The Belgaum Dist. Central Co. Opp. Bank., Belgaum V. Commissioner of Income tax., Belgaum

ITA 105/PAN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84813 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Assessee Lawyers: A A KULKARNI
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 147; 263; 63; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 105/PNJ/2012 (ASSESSMENT YEAR - 2008 - 09) THE BELGAUM DIST. CENTRAL CO - OP BANK LTD. OPP. CENTRAL BUS STAND. OLD P.B. ROAD, BELGAUM. PAN:AAAAB0839M (APPELLANT) VS. THE COMMISSIONER OF INCOME TAX DR. AMBEDKAR ROAD OPP. CIVIL HOSPITAL ROAD, BELGAUM . (RESPONDENT) APPELLANT BY : A.A. KULKARNI, ADV. RESPONDENT BY : NISHANT K., LD. DR. DATE OF HEARING : 16/10/2014 DATE OF PRONOUNCEMENT : 28 /11/2014 O R D E R PER: D.T. GARASIA (JM) THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT - BELGAUM, DATED 5 TH OCTOBER, 2012 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE. 1. THE IMPUGNED ORDER IN THIS CASE U/S 263 HAVING BEEN PASSED ON 05 - 02 - 2012 REVISING THE ASSESSMENT ORDER DATED 28 - 08 - 2012 GRANTING RELIEF U/S 80P AS PER THE RETURN W ITHOUT SPECIFICALLY EXAMINING THE ELIGIBILITY TO SUCH RELIEF THE ASSESSMENT ORDER BEING AMENDABLE TO ACTION U/S. 147 DEALING WITH ESCAPEMENT OF INCOME THE COMMISSIONER HAD NO JURISDICTION TO ACT U/S 263. 2. THE FAILURE TO ADOPT THIS GROUND IN THE ORIGINAL WAS NEITHER WILFUL NOR DELIBERATE. IT DOES NOT REQUIRE ANY FRESH INVESTIGATION INTO FACTS APART FROM LOOKING INTO THE MATERIAL ALREADY ON RECORD. PRINCIPLES FOR ADMISSION OF ADDITIONAL GROUNDS HAVE BEEN LAID DOWN REPEATEDLY BY COURT AND WE MAY REFER ONLY TO A FEW OF THOSE DECISION IN 229 ITR 383(SC), 187 ITR 688 (SC), 199 ITR 351 (BOM. FB), 193 ITR 624 (KER.). BEING UNAWARE OF THE CORRECT POSITION IN LAW AND THE SAME HAS NOW BEEN BROUGHT TO MY KNOWLEDGE BY MY COUNSELS. HENCE, IT IS PRAYED THAT THE ABOVE GR OUND MAY BE ENTERTAINED AND DISPOSED OF IN ACCORDANCE WITH LAW. 2 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS CO - OP BANK REGISTERED UNDER KARNATAKA STATE CO - OPERATIVE SOCIETY ACT 1956 AS DEFINED U/S 2(1A) OF THE INCOME TAX ACT CARRYING ON THE BUSINESS OF BANKING AND IS GOVERNED BY THE BANKING REGULATION ACT 1949. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR A.Y.2008 - 09 ON 30.09.2008 DECLARING THE TOTAL INCOME OF RS. 4,89,77,310/ - . SUBSEQUENTLY REVISED THE RETURN COMPUTING THE TOTAL IN COME OF RS. 46,85,39,465/ - . THE ASSESSING OFFICER HAS ALLOWED THE GROSS DIVIDEND RECEIPTS OF RS. 62,18,000 IN THE P&L ACCOUNT (RS.62,16,000) FROM KSC APEX BANK LTD, BANGALORE AND RS. 2,000 FROM KSC APEX BANK LTD., BANGALORE AND RS. 2,000/ - FROM INDIAN FAR MERS FERTILIZERS CO - OP LTD) AND CLAIMED THE SAID INCOME AS EXEMPT FROM TAX IN THE STATEMENT OF COMPUTATION OF INCOME. 3.1. THE COMMISSIONER OF INCOME TAX HAS PERUSED THE RECORD AND FOUND THAT THE ORDER U/S. 143(3) PASSED BY AO IS ERRONEOUS AS WELL AS PRE JUDICIAL TO THE INTEREST OF REVENUE , ON THE GROUND THAT ON GOING THROUGH THE RECORD IT WAS SEEN THAT ASSESSEE HAS CREDITED GROSS DIVIDEND RECEIPTS OF RS. 62,18,000 / - IN THE P&L ACCOUNT (RS.62,16,000) FROM KSC APEX BANK LTD, BANGALORE AND RS. 2,000 FRO M KSC APEX BANK LTD., BANGALORE AND RS. 2,000/ - FROM INDIAN FARMERS FERTILIZERS CO - OP LTD) AND CLAIMED THE SAID INCOME AS EXEMPT FROM TAX IN THE STATEMENT OF COMPUTATION OF INCOME. THE ASSESSEE DID NOT GIVE ANY REASON FOR CLAI MING THE DIVIDEND INCOME OF R S. 62,18,000/ - AS EXEMPT. THE ASSESSING OFFICER FAILED TO EXAMINE AS TO HOW THE DIVIDEND INCOME WAS RECEIVED BY THE CO - OPERATIVE BANK WAS EXEMPT FROM THE TAX UNDER WHAT PROVISIONS OF THE I . T . ACT. 1961. THERE WAS LACK OF EXAMINATION AND LACK OF APPLICATION OF MIND BY THE AS SESSING OFFICER, T HE ASSESSING OFFICER HAS NOT CONSIDERE D THE PROVISIONS OF SECTION 80P(4) OF THE IT ACT 1961 WHICH WAS APPLICABLE FROM 1.4.2007 ON ACCOUNT OF WHICH THE PROVISIONS OF SECTION 80P WAS NOT APPLIED IN THE RELATION TO ANY CO - OP ERATIVE BANK, THEREFORE, SHOW CAUSE NOTICE WAS GIVEN. THE ASSESSEE 3 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) WAS GIVEN SHOW CAUSE NOTICE AND ASSESSEE HAS REPLIED TO SHOW CAUSE WHICH READ AS UNDER : WITH REFERENCE TO THE ABOVE MENTIONED NOTICED U/S 263 INFORMING ABOUT THE ERRONEOUS ORDER AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ASKING US TO SHOW CAUSE WHY NOT THE ORDER BE SET ASIDE OR MODIFIED. SIR WITH 80P DEDUCTION WITHDRAWAL SINCE ASST. YEA R 2008 - 09 WE HAVE BEEN PAYING ADVANCE TAX AND THE TAX DUE ON THE RETURNED INCOME. BASICALLY, WE ARE A CO - OPERATIVE SOCIETY AND THEN WE ARE DOING THE BUSINESS OF BANKING. THE DIVIDEND RECEIVED OF RS.62,18,000 IS FORM KARNATAKA STATE CO.OP APEX BANK AND IN DIAN FARMERS FERTILIZERS CO.OP BANK LTD. THESE DIVIDENDS RECEIVED FROM ANOTH ER CO.OP SOCIETY ARE EXEMPT U/S 80P(2)(D). WE HAVE CLAIMED THIS AS AN EXEMPTION WHILE FILING THE RETURN OF INCOME SPECIFICALLY AS AN EXEMPTED ITEM. AND SO THERE WAS NO NEED TO GI VE ADDITIONAL REASON. THE ASSESSING OFFICER, JT. COMMISSIONER IN THE COURSE OF ASSESSMENT PROCEEDING HAS ENQUIRED THE DETAILS ABOUT THE SAME AND ASKED US TO FILE THE EXPLANATION AND THE DETAILS. THE DETAILS AND THE EXEMPTION CLAIMED PARTICULARS ARE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HENCE, ASSESSING OFFICER HAS NOT FAILED TO EXAMINE THE SAID ISSUE, THERE HAS BEEN NO LACK OF APPLICATION OF MIND OF THE ASSESSING OFFICER. IN FACT COUPLE OF OTHER ITEMS OF VERY BIG QUANTITY HAVE BEEN BROUGHT U NDER THE TAX PURVIEW. THE BROADER MEANING OF 80P(4) IS AS FAR DISCUSSED AND UNDERSTOOD IS TO TAX THE INCOME OF THE BANKING BUSINESS UNDERTAKEN BY THE CO.OPERATIVE SOCIETY. AFTER CONSIDERING THE REPLY THE COMMISSIONER OF INCOME TAX HAS ENHANCED THE IN COME ON THE GROUND THAT ASSESSEE IS A CO - OPERATIVE BANK, IN VIEW OF OVERRIDING PROVISIONS OF SECTION 8 0P (4), DEDUCTION U/S. 80 P IS NOT AVAILABLE TO ASSESSEE AND F OR THAT REASON IT IS NOT ENTITLED TO ANY DEDUCTION OF DIVIDEND INCOME FROM ITS GROSS TOTAL IN COME U/S. 80P (2)(D). THE COMMISSIONER WAS OF THE VIEW THAT ASSESSEE HAS WITHOUT ANY BASIS CLAIMED THE DIVIDEND INCOME OF RS. 62,18,000/ - WAS EXEMPT FROM TAX. THE ASSESSING OFFIC ER FAILED TO APPLY THE LAW AND HAD ERRED IN NOT BRINING TO TAX OF INCOME RS.62,18,000/ - . THE IMPUGNED ORDER OF ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. IN VIEW OF THIS THE FACTS ON RECORD AND PROVISIONS OF THE ACT, THE COMMISSIONER HAS ENHANCED THE INCOME OF RS. 62,18,000 / - . 4 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) 4. THE LEARNED AR SUBMITTED T HAT ASSESSEE IS A CO - OPERATIVE R EGISTERED UNDER STATE CO - OPERATIVE SOCIETY ACT. THE ASSESSEE HAS RECEIVED THE DIVIDEND FROM KSC APEX BANK LTD, BANGALORE AND INDIAN FARMERS FERTILIZERS CO - OP LTD . THIS DIVIDEND WERE RECEIVED FROM ANOTHER CO - OPERATIVE SOCIETY ARE EXEMPT U/S. 80P(2)(D). THE LEARNED AR SUBMITTED THAT THE COMMISSIONER HAS POWER TO REVISE THE ANY ORDER MADE BY HIS ANY SUBORDINATE AND CORRECT ANY ERRORS THEREIN. BUT IF THERE IS A N ESCAPED TURN OVER THE COMMISSIONER HAS NO POWER TO REVISE THE ORDER BECAUSE THE ORDER IS PURELY THE REVISIONAL JURISDICTION. HE RELIED UPON THE DECISION OF HONBLE HIGH COURT OF MYSORE AT BANGALO RE IN THE CASE OF RALLIS INDIA LIMITED V. THE STATE OF MYSORE 16 STC 130 (MYS). THE LEARNED AR SUBMITTED THAT THE DECISION OF HONBLE KARNATKA HIGH COURT AT BANGALORE IN THE CASE OF BIDAR SAHAKAR SA KKARE KARKHANE LTD. VS. THE STATE OF KARNATAKA WHEREIN IT HAS HELD THAT THE REVISION AL POWER CANNOT BE EXERCISED IN RESPECT OF A MATTER WHICH FALLS WITHI N THE POWER OF REASSESSED THE ESCAPED TURNOVER. THE REVISING AUTHORITY, IN OTHER WORDS, SHOULD NOT TRENCH UPON THE POWERS WHICH ARE EXPRESSLY RESERVED TO THE ASSESSING AUTHORITY UNDER SECTION 12 - A OF THE KARNATAKA SALES TAX ACT, 1957. THE DEPUTY COMMISSION ER, IN EXERCISE OF HIS REVISIONAL JURISDICTION, SHOULD NOT IGNORE THAT LIMITATION. IF THE RECORD REVEALS NO APPLICATION OF MIND BY THE ASSESSING AUTHORITY IN RESPECT OF A PART OF THE TURN OVER, THEN IT MUST BE DEEMED TO HAVE ESCAPED ASSESSMENT. IT WOULD TH EREFORE BE A CLEAR CASE FALLING WITHIN THE EXCLUSIVE JURISDICTION OF THE ASSESSING AUTHORITY FOR REASSESSMENT, NO MATTER WHETHER THAT PART OF THE TURNOVER WAS IN OR OUT SIDE OF RECORD OF ASSESSMENT. IF, ON THE OTHER HAND, THE ASSESSING AUTHORITY HAS APPLIED HIS MIND AND ERRONEOUSLY EXCLUDED ANY PART OF THE TURNOVER, THEN CERTAINLY IT WOULD BE A CASE FOR THE REVISIONAL AUTHORITY TO REVISE THE ASSESSMENT ORDER. HE ALSO RELIED UPON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF M.L. VASUDEVA MURTHY A ND SONS AND ORS. VS. JOINT COMMISSIONER OF AGRICULTURAL INCOME TAX 198 ITR 426 AND IN THE CASE OF H. KENCHE GOWDA 5 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) 174 ITR 389 AND SUBMITTED THAT THERE IS A POWER TO REVISE THE ASSESSMENT ORDER IT CANNOT BE EXERCISED IN REVISIONAL JURISDICTION. 5. ON THE OTHER HAND, LEARNED DR RELIED UPON THE OR DER OF COMMISSIONER OF INCOME TA X AND THE DECISION OF SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83. 6. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE CASE LAWS RELIED BY THE DR. THE COMMISSIONER HAS EXERCISED HIS POWER U/S. 263 IN RESPECT OF ORDER PASSED BY AO U/S. 143(3). THE MAIN CONTENTION OF THE COMMISSIONER OF INCOME TAX THAT THE ASSESSEE HAS CLAIMING THE DIVIDEND INCOME O F RS. 62,18,000/ - AS EXEMPT. THE COMMISSIONER WAS OF VIEW THAT THE ASSESSING OFFICER FAILED TO EXAMINE AS TO HOW THE DIVIDEND INCOME RECEIVED BY THE CO - OPERATIVE WAS EXEMPT FROM THE TAX UNDER THE PROVISIONS OF IT ACT 1961. THE COMMISSIONER WAS OF THE VIEW T HAT THERE WAS A LACK OF EXAMINATION AND LACK OF APPLICATION OF MIND BY THE ASSESSING OFFICER. THE COMMISSIONER HAS HELD THAT AS PER PROVISIONS OF SECTION 80P(2)(D) IN CASE OF SPECIFIED CO - OPERATIVE SOCIETY. THE INCOME BY WAY OF INTEREST AND DIVIDEND DERIVE D BY THE CO - OPERATIVE SOCIETY FROM THE INVESTMENT WITH ANY OTHER CO - OPERATIVE SOCIETY WILL BE DEDUCTED FROM THE GROSS TOTAL INCOME. THE PROVISIONS OF SECTION 80P(4) WERE INSERTED W.E.F 1.4.2007 I.E. FROM A.Y.2007 - 08. AS PER THIS SUB - SECTION 80P SHALL NOT APPLY IN RELA TION TO ANY CO - OPERATIVE BANK . THUS, AS PER THE LAW CO - OPERATIVE BANK S HALL NOT GET ANY DEDUCTION U/S. 80P. THE COMMISSIONER HAS HELD THAT THE ASSESSING OFFICER FAILED TO APPLY THE CORRECT LAW AND HE HAS ERRED TO BRING THE TA X OF INCOME OF RS. 62,18,000/ - . THE COMMISSIONER THEREFORE, HAS ENHANCED THE INCOME BY RS.62,18,000/ - AND PENALTY PROCEEDING WAS ALSO INITIATED. SECTION 2 63 WHICH READ AS UNDER: SEC. 263 . REVISION OF ORDERS PREJUDICIAL TO REVENUE: - T HE 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 6 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) PREJU DICIAL TO THE INTERESTS OF THE R EVENUE HE MAY, AFTER GIVIN G THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. SECTION 80P(2)(D) IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDEND DERIVED BY THE CO - OPERATIVE SOCIETY FROM THIS INVESTMENT WITH ANY OTHER CO - OPERATIVE SOCIETY WHOLE OF SUCH INCOME IS EXEMPTED . SECTION 8 0P(IV) WHICH READ AS UNDER: . 80P(2) (D ): - IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO - OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO - OPERATIVE S OCIETY, THE WHOLE OF SUCH INCOME IS EXEMPTED. FROM THIS AB OVE BARE READING OF THIS SECTION THE SECTION SAYS THAT THE PROVISIONS OF SECTION 80P WILL NOT APPLY IN RELATION TO THE CO - OPERATIVE SOCIETY. THE DIVIDEND INCOME OF THE ASSESSEE CO - OPERATIVE BANK IS NOT EXEMPTED FROM TAX UNDER THE PROVISIONS OF IT ACT 1961. THE ASSESSEE HAS CLAIMED THIS INCOME AS EXEMPT FROM THE INCOME TAX ACT. WE ARE OF THE VIEW THAT ASSESSEE IS NOT ENTITLED FOR EXEMPTION OF DIVIDEND INCOME OF RS. 62,18,000/ - U/S. 80P(2)(D) AS THE ASSESSEE IS A CO - OPERATIVE BANK. WE FIND THAT AS PER THE PRO VISIONS THE ASSESSEE IS NOT ENTITLED FOR SUCH EXEMPTION. THE COMMISSIONER OF INCOME TAX IN HIS JU RISDICTION U/S. 263 MAKES IT CLEAR THAT PRE - REQUISITE FOR EXERCISE OF JURISDICTION BY COMMISSIONER SUO MO T U UNDER IT, IS THAT THE ORDER OF INCOME TAX OFFICER I S ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE COMMISSIONER HAS TO BE SATISFIED WITH TUNE CONDITION S, NAMELY (I) THE ORDE R OF ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF RE VENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF COMMISSIONER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE - THE REC OURSE CANNOT BE HELD TO U/S. 263 (1) ON THE ACT. THE PROVISIONS C ANNOT BE INVOKED TO CORRECT EACH AND EVERY T YPE OF MISTAKE OR ERROR COMMITTED BY ASSESSING OFFICER, I T IS ONLY WHEN AN ORDER IS 7 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) ERRONEOUS THAT SECTION WILL BE ATTRACTED. FAILURE TO MAKE THE ENQUIRY WHERE THE ENQUIRY IS PRIMA FACIE WANTED TO CONSTITUTE TO P REJUDICIAL TO THE REVENUE WHETHER ANY UNDER STATEMENT OF INCOME IS OTHERWISE INFERABLE OR NOT ONLY CASE THE COMMISSIONER SETTING ASIDE THE ASSESSMENT. ACTION U/S. 263 WOULD BE VALID THOUGH HE HAS NOT INDICATED THE EXTENT OF UNDERSTATEMENT OF INCOME TAX ACT. IT WAS HELD IN THE CASE OF CIT VS. ASSAM TEE HOUSE 344 ITR 507 (P&H) HIGH COURT WHEREIN IT IS HELD THAT ASSESSING OFFICE DID NOT UNDER TAKE VERIFICATION OF CLOSING STOCK AND PURCHASE AND DID NOT CHECK THE BOOKS OF ACCOUNTS. IF THE ASSESSING OFFICER FAI LED TO VERIFY THE BOOKS OF ACCOUNT THESE ARE GOODS GROUNDS AND ENOUGH REASONS FOR INVOKING THE SECTION 263 OF THE ACT. WE FIND THAT WHERE THE ASSESSEE IS FOLLOWING THE MER CANTILE SYSTEM OF ACCOUNTING TOOK THE INTEREST AS LIABILITY, WHEN THERE WAS NO EVIDEN CE THAT SUCH LIABILITY HAS ACCRUED DURING THE YEAR , BUT SUCH LIABILITY HAD BEEN ALLOWED BY THE ASSESSING OFFICER IT IS A CASE WHERE THE DEDUCTION HAS BEEN WRONGLY ALLOW THE JURISDICTION U/S. 263 WAS JUSTIFIED IN THE CASE OF CIT VS. MADRAS ELECTRICAL CONDUC TORS 341 ITR 155 (MAD) AND IN CORRECT EXEMPTION OF FACT OR NOT IN CORRECT THE APPLICATION OF LAW WOULD CONSTITUTE AND ERROR CAPABLE OF CONFERRING THE JURISDICTION U/S. 263. SUCH ERROR SHOULD BE TAKEN AS ARISING OUT OF NON APPLICATION OF MIND ON THE PART OF ASSESSING OFFICER. IN THE CASE OF MAL A BAR INDUSTRIES CO. LTD. VS.CIT, 243 ITR 83 WHEREIN IT IS HELD THAT NON ENQUIRY WHERE I T IS REQUIRED, COURT CONSTITUTES AN ERROR ON FACE OF IN R EFERENCE TO NON APPLICATION OF M IND SO AS TO JUSTIFY REVISIONAL JURISDICTI ON. WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION O F SUPREME COURT IN THE CASE OF MALBAR INDUSTRIAL COMPANY LTD. VS. COMMISSIONER OF INCOME TAX 243 ITR 83 WHEREIN THE SUPREME COURT HAS HELD THAT A BARE READING OF THIS PROVISIONS MAKES I T CLEAR THAT THE PREREQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IT IS THAT THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE COMMISSIONER HAS TO BE SATIS FIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS 8 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS BUT IS NOT PR EJUDICIAL 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 PROVISIONS CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. 6.1 WE FIND THAT THE ISSUE IN CONTROVER SY IS COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD V. CIT 243 ITR 83(SC) WHEREIN IT IS HELD AS UNDER: THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN 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 INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJU DICIAL TO THE INTERESTS OF THE R EVENUE , UNLESS THE VIEW TAKEN BY THE I NCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH W ILL BE ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. RAMPYUARI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC) AND IN SMT. TARA D EVI AGGARWAL VS. CIT (1973) 88 ITR 323 (SC). IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT THE ITO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE I NCOME T AX O FFICER FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. 9 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) IT APPEARS THAT THE RESOL UTION PASSED BY THE BOARD OF THE APPELLANT - COMPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS, THE CONCLUSION THAT THE ORDER OF THE I NCOME T AX O FFICER WAS ERRONEOUS IS IRRESISTIBLE. WE ARE, THE REFORE, OF THE OPINION THAT THE HIGH COURT HAS RIGHTLY HELD THAT THE EXERCISE OF THE JURISDI CTION BY THE COMMISSIONER U/S. 2 63(1) WAS JUST IFIED. THE SECOND CONTENTION HAS TO BE REJECTED IN VIEW OF THE FINDING OF FACT RECORDED BY THE HIGH COURT. IT WAS NOT SHOWN AT ANY STAGE OF THE PROCEEDINGS THAT THE AMOUNT IN QUESTION WAS FIXED OR QUANTIFIED AS LOSS OF AGRICULTURAL INCOME AND, ADMITTEDLY, IT IS NOT SO FOUND BY THE TRIBUNAL. THE FURTHER QUESTION WHETHER IT WILL BE AGRICULTURAL INCOME WITHIN THE MEA NING OF SEC. 2(1A) OF THE ACT AS ELUCIDATED BY THE COURT IN CIT VS. RAJA BENOY KUMAR SAHAS ROY (1957) 32 ITR 466 (SC) DOES NOT ARISE FOR CONSIDERATION. IT IS EVIDENT FROM THE ORDER OF THE HIGH COURT THAT THE FINDINGS RECORDED BY THE TRIBUNAL THAT THE A PPELLANT STOPPED AGRICULTURAL OPERATION IN NOVEMBER 1982 AND THE RECEIPT UNDER CONSIDERATION DID NOT RELATE TO ANY AGRICULTURAL OPERATION CARRIED ON BY THE APPELLANT, WERE NOT QUESTIONED BEFORE IT. THOUGHT WE DO NOT AGREE WITH THE HIGH COURT THAT THE AM OUNT WAS PAID FOR BREACH OF CONTRACT AS INDEED IT WAS PAID IN MODIFICATION/RELAXATION OF THE TERMS OF THE CONTRACT, WE HOLD THAT THE HIGH COURT IS JUSTIFIED IN CONCLUDING THAT THE SAID AMOUNT WAS A T AXABLE RECEIPT UNDER THE HEAD INCOME FROM OTHER SO URCES. WE FIND NO MERIT IN THE APPEAL AND DISMISS THE SAME WITH COSTS. NOW COMING TO THE FACTS OF THIS CASE, IN THIS CASE THE ASSESSING OFFI CER HAS ALLOWED THE DIVIDEND INCOME OF RS.62,18,000/ - , EXEMPTION FROM THE TAX WHICH IS NOT AS PER THE INCOME TAX LAW. THEREFORE, IN THE INSTANT CASE THE ASSESSING OFFICER HAS NOT MADE ENQUIRY AND HE HAS NOT APPLIED HIS MIND. THEREFORE, REVISIONAL JURISDICTION OF THE COMMIS SIONER OF INCOME TAX IS JUSTIFIED IN THIS CASE. 6.2 WE HAVE GONE THROUGH THE ARGUMENT TAKEN BY THE AR. THE AR HAS RELIED UPON THE KARNATAKA SALES TAX ACT 1957. SECTION 22A IS SIMILARLY TO SECTION 263 OF THE INCOME TAX ACT. THE AR ARGUED THAT AS PER THE K ARNATAKA SALES TAX ACT 10 . ITA NO.105/PNJ/212 (ASST. YEAR - 2008 - 09) IN THE DECISION OF KARNATAKA IN B IDAR S AH AKKAR KARKHANE LTD. VS. CIT THE STATE OF KARNATAKA 65 WHEREIN IT IS HELD THAT WHEN THE REVISIONAL JURISDICTION OF THE DEPUTY COMMISSIONER IS VERY LIMITED AND IF THE HARVESTING CHARGES ARE NO T INCLUDED IN TAXABLE TURN OVER BY THE AO, T HE DEPUTY COMMISSIONER OF THE SALES TAX HAS NO POWER TO REVISE THE ORDER AND INCLUDE THE HARVESTING CHARGES. BUT WE DO NOT AGREE ON THE GROUND THAT THE ASSESSEE HAS RELIED UPON THE DECISION OF RALLIS INDIA LTD. V S. CIT 60 SOT 130 (MYSORE). ON THE GROUND THAT THE ASSESSING OFFICER HAS JURISDICTION TO INCLUDE THE TURN OVER BY REVISING THE ASSESSMENT OR REOPENING THE ASSESSMENT ORDER. WE FIND THAT T HIS ALL DECISION PERTAINING TO SALES T AX A ND ACCORDINGLY INCOME TAX A CT. , T HERE WAS NO DIRECT DECISION ON THAT ISSUE. AS WE HAVE DISCUSSED ABOVE THE ISSUE IN CONTROVERSY IS DIRECTLY COVERED BY THE SUPREME COURT DECISION IN THE CASE OF MALBAR INDUSTRIAL COMPANY LTD. VS. COMMIS SIONER OF INCOME TAX 243 ITR 83, THEREFORE, THIS JUDGEMENT WILL NOT HELPFUL TO THE ASSESSEE. 7 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 .11 .2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 28 .11 .2014 P.S. - *PK* COPY TO: ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER