TMI Blog1998 (6) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (Appeals) was not the subject-matter of appeal at all? 3. Whether, on the facts and in the circumstances of the case, the assessee was entitled to weighted deduction under section 35B in respect of the expenditure of Rs. 37,26,317 detailed in the statement of the case?" The assessee for the assessment year 1977-78 filed a return of income admitting the income of Rs. 1,63,72,720. The Income-tax Officer called for the particulars under section 143(2) of the Act and the details submitted by the assessee were examined by the Income-tax Officer. The Income-tax Officer found that there was a variation between the income returned and the income proposed to be assessed which exceeded the figure of Rs. 1,00,000 and, therefore, he forwarded the draft assessment order under section 144B of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), to the Inspecting Assistant Commissioner calling upon the assessee to file its objection to the proposed order. The assessee did not furnish any reply and the Income-tax Officer presumed that the assessee had no objection to offer and completed the assessment under section 143(3) read with section 144B of the Act. In the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of the expenses and their eligibility for weighted deduction. He was of the view that weighted deduction claimed by the assessee has been accepted by the Income-tax Officer without verifying as to the sub-clause of section 35B(1)(b) of the Act under which the claim would be admissible. He was, therefore, of the view that the matter should be restored to the Income-tax Officer for reconsideration and he held that the assessment order passed by the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue and set aside the assessment order with a direction to the Income-tax Officer to pass a fresh assessment order in accordance with law after giving an opportunity to the assessee. The assessee filed an appeal to the Income-tax Appellate Tribunal against the order passed by the Commissioner of Income-tax under section 263 of the Act. The Appellate Tribunal held that the Commissioner of Income-tax did not have any jurisdiction to pass the order under section 263 of the Act on the ground that the order of assessment was the subject-matter of appeal before the Commissioner of Income-tax (Appeals) and the order was also passed by the Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anarthana Raja, learned counsel for the assessee, on the other hand, submitted that the order of the Income-tax Officer clearly shows that the Assessing Officer called for the details and examine the same and the grant of deduction was not against any provision of Law. According to learned counsel for the assessee, the Commissioner of Income-tax had not applied his mind properly and in the absence of any finding that the order was erroneous and prejudicial to the interests of the Revenue, the Commissioner had no jurisdiction to revise the order of assessment. Learned counsel for the assessee submitted that the finding of the Appellate Tribunal that the Income-tax Officer had examined the matter in an elaborate manner is a finding of fact and, therefore, this court should not interfere with the finding of fact. According to learned counsel for the assessee, the payments were made to foreign brokers through whom information was obtained in respect of cargo availabilities and freight rates and on the basis of the information furnished, the freight contracts were finalised and the expenditure was incurred for obtaining market information. We have carefully considered the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner is whether the order of the Assessing Officer can be regarded as erroneous and prejudicial to the interests of the Revenue. It may be erroneous in law or in fact. It may be erroneous in the sense that the Income-tax Officer had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed was against the provisions of law. Therefore, the view expressed by the Appellate Tribunal that the Income-tax Officer had allowed the claim after examining the records is inconsistent with the positive finding of the Commissioner of Income-tax who recorded the finding on perusal of the entire assessment records. When the Appellate Tribunal, on appeal, differs from the finding of fact of the Commissioner, it should have recorded its finding indicating the material on which it came to such a conclusion. Learned counsel for the assessee produced before us a copy of the reply sent by the assessee to the show-cause notice issued by the Commissioner of Income-tax under section 263 of the Act and according to the statement filed along with the show-cause notice which was apparently filed before the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Supreme Court in CIT v. Shree Manjunathesware Packing Products and Camphor Works [1998] 231 ITR 53, held that the revisional powers conferred on the Commissioner of Income-tax under section 263 of the Act are of wide amplitude enabling the Commissioner to call for and examine the records under any proceeding of the Act and empowering the Commissioner to make or cause to make such enquiry as he deems necessary in order to find out whether any order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. Therefore, when the powers conferred upon the Commissioner of Income-tax are of wide amplitude enabling the Commissioner to pass any order, it is not necessary for the Commissioner to record his final conclusion regarding the allowability of the claim of the assessee under section 35B of the Act on the merits of the case. In our opinion, it would be sufficient if he comes to the conclusion on materials that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue and if such a conclusion is arrived at on materials on record, it is not necessary for him to record his final conclusion on the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a prima facie finding that the expenses incurred do not appear to come under any specific sub-clause of section 35B(1)(b) of the Act and the absence of his final conclusion in the matter by the Commissioner would not in any way debar him from exercising his revisional jurisdiction nor would it render the jurisdiction properly exercised by the Commissioner non est in law. Though the Appellate Tribunal referred to the claim of the assessee that the expenses would fall under sub-clauses (ii) and (iv) of section 35B(1)(b) of the Act, it has not recorded any finding that the view of the Commissioner that they do not come under any sub-clauses of section 35B(1)(b) of the Act was in any way erroneous. The Tribunal referred to the order in the case of Indian Hotel Limited, and it is not clear how the decision in Indian Hotel Limited is relevant in considering the question whether the expenses claimed would fall under any of the sub-clauses of section 35B(1)(b) of the Act. The Gujarat High Court in CIT v. M. M. Khambhatwala [1992] 198 ITR 144, held that the Commissioner would be entitled to exercise his power of revision if he is of the view that the order of the Income-tax Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue due to the State has not been realised or cannot be realised. The Bombay High Court held that there must be materials available on record for the Commissioner to satisfy himself, though prima facie, that the order of the Income-tax Officer was not in accordance with law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. The Bombay High Court held that merely because the Income-tax Officer had not made an elaborate discussion about the allowance of the claim of the assessee would not render the order of the Income-tax Officer erroneous and prejudicial to the interests of the Revenue. It is significant to notice, in the case before the Bombay High Court, the Commissioner after invoking the revisional jurisdiction, has not recorded his prima facie view that the claim of the assessee was erroneous and that the expenditure was not revenue in nature, but was capital in nature, but, merely directed the Income-tax Officer to re-examine the matter. However, in the instant case, the Commissioner, on examination of records, prima facie came to the conclusion that payments of commission and brokerage did not appear to come under any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of the Revenue administration. There might be cases where the Commissioner might wish to interfere with an order of the Income-tax Officer in order to safeguard the fair name and reputation of the Income-tax Department without any thought of going into the particular aspects of the assessment. Assessments which are mala fide, politically and communally motivated may be, however, set aside as being prejudicial to the interests of the Revenue. It is unnecessary, for us to illustrate the point any further. All that we wish to observe is that the scope of the interference under this section is not to set aside merely unfavourable orders and bring to tax some more money to the treasury. Nor is the section meant to get at sheer escapement of revenue which, as is well known, is taken care of by provisions elsewhere in the Act such, for instance, as section 147 of the Act. The prejudice must be prejudice to the Revenue administration." The above decision is distinguishable on the facts of the case as the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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