TMI Blog2018 (8) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 of ld. Pr. CIT, Jaipur passed U/s 263 of the IT Act for the assessment year 2009-10. The assessee has raised the following grounds under as under:- 1. Under the facts circumstances of the case, the order passed by Ld. CIT U/s 236 is illegal bad in law and be quashed. 1.1 The Ld. CIT has erred on facts and in law in holding that AO has not made necessary enquiries/ verification with reference to the purchases made from M/s Mohit International and M/s Nakshatra Business Pvt. Ltd. as to the correctness of the rates and at the same time admitting that on account of these purchases, AO has rejected the books of assessee and disallowed 25% of such purchase in the assessment framed U/s 147/143(3) dated 24.06.2016 and therefore, order of AO cannot be held to be erroneous and prejudicial to the interest of Revenue. 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. the appropriate cost be awarded to the assessee. 2. The assessee filed its return of income for the assessment year under consideration electronically on 28.09.2009, declaring total income of ₹ 3,53,79,360/-. The Scrutiny assessment U/s 143(3) was comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of Hon ble M.P. High Court in case of CIT vs. Narottam Mishra 395 ITR 138. 4. On the other hand, the ld. DR has submitted that once the purchases are considered as bogus due to the accommodation entries availed by the assessee then, the entire purchases ought to have been disallowed instead of 25%. Hence, the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. She has relied upon the impugned order of the Pr. CIT. 5. Having considered the rival submissions as well as the relevant material on record. We note that the original assessment was completed U/s 143(3) vide order dated 13.12.2011. The assessment was reopened by the AO by issuing notice U/s 148 on 17.03.2015 to assess the income on account of bogus purchases made by the assessee from two parties namely M/s Mohit International M/s Nakashatra Business Pvt. Ltd. ( Hema Trading Co. Pvt. Ltd.). Thus the AO proposed to reassess the income on account of purchases of ₹ 41,55,399/- made by the assessee from these two above said parties due to the reasons that in the search and survey action carried out by investigation Wing, Mumbai and Surat it was found that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Pr. CIT U/s 263 of the Act. Section 263 confers the power to the Pr. Commissioner/Commissioner for calling the record and examination of the same and then may revise the order passed by the Assessing Officer if it is found erroneous and prejudicial to the interest of the Revenue. As per Clause-C of Explanation-1 to Section 263 the powers of the Pr. Commissioner/ Commissioner U/s 263(1) includes and extended to subject matter has not been considered and decided in the appeal if the said order is the subject matter of the appeal. Therefore, in case the order passed by the Assessing Officer has been subject matter of the appeal then the power of the Pr. Commissioner/Commissioner U/s 263 is extended only to the matter which has not been considered and decided in the appeal. For ready reference we quote explanation-1 to section 263(1) as under:- Section 263(1) The Principal Commissioner Or 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 [Assessing] 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been allowed. This judgment of the Supreme Court in the case of Malabar Industrial (supra) has been followed in the case of Commissioner of Income Tax (Central) Ludhiana vs Max India Ltd. (2008) 166 Taxman 188 (SC) and in para 2 the following principles have been crystalized : At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this court has taken the view that the phrase prejudicial to the interest of the revenue under Section 263 has to be read in conjunction with the expression 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 interest of the revenue. For example, when the 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 interest of the revenue, unless the view taken by the Income Tax Officer is unsustainable in law. ( Emphasis Supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he preceding paragraph. 11. Merely because in a given set of circumstances two different opinions can be formed, it is not appropriate to interfere with one of the opinion expressed until and unless the opinion is found to be perverse or based on no evidence or material. If this principle is applied to the present case, we find that the tribunal has not committed any error, it was a case where the exercise of jurisdiction under Section 263 by the Commissioner being unsustainable, the tribunal has rightly interfered into the matter, in view of the interpretation to Section 263 made by the Supreme Court, as detailed hereinabove, interference made by the Commissioner Appeal being unsustainable, we answer question No.1 and 3 by holding that the exercise of power under Section 263 by the appellate authority namely the Commissioner Appeal while passing the appellate order on 31.12.2012 was not proper and by interfering in a proceeding under Section 263 an error has been committed and if the tribunal has interfered on same, no illegality is committed by the tribunal. Once we hold that the exercise of power under Section 263 by the commissioner while passing order on 31.12.2012 was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, for the purposes of this sub-section,-. ( c) where any order referred to in this sub-section and passed by the AO had been the subject-matter of any appeal filed on or before or after 1st June, 1988, the powers of the CIT 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 . 7. The consequence of the said amendment made with retrospective effect is that the powers under s. 263 of the CIT shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the CIT under s. 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred. 8. The question referred is, therefore, answered in the negative, in favour of the Revenue and against the assessee. Accordingly, when the addition made by the AO was the subject matter of appeal before the ld. CIT(A) and this issue was pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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