TMI Blog2018 (3) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the record. The Commissioner has not pointed out any such material. In the absence of such material, in our opinion, the Commissioner wanted a further enquiry into the correctness or otherwise of the claim of expenditure, which, totally, falls outside the scope of his jurisdiction under Section 263 of the Act. It is the order of the Commissioner, which is based on an incorrect assumption that the expenditure might have been exaggerated or bloated up without there being anything on record. The Commissioner has also not rendered a finding that assumption of income at 10% of the undisclosed turn over is contrary to any statutory provisions or settled legal principle. Therefore, it cannot be said that the order of the AO suffers from the defect of an incorrect assumption of fact or an incorrect application of law warranting interference - Decided in favour of assessee - ITTA No.251 of 2005 - - - Dated:- 3-1-2018 - Mr. C. V. Nagarjuna Reddy And Mr. T. Amarnath Goud, JJ. For The Appellant : Mr. J. V. Prasad For The Respondent : Mr. C. P. Ramaswami Judgment: ( per Hon ble Sri Justice C.V.Nagarjuna Reddy) This Appeal filed by the Revenue raises t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the respondent- assessee for the block period 1988-89 to 1998-99. At the hearing, Mr.J.V.Prasad, learned Senior Standing Counsel for Income Tax, submitted that though a decision was taken to file Appeals against the Common Order pertaining to the two other group companies also, the details as to, whether they were filed, and if so, they have been disposed of or not, are not available. Be that as it may, the learned Standing Counsel has strenuously submitted that the Tribunal has committed a serious error in setting aside the order of the Commissioner. He has taken us through the order of the Commissioner and submitted that the issue viz ., acceptance of returns filed by the respondent -assessee showing ₹ 36 lakhs as expenditure out of the turnover sales of ₹ 40 lakhs and accepting only ₹ 4 lakhs as taxable income was erroneous and that the Commissioner has rendered a clear finding that the AO ought not to have taken the returns of the assessee on its face value without holding proper enquiry as to the correctness or otherwise of his claim of expenditure. Opposing the above submission, Dr.C.P.Ramaswamy, learned Counsel for the respondent- assessee, sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery type of mistake or error committed by the AO unless such mistake leads to an erroneous order causing prejudice to the interests of the Revenue. The Supreme Court held that an incorrect assessment of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. It has further held that the order passed without applying the principles of natural justice or without application of mind also falls in the same category of erroneous orders. Dealing with the phrase prejudicial to the interests of the Revenue , the Supreme Court held that it is not an expression of art and that understood in its ordinary meaning it is of wide import and is not confined to mere loss of tax. That if due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue, and that this phrase has to be read in conjunction with an erroneous order passed by the Assessing Officer. 12. In C.I.T. v. Max India Ltd. [2007] 295 ITR 282 (SC) the Supreme Court held that when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rat High Court in C.I.T. v. Arvind Jewellers [2003] 259 ITR 502 (Guj. ), reiterating the principle that Section 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the AO, further held that the order of the AO cannot be termed as prejudicial, simply because he has adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the Commissioner did not agree. 17. On an exhaustive consideration of the case law, a Division Bench of this Court in Spectra Shares and Scrips Pvt. Ltd. ( supra) summarized the legal position regarding the scope of jurisdiction of the Commissioner under Section 263 of the Act, as under: a) 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 ..... 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 limited only to the material which was available before the Assessing Officer and, in order to protect the interests of the Revenue, the 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment. In fact, the block assessment return has been accepted in toto. The order framed by the A.O. was therefore, erroneous because it is a stereo typed order which simply accepted what the assessee has stated in the block return and the A.O. failed to make enquiries which are called for in the circumstances of the case. [(88 ITR 323(SC) and 67 ITR 84(SC)]. The A.O. has even failed to compute the undisclosed income of the assessee, assessment year-wise by discussing each year s income separately. Telescoping of income has also not been done assessment year-wise. Details of cash and Bank balances added back have also not been discussed. Therefore, neither have the undisclosed investments been discussed by the assessing officer in the assessment order nor the undisclosed income. While estimating the business profit also, the A.O. has not quantified the undisclosed business transactions assessment year wise on which the profits have been estimated. It is also not clear from the assessment order, whether the cost of sales have been accounted for in the books of account or the purchases have been made outside the books of account. The case laws and the Tribunal decisions cited by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Commissioner, which is based on an incorrect assumption that the expenditure might have been exaggerated or bloated up without there being anything on record. The Commissioner has also not rendered a finding that assumption of income at 10% of the undisclosed turn over is contrary to any statutory provisions or settled legal principle. Therefore, it cannot be said that the order of the AO suffers from the defect of an incorrect assumption of fact or an incorrect application of law warranting interference with it by the Commissioner. On the Contrary, the order of the AO, a copy of which was placed before us by the learned Counsel for the respondent- assessee, categorically shows that the detailed working of the total disclosure made by the group was submitted by the assessee before the Deputy Director of Income Tax and that after verification, he has vetted the same. This finding of fact was not found incorrect by the Commissioner. If, on verification of the detailed working by the (DD80), the AO has accepted the return filed by the assessee, the view taken by him is plausible one. The law is well settled from the afore-mentioned judgment that where two views are possible ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
