TMI Blog2006 (10) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ssable u/s 41(1) of the Act. Unless and until there is a cessation of liability, section 41 will not be pressed into service. Thus, we find the reasoning by the Tribunal was based on valid materials and evidence and hence there is no error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence, no substantial questions of law arise for consideration of this court and the tax case is dismissed. - R. BALASUBRAMANIAN AND P.P.S. JANARTHANA RAJA, JJ. For the Appellant : Pushya Sitaraman, Adv. JUDGMENT P.P.S. JANARTHANA RAJA, J. 1. This appeal is filed by the Revenue under Section 260A of the Income Tax Act, 1961 in I.T.A. No. 1771/Mds/1994, passed by the Income Tax Appellate Tribunal, Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinafter referred to as the Act ) on 21.01.1992 and determined the total income at Rs. 13,14,679/-. The assessee surrendered the Group Gratuity Scheme with LIC and received a sum of Rs. 8,22,925/- during the year relevant to the assessment year 1989-90. As there was no proper enquiry made by the Assessing Officer in the assessment completed on 21.01.1992, the Commissioner of Income Tax passed order under Section 263 of the Act and set aside the assessment, with a direction to the Assessing Officer to assess the said amount under Section 41(1) of the Act for the assessment year 1989-90. Aggrieved by the order, the assessee filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal ). The Tribunal al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that 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 is prejudicial to the Revenue - recourse cannot be had to Section 263(1) of the Act. There can be no doubt that the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 263 are not satisfied. Such an order has no legs to stand and deserves to be quashed. We accordingly cancel the order passed Under Section 263 of the Act and restore the assessment order passed by the A.O. From a reading of the above reasoning of the Tribunal, it is clear that the assessee has continued to show the admitted amount of Rs. 8,22,925/- as liability in the balance sheet. The undisputed fact is that it is a liability reflected in the balance sheet. Once it is shown as liability by the assessee, the CIT is wrong in holding that the same is assessable under Section 41(1) of the Act. Unless and until there is a cessation of liability, Section 41 will not be pressed into service. 5. In view of the foregoing reasons, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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