TMI Blog2010 (12) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... yzing the facts of the assessee's case and the written submissions filed by the assessee along with documentary evidences in support thereof. Thus, the act of the learned CIT of considering the assessment order as erroneous and prejudicial to the interest of the revenue is nothing 3 That on facts and circumstances of the case and in law, the learned CIT has while making the impugned revision erred in quoting in his order on numerous occasions that the appellant has paid commission to the foreign agent, when the same has never been paid, but have been net off from the export invoice value and only net invoice value has been charged through the export invoices and the said net value has been realized through the official banking channel. 4 That on facts and circumstances of the case and in law, the learned CIT had erred in totally disregarding the decision of this jurisdictional Bench of Tribunal in the case of Shri Samir A. Batra (Prop, of Samir Exports and Batra Overseas, Surat), PAN-ABIPB6251F v. The ITO, Ward-5(4), Surat, ITA Nc 4130/Ahd/2007; A.Y. 2004-05 and Shri Atma Prakash Batra, PAN-ABIPB6368B v. The Addl. CIT, Range-5, Surat, ITA No. 4131/Ahd/2007; A.Y. 2004-05 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order dated 28.12.2007 u/s 143(3) of the Act with the direct ions to make a fresh assessment after detailed inquiries and verification of the nature of transact ions entered into by the assessee firm with the said Golden Cover Trading during the FY 2004-05 , fulfillment of the responsibilities and obligations as enlisted in the Agreement dated 01-04-2004 by the said party, benefit , if any, derived by the assessee from the agreement and admissibility of the commission payment , as per law. The ld. CIT concluded in his order dated 24.3.2010 in the following terms: 4. I have carefully considered the submissions made on behalf of the assessee firm and I fail to agree with any of those grounds for not exercising my powers u/s 263 of the IT Act . The argument that the Assessing Officer had accepted the assessee's claim after detailed scrutiny of detailed submissions and material evidences in support f i led in reply to the show cause notice is altogether not correct . Though it can not be denied that the Assessing Officer had issued a show cause notice in regard to the admissibility of the assessee's claim and had completed the assessment after obtaining compliance ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely a statement which is not supported with any material evidence. 7. The assessee's submission that the very same issue of allow ability of the commission paid to Foreign Agent has been decided against the Department by the Hon'ble ITAT, Ahmedabad, in the case of Shri Samir Batra (Prop. of M/s Sami r Exports and M/s Sami r Overseas), who too is assessed in CIT-I I , Surat charge, is found to be not relevant as the facts of the case cited are not exactly the same and the ITAT decision cited has not been accepted by the Department . Further, in the assessee's own case for AY 2004-05, the issue is pending before the ITAT. 8. In view of the above, I , in exercise of my powers u/s 263 of the IT Act , 1961 set aside the order of assessment passed by the AO u/s 143(3) of the Act on-28.12.2007 with a direction to the present AO to make a fresh assessment for AY 2005-06 after detailed enquiries verification of the nature of transact ion entered into by the assessee firm with the said Golden Cover Trading during FY 2004-05, fulfillment of the responsibilities and obligations as enlisted in the Agreement dated 01.4.2004 by the said party, benefit , if any, derived by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include - (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the 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. (2) No orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely. The provisions of sec. 263 of the Act do not visualize the substitution of the judgment of the Commissioner for that of the AO unless his order is not in accordance with law. There again every erroneous order cannot be the subject matter of revision because the second requirement has also to be fulfilled. There must be material on record to show that tax which was lawfully exigible has not been imposed as held in Gabriel India Ltd. (supra). However, the expression prejudicial to the interest of the revenue , as held by the Supreme Court in the Malabar Industrial Co. Ltd.,243 ITR 83(SC) case, is not an expression of art and is not defined in the Act and, therefore, must be understood in its ordinary meaning. It is of wide import and is not confined to only the loss of revenue. The words prejudicial to the interest of the revenue , as observed in Dawjee Dadabhoy and Co. vs. S.P. Jain, 31 ITR 872 (Calcutta), can only 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 realized or cannot be realized. Thus, the exercise of revisional jurisdiction under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x x x x There must be some prima facie material on record to show that 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. x x x x We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax 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 .. 5.4 While adjudicating a similar issue, Hon ble Supreme Court in the case of CIT Vs Max India Ltd. (supra) relying upon its earlier decision in the case of Malabar Industrial Co. Ltd. (supra) held as under: The phrase prejudicial to the interests of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble High Court it was held as under: Coming to the facts of the present case, it is the finding of fact given by the Tribunal that the assessee has produced relevant material and offered explanations in pursuance of the notices issued under section 142(1) as well as section 143(2) of the Act and after considering the materials and explanation, the Income-tax Officer has come to a definite conclusion. The Commissioner of Income-tax did not agree with the conclusion reached by the Income-tax Officer. Section 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the Revenue. Since the material was there on record and the said material was considered by the Income-tax Officer and a particular view was taken, the mere fact that a different view can be taken, should not be the basis for an action under section 263 of the Act and it cannot be held to be justified. 5.7 In CIT v. Mehrotra Brothers 270 ITR 157 (MP), the Hon ble High Court gave the stamp of approval to the order of the Tribunal which, after relying on CIT v. Ratlam Coal Ash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. 5.101 The Hon ble High Court in the said decision further went on to observe that : There must be some prima facie material on record to show that 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. 5.11 In CIT vs. Ani l Kumar Sharma [2010] 194 Taxman 504 (Del), whi le following thei r own decision in Sunbeam Auto Ltd. (supra) , Hon ble Delhi High Court observed: 7. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-I of the Act requires to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic tome. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee feels aggrieved with. As far as absence of discussion in the assessment order is concerned, this is what has been laid down by this court in the case of Rayon Silk Mills v. CIT [1996] 221 ITR 155: In the first instance it was contended by learned counsel for the assessee that the very premise on which order under section 263 was made against the assessee, namely, that the Income-tax Officer has not at all examined the goodwill account is not existent. According to him, it is apparent from the record that the goodwill account was thoroughly examined by the Income-tax Officer before making the assessment and after exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax has to find in the first instance that the order is erroneous and, secondly, the order is prejudicial to the interests of the Revenue. The conditions are twin conditions as held by the apex court and both of them have to be fulfilled before the Commissioner of Income-tax can exercise jurisdiction under section 263 of the Act. In the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) the apex court has held: The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. Applying the aforesaid tests to the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. On further appeal, Hon ble High Court reversed the order of the ITAT in the following terms: 7. It is pertinent to mention here that the assessee avoided to give the explanation/reply to the notice issued by CIT which was admittedly served on him. Even otherwise, the CIT has directed the Assessing Officer to reassess the income and still it is open for the assessee to show the books of account for the purposes of verification of the sundry credits of a huge sum shown by him. We do not agree with the reasons given by the ITAT for quashing the order passed by CIT that heavens would have not fallen if one more opportunity was given to the assessee before passing the order. The question of giving further opportunity would have arisen only when the assessee would have sought further date to give the reply. In a casual manner ITAT has mentioned that loans were confirmed by the Assessing Officer, but it has not given any details as a court of fact that what amount was got confirmed by which document. 8. For the reasons as discussed above, we are of the view that the ITAT has erred in law in quashing the order passed by CIT under section 263 of the Income-tax Act, 1961, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct assumption of fact or an incorrect application of law would satisfy the requirement of the order being erroneous. The expression prejudicial to theinterest of Revenue as understood in its ordinary meaning is of wide import and not confined to the loss of tax alone. If due to an erroneous order of the Assessing Officer, the revenue is loosing, as lawfully payable by a person, it should be certainly prejudicial to the interest of Revenue [Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 831 (SC), Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and Smt. Tara Devi Aggrawal v. CIT [1973] 88 ITR 323 (SC). While setting aside the assessment order, the Commissioner noted that the Income-tax Officer passed the order without any material on record. Admittedly, the Circular dated 6-10-1952 has also not been considered by the Assessing Officer. In our view, the Assessing Officer failed to apply its mind in its correct perspective and the order passed by him is erroneous. There is no material on record to support the decision arrived at by the Tribunal. In this background, the Tribunal, therefore, was wrong in arriving at its conclusion that the Commissioner of the Income-tax had exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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