TMI Blog2021 (6) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... f corporate guarantee for strengthening net worth was capital receipt. Waiver of loan has been held to be capital receipt and cannot be taxed u/s. 28(iv) of the Act as mentioned above, This view has been taken by the Hon'ble Bombay High Court in the case of Mahindra and Mahindra [ 2003 (1) TMI 71 - BOMBAY HIGH COURT] This shows that the view taken by the Assessing Officer is a plausible view in line with the decision of the Hon'ble High Court and, therefore, by no stretch of imagination, the assessment order dated 22.12.2006 can be said to be erroneous and prejudicial to the interest of the Revenue. We find that in the case of CIT Vs. Anil Kumar [ 2010 (2) TMI 75 - DELHI HIGH COURT] has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Thus we are of the considered opinion that the assessment order framed u/s. 143(3) of the Act is neither erroneous nor prejudicial to the interest of the Revenue. - Decided in favour of assessee. - ITA No. 3899/MUM/2009 - - - Dated:- 18-6-2021 - N.K. Billaiya, Member (A) and Amit Shu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be treated as his income. Further, it is observed that a loan given to the company by CUM and its associates includes accumulated interest, which has been claimed as revenue expenditure. The cessation of liability on account of basic loan amount is also liable to be taxed u/s. 28(iv) of the I.T. Act. Thus, the assessment made by the Assessing Officer is without proper enquiry and application of mind, hence the assessment is erroneous and prejudicial to the interest of the revenue. You are hereby given an opportunity to show cause as to why the amount of ₹ 5,10,83,475/- received by way of cessation of liability should not be treated as revenue receipt u/s. 41(1) and 28(iv), you are further given an opportunity to show cause as to why the amount of interest should not be brought for taxation u/s. 41(1), and why the assessment made by the A.O. should not be set aside to this extent. Your case is fixed for hearing on 23rd March, 2009 at 11.30. 5. A perusal of the contents of the notice show that the ld. CIT was of the firm belief that the assessee, by way of cessation of liabilities, has received a sum of ₹ 5,10,83,475/- which attracts the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the issue is highly debatable, in as much as, there are direct decisions in favour of the assessee and against the revenue. 10. For example, the Hon'ble High Court of Bombay in the case of Mahindra and Mahindra 261 ITR 501 has held that waiver of loan utilised for purchase of capital asset is a capital receipt. 11. We are of the considered view that the basis for assuming jurisdiction u/s. 263 of the Act is Note II to Schedule XIIIB of the balance sheet was very much examined by the Assessing Officer while framing assessment order u/s. 143(3) of the Act and, therefore, it cannot be said that there was no application of mind by the Assessing Officer. 12. The Assessing Officer has taken a plausible view after going through the relevant balance sheet, profit and loss account, audit report and notes thereon. After considering the facts, the Assessing Officer has taken a plausible legal view that waiver of loan of ₹ 5,10,83,475/- by joint promoters by way of corporate guarantee for strengthening net worth was capital receipt. 13. Further, waiver of loan has been held to be capital receipt and cannot be taxed u/s. 28(iv) of the Act as mentioned above, This view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Vikas Polymer reported in 341 ITR 537 has held as under: 63. We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to : (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Gabriel India Ltd. 203 ITR 108 has held as under: The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this subsection, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions erroneous , erroneous assessment and erroneous judgment have been defined in Black's Law Dictionary. According to the definition, erroneous means involving error; deviating from the law . Erroneous assessment refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, erroneous judgment means one rendered according to course and practice of court, but contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er tax than what was just has been imposed. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory pow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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