TMI Blog2017 (12) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... hich caused prejudiced to the revenue. The Ld. CIT (Exemption) mentioned that these facts were considered by the Assessing Officer in his order, thus ruling out non-application of mind to this issue by the A.O. Cancellation of registration granted to the under section 12AA by the Ld. CIT (Exemption) Kolkata by invoking his powers under section 12AA(3) - Held that:- Retrospectively cancellation of the registration granted to the assessee is bad in law. See case of Agra Development Authority vs CIT [2013 (8) TMI 549 - ITAT AGRA] - I.T.A. No. 663 & 76/Kol/2016 - - - Dated:- 30-11-2017 - Shri J. Sudhakar Reddy, AM And Shri S.S. Viswanethra Ravi, JM For The Assessee : Shri V.N. Purohit, FCA appearing For The Revenue : Md. Usman, CIT DR ORDER Per J. Sudhakar Reddy, AM This is an appeal filed by the revenue directed against the order of Commissioner of Income Tax (Exemptions), Kolkata dated 11.02.2016 for the assessment year 2010-11 under section 263 on the following ground. That the Commissioner of Income Tax (Exemption) has erred both in law and on the facts of the case in holding that assessment order passed on 27.03.2014 u/s. 147/143(3) by A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Engineers and Constructions Pvt. Ltd. Kolhapur had made donation in cash of ₹ 15 lakhs to the organisation in the month of September, 2009 and such donation was not found recorded in the books of account. The assessee submitted that merely because cancellation of registration under section 12AA(3) cannot be done retrospectively, it cannot be concluded that invoking of powers under section 263 of the Ld. CIT (Exemption) Kolkata is bad in law as the second ground on which the assessment was cancelled holds. 5. After hearing rival contentions, we find that registration granted to the assessee trust under section 12AA cannot be invoked retrospectively under section 12AA(3) of the Act. 6. In the case of Agra Development Authority vs CIT 141 ITD 336, it is held as follows: 402. Cancellation under section 12AA(3) Power of cancellation of registration under section 12A came to be incorporated by amendment in section 12AA(3) by the Finance Act, 2010, w.e.f. 1st June, 2010, hence cancellation of registration by CIT for assessment year 2009-10 was not in accordance with law Held The combined reading of ss. 12A and 12AA(3) makes it clear that before 1st June, 2010 regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Spectra Shares and ScripsPvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on this issue of exercise of jurisdiction u/s 263 of the Act by the Principal Commissioner of Income Tax and culled the principles laid down in the judgments as below : 24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer 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 Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue recourse cannot be had to Sec.263 (1) of the Act. It also held at pg-88 as follows: The phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y possible; and therefore, the subsequent amendment in 2005 even though retrospective will not attract the provision of Sec.263. 26. In Vikas Polymers (4 Supra), the Delhi High Court held that the power of suomotu revision exercisable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an erroneous judgment means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written differently or more elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suomotu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very item from the assessee and the assessee had furnished its explanation. Merely because the Assessing Officer in his order did not make an elaborate discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. It held that the Commissioner cannot initiate proceedings with a view to start fishing and roving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business etc., without any enquiry or evidence whatsoever . He directed the income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. The Supreme Court held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre-judicial to the interest of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indicate the results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he had jurisdiction or not and whether the income tax assessed in the assessment years which were originally passed were correct or not 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the Act can be culled out: a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. g) The power of the Commissioner under Sec.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. Now we examine the following judgements. :- DIRECTOR OF INCOME TAX vs. JY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that out of sale consideration, a sum of ₹ 1 lakh was to be received for sale of permit. If that is so, there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under s. 263. Applying the propositions of law laid down in all these case laws, to the facts of this case, we uphold the contention of the assessee that the exercise of powers by the ld. CIT u/s 263 of the Act, is bad in law. Hence, we cancel this order passed under section 263 of the Act. 11. In view of the above discussion we have no hesitation in holding that the order passed under section 263 of the Act is bad in law. 12. In the result, the appeal of the assessee is allowed. ITA No. 76/Kol/2016 13. This is appeal against the cancellation of registration granted to the under section 12AA of the Act by the Ld. CIT (Exemption) Kolkata by invoking his powers under section 12AA(3) of the Act, vide his order dated 11.12.2015. 14. The only submission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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