroneous judgment have been defined in Black's Law Dictionary. According to the definition, erroneous means involving error; deviating from the law . Erroneous assessment refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, erroneous judgment means one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles . 12. From the aforesaid definitions i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t), at page 881, the words 'prejudicial to the interests of the Revenue' have not been defined, but it must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. It can mean nothing else . The aforesaid observations were also applied by the Gujarat High Court in Addl. CIT v. Mukur Corporation [1978] 111 ITR 312. We are of the opinion that the aforesaid interpretation given by the Calcutta High Court to the expression prejudicial to the interests of the Revenue is the correct interpretation. 14. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owers of the Commissioner set out above. The Incometax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) order dated 13/05/2014, wherein, various decisions like Mudhit Madanlal Gupta vs ACIT (51 DTR 217), DCIT vs Magapatta Township Development and Construction Company (141 ITD 682)(Pune), Rahul Construction Company vs ITO (ITA No.1250/Pn/2009), CIT vs Vandana Properties (2012) 353 ITR 36 (Bom.) and various decisions were considered and finally decided in favour of the assessee. 3.6. Hon ble Delhi High Court in CIT vs Sunbeam Auto Ltd. (2011) 332 ITR 167 order dated 11/09/2009, after considering various decisions, made an elaborate discussion and decided in favour of the assessee by holding that there is distinction between lack of enquiry and inadequate enquiry and hold that if there is an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order us/263, merely because he has a different opinion in the matter. This judicial pronouncement squarely defends the case of the assessee. While coming to this conclusion, the Hon ble Court duly considered the following decision a. Asstt. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 (2007) 291 ITR 500 (SC) b. CIT vs. Mysore Spun Concrete Pipe (P) Ltd. (1991) 97 CTR (Kar) 117 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any appeal filed on or before or after the 1st day of June, 1988, the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. [Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] (2) No order shall be made under sub-section (1) after the expiry of two years from the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous that the section will be attracted . The Supreme Court held that an incorrect as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiries in matters or orders which are already concluded. 3.10. The ratio laid down by the Ahmadabad Bench of the Tribunal in the case of Aditya medisales vs addl. CIT (ITA No.1334/Ahd/2015) order dated 16/02/2016 further supports the case of the assessee, wherein, the revisional jurisdiction invoked u/s 263 of the Act was quashed. The relevant portion from the aforesaid order is reproduced hereunder for ready reference:- 7. We have noted that as on the time of passing the impugned revision order, the matter regarding disallowance under section 14 A was pending for I . T.A . No. 1334/Ahd/15 Assessment Year : 2010 -1 1 consideration before the CIT(A). The assessee had filed the appeal before the CIT(A) on 22nd March 2013 and even the written submissions were filed on 14th October 2013. Learned CIT(A) was thus in seisin of the question as to whether the disallowance under section 14A was correctly made, and let us not forget that the CIT(A) had all the powers, co terminus with the powers of the Assessing Officer, including the powers of enhancement. As to whether the learned Commissioner could have exercised his revision powers under section 263 at this point of time, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). The view adopted by the learned Assessing Officer was after due examination of the matter and a considered view after taking into account all the relevant factor and even if a different view, on the same set of facts, was possible, the possibility of another view in favour of the assessee did not render the assessment erroneous and prejudicial to the interest of revenue so as to trigger revision under section 263. In any event, even on merits, the stand of the Commissioner was incorrect and unsustainable in law. For all these reasons, we are not inclined to uphold the impugned order. Accordingly, the revision order stands quashed. 3.11. To sum up the issue, admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase prejudicial to the interest of the Revenue u/s. 263 of the Act, has to be read in conjunction with the expression erroneous order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue, meaning thereby, prejudice must be prejudice to the Revenue administration ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
