Sify Software Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1135/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7811 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 03-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 27-04-2016
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Principle of natural justice; Revised return
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1135/MDS./2016 / ASSESSMENT YEAR : 2012-13 M/S. SIFY SOFTWARE LTD., 2 ND FLOOR, TIDEL PARK, 4, CANAL BANK ROAD, TARAMANI, CHENNAI 600 113. VS. THE ACIT, CORPORATE CIRCLE 6(2), CHENNAI -34. [PAN CHESO 4930 C ] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MR.R.VIJAYARAGHAVAN,ADVOCATE /RESPONDENT BY : MR.SRINIVASA RAO, CIT, DR / DATE OF HEARING : 03 - 01 - 201 7 / DATE OF PRONOUNCEMENT : 27 - 02 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX, CHENNAI-6. DATED 2 3.03.2016 PASSED U/S.263 OF THE ACT PERTAINING TO ASSESSMENT YEAR 2003-04. ITA NO.1135/16 :- 2 -: 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FILED THE RETURN OF INCOME ON 28.09.2012 DECLARING A LOSS OF ` 20.96,69,754/- AND SUBSEQUENTLY FILED A REVISED RETURN OF INCOME O N 31.05.2013 DECLARING A TOTAL LOSS OF ` 20.96,69,755/-. THE AO WHILE FRAMING THE ASSESSMENT ORDER U/S.143(3) OF THE ACT VIDE ORDER D ATED 24.03.2015 ASSESSED A TOTAL LOSS OF ` 15,56,10,151/- AND MADE AN ADDITION OF ` 5,40,59,603/- BEING THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE ON INTANGIBLE ASSETS FOR ASSESSMENT YEAR 2012-13. ACCORDING TO CIT IN HIS ORDER PASSED U/S.263 OF THE ACT OBSERVED THA T THE AO HAD NOT EXAMINED THE EMPLOYEE COSTS IN DETAIL DURING THE AS SESSMENT PROCEEDINGS. 2.1 FURTHER, THE CIT FOUND THAT THE ASSESSEE COMPAN Y HAD DEBITED PERSONAL EXPENSES TO THE TUNE OF ` 44.88 CRORE WHEREAS IN THE LAST FINANCIAL YEAR, IT WAS SHOWN AT ` 32.04 CR. THUS, THE INCREASE IN THE PERSONAL EXPENSES OVER THE LAST YEAR COMES TO ` 12.84 CR (RS.44.88 RS.32.04) WHEREAS THE OVERALL INCREASE IN TURNOVER WAS ONLY ` 9.71 CR. THIS APPARENTLY REVEALS THAT THE ASSESSE E COMPANY HAD INCURRED ` 12.84 CR OF EMPLOYEE COST TO ACHIEVE ONLY ` 9.71 CR OF TURNOVER. THIS INCREASE IN PERSONAL EXPENSES IS ABN ORMAL IN THE CASE OF SOFTWARE INDUSTRY ENGAGING EMPLOYEES/PROFESSIONA LS FOR A LOSS AND SUCH A SCENARIO IS VERY REMOTE IN THE SOFTWARE LINE BUSINESS. ACCORDING ITA NO.1135/16 :- 3 -: TO CIT, AS THE AO HAD COMPLETELY FAILED TO APPLY HI S MIND AND CONDUCT INQUIRY INTO THIS ISSUE AT HAND, ASSESSMENT ORDER P ASSED U/S 143(3) OF THE ACT BY THE AO IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. HENCE, CIT CAME TO A CONCLUSION THAT THE A SSESSMENT ORDER PASSED ULS 143(3) OF THE ACT CAN BE SUBJECTED TO RE VISION U/S 263. ACCORDINGLY, THE ASSESSMENT ORDER IS HEREBY SET ASI DE WITH A DIRECTION TO THE AO TO EXAMINE THE ISSUE AND PASS A FRESH ORD ER WITHIN THE STIPULATED TIME AFTER PROVIDING DUE OPPORTUNITY TO THE ASSESSEE. AGGRIEVED WITH THE ORDER OF LD. CIT, THE ASSESSEE I S IN APPEAL BEFORE US. 3. THE MAIN CONTENTION OF THE LD.A.R IS THAT THERE IS NO ERROR FOUND BY THE LD. CIT IN THE ASSESSMENT ORDER AND TH E CIT CANNOT MAKE ROVING ENQUIRY. THE AO BEING A QUASI JUDICIAL AUTHORITY, AFTER EXAMINING THE FACTS OF THE CASE HAD TAKEN ONE VIEW, IF THAT VIEW IS POSSIBLE VIEW, CIT CANNOT INTERFERE WITH THE FINDIN GS OF THE AO. ACCORDING TO LD.A.R, THE COMMISSIONER HAS TO BE SAT ISFIED OF TWIN CONDITIONS NAMELY (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE STS OF THE REVENUE. IF ONE OF THE CONDITIONS IS ABSENT, CI CANNOT INVOKE T HE PROVISIONS OF THE SECTION 263 OF THE ACT. THE CIT HAS NOT GIVING ANY FINDINGS HOW THE SALARY PAYMENT IS EXCESSIVE. HE CANNOT QUESTION TH E BUSINESS DIVISION ITA NO.1135/16 :- 4 -: OF THE ASSESSEE IN INCURRING THE EXPENDITURE. ACCO RDING TO HIM, EVERY EXPENDITURE INCURRED BY THE ASSESSEE MAY NOT BE RES ULTED IN INCREASE IN REVENUE. SOMETIME, ASSESSEE IS FORCED TO INCURR THE EXPENDITURE TO AVOID ANY KIND OF LOSS IN THE BUSINESS OF THE ASSES SEE. LD.A.R SUBMITTED THAT AT THE TIME OF ASSESSMENT PROCEEDINGS, THE AO APPLIED HIS MIND AND HAD TAKEN A CONSCIOUS DECISION IN WHICH THE CIT CANNOT FIND MISTAKES. 4. ON THE OTHER HAND, LD.D.R SUBMITTED THAT THE LA BOUR COST INCURRED BY THE ASSESSEE IN THE ASSESSMENT YEAR UND ER CONSIDERATION IS VERY HUGE AS COMPARED TO EARLIER YEARS. HE SUBMITT ED THAT FOR ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE I NCURRED LABOUR COST AT ` 44.88 CRORES AS COMPARED TO IMMEDIATE EARLIER FINA NCIAL YEAR AT ` 32.04 CRORES. THE EXCESS EXPENDITURE BY THE ASSES SEE TOWARDS EMPLOYEE COST FOR THE ASSESSMENT YEAR UNDER CONSIDE RATION WAS ` 12.8 CRORES AS COMPARED TO THE IMMEDIATELY EARLIER ASSES SMENT YEAR. HOWEVER, THE TURNOVER INCREASED FROM IMMEDIATELY EA RLIER FINANCIAL YEAR TO THE CURRENT FINANCIAL YEAR IS ONLY 9.71 CRO RES. ACCORDING O HIM, INCREASE OF LABOUR COST IS ABNORMAL IN THIS ASSESSM ENT YEAR. THERE IS NO ENQUIRY BY THE AO IN THIS REGARD DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. THE ASSESSMENT ORDER IS VERY SILENT TO THIS ISSUE. HE SUBMITTED THAT CIT EXERCISED THE POWER U/S.263 OF T HE ACT AND HAD ITA NO.1135/16 :- 5 -: GIVEN DIRECTION TO THE AO TO EXAMINE THE ISSUE AFTE R GIVING OPPORTUNITY TO THE ASSESSEE. HE RELIED ON THE ORDER OF THE CIT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US AND ALSO GONE TH ROUGH ALL THE JUDGMENTS CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP THE LEGAL ISSUE WITH REFERENCE TO THE JURISDICTION OF INVOKIN G THE PROVISIONS OF SECTION 263 OF THE ACT BY THE LEARNED CIT. THE SCHE ME OF THE IT ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROV ISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO ER RONEOUS ORDER OF THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX LAWFUL LY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INT EREST OF THE REVENUE. AS HELD IN THE CASE OF MALABAR INDUSTRIES CO. LTD., (2 43 ITR 82(SC)), THE COMMISSIONER CAN EXERCISE REVISION JURISDICTIONAL U /S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESSING OFFICER S OUGHT TO BE REVISED IS (I)ERRONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. THE WORD 'ERRONEOUS' HAS NOT BEEN DEFINED IN THE IN COME TAX ACT. IT HAS BEEN HOWEVER DEFINED AT PAGE 562 IN BLACK'S LAW DICTIONARY (SEVENTH EDITION) THUS'; 'ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM TH E LAW'. THE WORD 'ERROR' HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY THUS: ITA NO.1135/16 :- 6 -: 'ERROR NO. 1 : A PSYCHOLOGICAL STATE THAT DOES NOT CONFORM TO OBJECTIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TRUE OR THAT WHAT IS TRUE IS FALSE'. AT PAGE 649/650 IN P. RAMANATHA AIYER'S LAW LEXICON REPRINT 2002, THE WORD 'ERROR' HAS BEEN DEFINED TO MEAN 'ERROR: A MISTAKEN JUDGEMENT OR DEVIATION FROM THE TRUTH IN MATTERS OF FACT, AND FROM THE LAW IN MATTERS OF JUDGEMENT 'ERR OR' IS A FAULT IN JUDGEMENT, OR IN THE PROCESS OR PROCEEDING TO JUDGE MENT OR IN THE EXECUTION UPON THE SAME, IN A COURT OF RECORD; WHIC H IN THE CIVIL LAW IS CALLED A NULLITYIE' (TERMES DE LA LEY). SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INA DVERTENCE S.99 CPC AND S.215 CR.PC. 'ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPEC T THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION.' 6. AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE S COPE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAI NED THUS: 'AN ERROR IS ANY DEVIATION FROM THE STANDARD OR COU RSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INTENTIONAL. A MI STAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSION OF MISCONCEPTION OF THE NATURE OF ITA NO.1135/16 :- 7 -: A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOWLED GE, A MISTAKE IS FROM INSUFFICIENT OR FALSE OBSERVATION. BLUNDER IS A PRACTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMITTED THROUGH GLARING IGNORANCE, HEEDLESSNESS, OR AWKWARDNESS. AN ERROR M AY BE OVERLOOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIED, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO CAN COUNTERAC T. STRICTLY SPEAKING, HALLUCINATION IS AN ILLUSION OF THE PERCE PTION, A PHANTASM OF THE IMAGINATION. THE ONE COMES OF DISORDERED VISION , THE OTHER OF DISCARDED IMAGINATION. IT IS EXTENDED IN MEDICAL SC IENCE TO MATTERS OF SENSATION, WHETHER THERE IS NO CORRESPONDING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN UNACCOUNTABLE ERROR IN JUDGEMENT OR FACT, ESPECIALLY IN ONE REMARKABLE OTHERWISE FOR AC CURATE INFORMATION AND RIGHT DECISION. IT IS EXCEPTIONAL ERROR OR MIST AKE IN THOSE OTHERWISE NOT LIKELY TO BE DECEIVED.' 7. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN WHETHER IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR. IN OUR VIEW, AN OR DER SOUGHT TO BE REVISED UNDER SECTION 263 WOULD BE ERRONEOUS AND FA LL IN THE AFORESAID CATEGORY OF 'ERRORS' IF IT IS, INTER ALIA, BASED ON AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW OR NON- APPLICATION OF MIND TO SOMETHING WHICH WAS OBVIOUS AND REQUIRED APPLICATIO N OF MIND OR ITA NO.1135/16 :- 8 -: BASED ON NO OR INSUFFICIENT MATERIALS SO AS TO AFFE CT THE MERITS OF THE CASE AND THEREBY CAUSE PREJUDICE TO THE INTEREST OF THE REVENUE. 8. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMO VE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFFICER TAKE S A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECO RD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS , WHERE SUCH INQUIRY WAS PRIMA FACIE WARRANTED. THE COMMISSIONER WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONEOUS O N THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFF ICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE CLAIM M ADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. UNLI KE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, THE ROLE OF AN ASSESSING OFFICER UNDER T HE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJUDICATOR BUT ALSO OF AN INVE STIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN, WHICH IS AP PARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. HE MUST DISCHARGE BOTH T HE ROLES EFFECTIVELY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHE RE THE FACTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOU SLY ON THE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCED B Y THE ASSESSEE ITA NO.1135/16 :- 9 -: BEFORE HIM. THE SCHEME OF ASSESSMENT HAS UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESERVES TO BE NOTED THAT THE P RESENT ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE INCOME-TAX ACT . IN OTHER WORDS, THE ASSESSING OFFICER WAS STATUTORILY REQUIRED TO M AKE THE ASSESSMENT UNDER SECTION 143(3) AFTER SCRUTINY AND NOT IN A SU MMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) OF SECTION 143. BUL K OF THE RETURNS FILED BY THE ASSESSEES ACROSS THE COUNTRY IS ACCEPT ED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTIN Y. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSING OFF ICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOUL D BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. T HE ASSESSING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTEREST OF TH E ASSESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF WHAT IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND , HE HAS A DUTY TO PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THA T NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE T AX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS ON HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS H IS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS O F THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE S UCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJEC TING THE CLAIM HAS NO ITA NO.1135/16 :- 10 - : PLACE. THE ORDER PASSED BY THE ASSESSING OFFICER BE COMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHERE THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE THERE IS ANYTHING WRONG WITH HIS ORDER IF ALL THE FACTS STATED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORR ECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS NOT ONLY WHEN IT CONTAINS SOME APPARENT E RROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHE N IT IS A STEREO-TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS ST ATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMINE THE GENUINEN ESS OF THE CLAIM WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CA SE. IN TAKING THE AFORESAID VIEW, WE ARE SUPPORTED BY THE DECISIONS O F THE HON'BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI (SUPRA), SMT . TARA DEVI AGGARWAL V. CIT [1973] 88 ITR 323 (SC), AND MALABAR INDUSTRIAL CO. LTD'S (SUPRA). 9. IN MALABAR INDUSTRIAL CO. LTD. CASE (243 ITR 82 (SC)), THE HON'BLE COURT HAS HELD AS UNDER: 'THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN ITA NO.1135/16 :- 11 - : INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL TH E ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL J USTICE OR WITHOUT APPLICATION OF MIND. IN OUR HUMBLE VIEW, ARBITRARINESS IN DECISION-MAKIN G WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAUSES PRE JUDICE TO AN ASSESSEE OR TO THE STATE EXCHEQUER. THE LEGISLATURE HAS TAKEN AMPLE CARE TO PROVIDE FOR THE MECHANISM TO HAVE SUCH PREJ UDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED THROUGH REV ISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 264 OR THROUGH AP PEALS AND OTHER MEANS OF JUDICIAL REVIEW, THE PREJUDICE CAUSED TO T HE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISD ICTION OF THE COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DE CISION-MAKING CAUSING PREJUDICE TO EITHER PARTY CANNOT THEREFORE BE ALLOWED TO STAND AND STARE AT THE LEGAL SYSTEM. IT IS DIFFICULT TO C OUNTENANCE SUCH ARBITRARINESS IN THE ACTIONS OF THE ASSESSING OFFIC ER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PROTECT THE INT EREST OF BOTH THE PARTIES, NAMELY, THE ASSESSEE AS WELL AS THE STATE. IF HE FAILS TO DISCHARGE HIS DUTIES FAIRLY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDERS CAN ALWAYS BE CORRECTED EITHER AT THE INSTANCE OF THE ASSESSEE, IF THE ASSESSEE IS PREJUDICED OR AT THE I NSTANCE OF THE COMMISSIONER, IF THE REVENUE IS PREJUDICED. WHILE M AKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO PLAY. HE I S THE INVESTIGATOR, ITA NO.1135/16 :- 12 - : PROSECUTOR AS WELL AS ADJUDICATOR. AS AN ADJUDICATO R HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TAXPAYER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQUIRES THAT WHEN HE ENQUIR ES INTO A SUBSTANTIAL MATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDI NG ON THE RELEVANT ISSUE GIVING, HOWSOEVER BRIEFLY, HIS REASONS THEREF OR. IN S.N. MUKHERJEE V. UNION OF INDIA AIR 1990 SC 1984, IT HA S BEEN OBSERVED BY THE HON'BLE SUPREME COURT AS FOLLOWS: 'REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURISDICTIO N BY THE APPELLATE OR SUPERVISORY AUTHORITY. BUT THE OTHER CONSIDERATI ONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN H OLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR IT S DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THAT THE RECORDING OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OR AR BITRARINESS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECI SION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIO NS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH A RE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION , THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT MAY, HOWEVER, BE ADDED THAT IT ITA NO.1135/16 :- 13 - : IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABO RATE AS IN THE DECISION OF A COURT OF LAW. THE EXTENT AND NATURE O F THE REASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICI T SO AS TO INDICATE THAT THE AUTHORITY HAS GIVEN DUE CONSIDERA TION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDING OF RE ASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRM S SUCH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AGREES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE.' 10. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE SUPREME COURT IN SIEMENS ENGG. & MFG. CO. OF INDIA LTD. V. UNION OF INDIA AIR 1976 SC 1785. IT IS SETTLED LAW THAT WHILE MAKING ASSESS MENT ON ASSESSEE, THE ITO ACTS IN A QUASI-JUDICIAL CAPACITY. AN ASSES SMENT ORDER IS AMENABLE TO APPEAL BY THE ASSESSEE AND TO REVISION BY THE COMMISSIONER UNDER SECTIONS 263 AND 264. THEREFORE, A REASONED ORDER ON A SUBSTANTIAL ISSUE IS LEGALLY NECESSARY. THE JUDGMENTS ON WHICH RELIANCE WAS PLACED BY THE LEARNED COUNSEL FO R THE ASSESSEE ALSO POINTS TO THE SAME DIRECTION. THEY HAVE HELD THAT O RDERS, WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVENUE, MUST B E REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IF THE ITA NO.1135/16 :- 14 - : ASSESSING OFFICERS ARE ALLOWED TO MAKE ASSESSMENTS IN AN ARBITRARY MANNER, AS HAS BEEN DONE IN THE CASE BEFORE US, THE ADMINISTRATION OF REVENUE IS BOUND TO SUFFER. IF WITHOUT DISCUSSING T HE NATURE OF THE TRANSACTION AND MATERIALS ON RECORD, THE ASSESSING OFFICER HAD MADE CERTAIN ADDITION TO THE INCOME OF THE ASSESSEE, THE SAME WOULD HAVE BEEN CONSIDERED ERRONEOUS BY ANY APPELLATE AUTHORIT Y AS BEING VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE WHIC H REQUIRE THAT THE AUTHORITY MUST INDICATE THE REASONS FOR AN ADVERSE ORDER. WE FIND NO REASON WHY THE SAME VIEW SHOULD NOT BE TAKEN WHEN A N ORDER IS AGAINST THE INTERESTS OF THE REVENUE. AS A MATTER O F FACT SUCH ORDERS ARE PREJUDICIAL TO THE INTERESTS OF BOTH THE PARTIE S, BECAUSE EVEN THE ASSESSEE IS DEPRIVED OF THE BENEFIT OF A POSITIVE F INDING IN HIS FAVOUR, THOUGH HE MAY HAVE SUFFICIENTLY ESTABLISHED HIS CAS E. 11. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAI D THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNDER SECTION 263 IN T HE FOLLOWING CASES: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERROR O F REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. (II) THE ORDER SOUGHT TO BE REVISED PROCEEDS ON INC ORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW . IN THE SAME ITA NO.1135/16 :- 15 - : CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PR INCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. (III) THE ORDER PASSED BY THE ASSESSING OFFICER IS A STEREOTYPE ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS ST ATED IN HIS RETURN OR WHERE HE FAILS TO MAKE THE REQUISITE ENQU IRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH IS CALLE D FOR IN THE CIRCUMSTANCES OF THE CASE. 12. WE SHALL NOW TURN TO THE FACTS OF THE CASE TO SEE WHETHER THE CASE BEFORE US IS COVERED BY THE AFORESAID PRINCIPL ES. PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER DO ES NOT SHOW ANY APPLICATION OF MIND ON HIS PART. HE HAS MADE ADDITI ON ONLY WITH REGARD TO DEPRECIATION ON INTANGIBLE ASSETS . THIS IS A CASE WHERE THE ASSESSING OFFICER MECHANICALLY ACCEPTED WHAT THE ASSESSEE WAN TED HIM TO ACCEPT WITHOUT ANY APPLICATION OF MIND OR ENQUIRY. THE EVI DENCE AVAILABLE ON RECORD IS NOT ENOUGH TO HOLD THAT THE RETURN OF THE ASSESSEE WAS OBJECTIVELY EXAMINED OR CONSIDERED BY THE ASSESSING OFFICER. IT IS BECAUSE OF SUCH NON-CONSIDERATION OF THE ISSUES ON THE PART OF THE ASSESSING OFFICER THAT THE RETURN FILED BY THE ASSE SSEE STOOD ACCEPTED ON BY MAKING ADDITION TOWARDS DEPRECIATION ON INTAN GIBLE ASSETS. THE ASSESSMENT ORDER PLACED BEFORE US IS CLEARLY ERRONE OUS AS IT WAS PASSED WITHOUT PROPER EXAMINATION OR ENQUIRY OR VER IFICATION OR OBJECTIVE CONSIDERATION OF THE CLAIM MADE BY THE AS SESSEE. THE AO HAS ITA NO.1135/16 :- 16 - : COMPLETELY OMITTED TO EXAMINE THE ISSUES IN QUESTIO N FROM CONSIDERATION AND MADE THE ASSESSMENT IN AN ARBITRA RY MANNER. HIS ORDER IS A COMPLETELY NON-SPEAKING ORDER. IN OUR VI EW, IT WAS A FIT CASE FOR THE LEARNED COMMISSIONER TO EXERCISE HIS REVISI ONAL JURISDICTION UNDER SECTION 263 WHICH HE RIGHTLY EXERCISED BY CAN CELLING THE ASSESSMENT ORDER AND DIRECTING THE ASSESSING OFFICE R TO PASS A FRESH ORDER CONSIDERING THE ISSUES RAISED BY THE CIT ON T HE IMPUGNED ORDER. IN OUR VIEW, THE ASSESSEE SHOULD HAVE NO GRIEVANCE IN THE ACTION OF LEARNED COMMISSIONER IN EXERCISING THE JURISDICTION U/S. 263 OF THE IT ACT. 13. IT WAS HOWEVER CONTENDED BY THE LEARNED COUNSE L THAT THE ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW IN ACCE PTING THE RETURN OF THE ASSESSEE WITH REFERENCE TO EXPENDITURE AND HENC E, THE COMMISSIONER WAS NOT JUSTIFIED IN ASSUMING THE REVI SIONAL JURISDICTION UNDER SECTION 263. WE HAVE GIVEN OUR THOUGHTFUL CON SIDERATION TO THE AFORESAID SUBMISSIONS. AS ALREADY STATED EARLIER, A N ORDER BECOMES ERRONEOUS BECAUSE INQUIRIES, WHICH OUGHT TO HAVE BE EN MADE ON THE FACTS OF THE CASE, WERE NOT MADE AND NOT BECAUSE TH ERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED OR THE CLAIMS MADE IN THE RETURN ARE ASSUMED TO BE CORRECT. THUS, IT IS MERE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE THE NECESSARY INQU IRIES OR TO EXAMINE ITA NO.1135/16 :- 17 - : THE CLAIM MADE BY THE ASSESSEE IN ACCORDANCE WITH L AW, WHICH RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. NOTHING MORE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE. ONE WOULD NOT KNOW AS TO WHAT WOULD HAVE HAPPENED I F THE ASSESSING OFFICER HAD MADE THE REQUISITE INQUIRIES OR EXAMINE D THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. HE COULD HAVE ACCE PTED THE ASSESSEE'S CLAIM. EQUALLY, HE COULD HAVE ALSO REJEC TED THE ASSESSEE'S CLAIM DEPENDING UPON THE RESULTS OF HIS ENQUIRY OR EXAMINATION INTO THE CLAIM OF THE ASSESSEE. THUS, THE FORMATION OF A NY VIEW BY THE ASSESSING OFFICER WOULD NECESSARILY DEPEND UPON THE RESULTS OF HIS INQUIRY AND CONSCIOUS, AND NOT PASSIVE, EXAMINATION INTO THE CLAIM OF THE ASSESSEE. IF THE ASSESSING OFFICER PASSES AN OR DER MECHANICALLY WITHOUT MAKING THE REQUISITE INQUIRIES OR EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW, SUCH AN ORDER WILL CLEARLY BE ERRONEOUS IN LAW AS IT WOULD NOT BE BASED ON OBJECT IVE CONSIDERATION OF THE RELEVANT MATERIALS. IT IS THEREFORE, THE MERE F AILURE ON THE PART OF THE ASSESSING OFFICER IN NOT MAKING THE INQUIRIES O R NOT EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW THAT P ER SE RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE. NOTHING ELSE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE TO SHOW THAT THE ORDER SOUGHT TO BE REVISED IS ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ITA NO.1135/16 :- 18 - : 14. WE ARE UNABLE TO ACCEPT THE SUBMISSION OF THE LEARNED COUNSEL FOR TWO OTHER REASONS ALSO. FIRST REASON IS THAT THE VIEW SO TAKEN BY THE ASSESSING OFFICER WITHOUT MAKING THE R EQUISITE INQUIRIES OR EXAMINING THE CLAIM OF THE ASSESSEE WILL PER SE BE AN ERRONEOUS VIEW AND HENCE WILL BE AMENABLE TO REVISIONAL JURISDICTI ON UNDER SECTION 263. SECOND REASON IS THAT IT IS NOT TAKING OF ANY VIEW THAT WILL TAKE THE MATTER UNDER THE SCOPE OF SECTION 263. THE VIEW TAK EN BY THE ASSESSING OFFICER SHOULD NOT BE A MERE VIEW IN VACU UM BUT A JUDICIAL VIEW. IT IS WELL ESTABLISHED THAT THE ASSESSING OFF ICER BEING A QUASI- JUDICIAL AUTHORITY CANNOT TAKE A VIEW, EITHER AGAIN ST OR IN FAVOUR OF THE ASSESSEE / REVENUE, WITHOUT MAKING PROPER INQUIRIES AND WITHOUT PROPER EXAMINATION OF THE CLAIM MADE BY THE ASSESSE E IN THE LIGHT OF THE APPLICABLE LAW. AS ALREADY STATED EARLIER, WE A RE NOT ABLE TO APPRECIATE ON WHAT MATERIAL WAS PLACED BEFORE THE A SSESSING OFFICER AT THE ASSESSMENT STAGE TO TAKE SUCH A VIEW. THE ASSES SEE HAS ALSO NOT BEEN ABLE TO LEAD ENOUGH EVIDENCE TO SHOW TO US THA T ANY INQUIRY WAS MADE BY THE ASSESSING OFFICER IN THIS REGARD. THERE FORE MERE ALLEGATION THAT THE ASSESSING OFFICER HAS TAKEN A V IEW IN THE MATTER WILL NOT PUT THE MATTER BEYOND THE PURVIEW OF SECTION 26 3 UNLESS THE VIEW SO TAKEN BY THE ASSESSING OFFICER IS A JUDICIAL VIE W CONSCIOUSLY BASED UPON PROPER INQUIRIES AND APPRECIATION OF ALL THE R ELEVANT FACTUAL AND LEGAL ASPECTS OF THE CASE. THE JUDICIAL VIEW TAKEN BY THE ASSESSING ITA NO.1135/16 :- 19 - : OFFICER MAY PERHAPS PLACE THE MATTER OUTSIDE THE PU RVIEW OF SECTION 263 UNLESS IT IS SHOWN THAT THE VIEW SO TAKEN BY TH E ASSESSING OFFICER CONTAINS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. 15. THE LEARNED COUNSEL HAS STRONGLY RELIED UPON TH E FOLLOWING OBSERVATIONS MADE IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) AND SUBMITTED THAT THE LEARNED COMMISSIONER WAS NOT JUSTIFIED IN SUBSTITUTING HIS VIEW FOR THAT OF THE ASSESSING OFF ICER: '... EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN O RDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCO ME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE V IEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TA X OFFICER IS UNSUSTAINABLE IN LAW.' 16. WE HAVE CAREFULLY GONE THROUGH THE AFORESAID O BSERVATIONS. 'ADOPTING' ONE OF THE COURSES PERMISSIBLE IN LAW NE CESSARILY REQUIRES THE ASSESSING OFFICER TO CONSCIOUSLY ANALYSE AND EV ALUATE THE FACTS IN THE LIGHT OF RELEVANT LAW AND BRING THEM ON RECORD. IT IS ONLY THEN THAT HE CAN BE SAID TO HAVE 'ADOPTED' OR CHOSEN ONE OF T HE COURSES ITA NO.1135/16 :- 20 - : PERMISSIBLE IN LAW. THE ASSESSING OFFICER CANNOT BE PRESUMED OR ATTRIBUTED TO HAVE 'ADOPTED' OR CHOSEN A COURSE PER MISSIBLE IN LAW WHEN HIS ORDER DOES NOT SPEAK IN THAT BEHALF. SIMIL ARLY, 'TAKING' ONE VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE ALSO NECE SSARILY IMPORTS THE REQUIREMENT OF ANALYSING THE FACTS IN THE LIGHT OF APPLICABLE LAW. THEREFORE, PROPER EXAMINATION OF FACTS IN THE LIGHT OF RELEVANT LAW IS A NECESSARY CONCOMITANT IN ORDER TO SAY THAT THE ASSE SSING OFFICER HAS ADOPTED A PERMISSIBLE COURSE OF LAW OR TAKEN A VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE. IT IS ONLY AFTER SUCH PROP ER EXAMINATION AND EVALUATION HAS BEEN DONE BY THE ASSESSING OFFICER T HAT HE CAN COME TO A CONCLUSION AS TO WHAT ARE THE PERMISSIBLE COURSES AVAILABLE IN LAW OR WHAT ARE THE POSSIBLE VIEWS ON THE ISSUE BEFORE HIM . IN CASE HE COMES TO THE CONCLUSION THAT MORE THAN ONE VIEW IS POSSIB LE THEN HE HAS NECESSARILY TO CHOOSE A VIEW, WHICH IS MOST APPROPR IATE ON THE FACTS OF THE CASE. IN ORDER TO APPLY THE AFORESAID OBSERVATI ONS TO A GIVEN CASE, IT MUST THEREFORE FIRST BE SHOWN THAT THE ASSESSING OFFICER HAS 'ADOPTED' A PERMISSIBLE COURSE OF LAW OR, WHERE TWO VIEWS ARE POSSIBLE, THE ASSESSING OFFICER HAS 'TAKEN' ONE SUC H POSSIBLE VIEW IN THE ORDER SOUGHT TO BE REVISED UNDER SECTION 263. T HIS REQUIRES THE ASSESSING OFFICER TO TAKE A CONSCIOUS DECISION; ELS E HE WOULD NEITHER BE ABLE TO 'ADOPT' A COURSE PERMISSIBLE IN LAW NOR 'TAKE' A VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE. IN OTHER WORDS, IT IS THE ASSESSING ITA NO.1135/16 :- 21 - : OFFICER WHO HAS TO ADOPT A PERMISSIBLE COURSE OF LA W OR TAKE A VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE. IT IS DIFFICU LT TO COMPREHEND AS TO HOW THE ASSESSING OFFICER CAN BE ATTRIBUTED TO H AVE 'ADOPTED' A PERMISSIBLE COURSE OF LAW OR 'TAKEN' A VIEW WHERE T WO OR MORE VIEWS ARE POSSIBLE WHEN THE ORDER PASSED BY HIM DOES NOT SPEAK IN THAT BEHALF. WE CANNOT ASSUME, IN ORDER TO PROVIDE LEGIT IMACY TO THE ASSESSMENT ORDER, THAT THE ASSESSING OFFICER HAS AD OPTED A PERMISSIBLE COURSE OF LAW OR TAKEN A POSSIBLE VIEW WHERE HIS OR DER DOES NOT SAY SO. THE SUBMISSIONS MADE BY THE LEARNED COUNSEL, IF ACCEPTED, WOULD REQUIRE US TO FORM, SUBSTITUTE AND READ OUR VIEW IN THE ORDER OF THE ASSESSING OFFICER WHEN THE ASSESSING OFFICER HIMSEL F HAS NOT TAKEN A VIEW. IT COULD HAVE BEEN A DIFFERENT POSITION IF TH E ASSESSING OFFICER HAD 'ADOPTED' OR 'TAKEN' A VIEW AFTER ANALYSING THE FACTS AND DECIDING THE MATTER IN THE LIGHT OF THE APPLICABLE LAW. HOWE VER, IN THE CASE BEFORE US, THE ASSESSING OFFICER HAS NOT AT ALL EXA MINED AS TO WHETHER ONLY ONE VIEW WAS POSSIBLE OR TWO OR MORE VIEWS WER E POSSIBLE AND HENCE, THE QUESTION OF HIS ADOPTING OR CHOOSING ONE VIEW IN PREFERENCE TO THE OTHER DOES NOT ARISE. THE AFORESAID OBSERVAT IONS OF THE HON'BLE SUPREME COURT DO NOT, IN OUR VIEW, HELP THE ASSESSE E; AND RATHER THEY ARE AGAINST THE ASSESSEE. ITA NO.1135/16 :- 22 - : 17. IN THE CASE OF PADMASUNDARA RAO V. STATE OF T AMIL NADU [2002] 255 ITR 147, THE HON'BLE SUPREME COURT HAS H ELD THAT:- '... THERE IS ALWAYS PERIL IN TREATING THE WORDS OF A SPEECH OR JUDGMENT AS THOUGH THEY ARE WORDS IN A LEGISLATIVE ENACTMENT, AND IT IS TO BE REMEMBERED THAT JUDICIAL UTTERANCES ARE MADE IN THE SETTING OF THE FACTS OF A PARTICULAR CASE, SAID LORD MORRIN IN HARRINGTON V. BRITISH RAILWAYS BOARD [1972] 2 WLR 5 37 (HL). CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFE RENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN T WO CASES....' THEREFORE, THE OBSERVATIONS OF THE HON'B LE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD'S CASE (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE LEARNED COUNSEL CAN NOT BE READ IN ISOLATION. THE JUDGMENT DESERVES TO BE READ IN I TS ENTIRETY TO CULL OUT THE LAW LAID DOWN BY THE HON'BLE SUPREME C OURT. IF SO READ, IT IS QUITE EVIDENT THAT THE ORDERS PASSED ON AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW OR WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND WILL SATISFY THE REQUIREMENT OF THE ORDER B EING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. IF THE ORDER SOUGHT TO BE REVISED UNDER SECTION 263 SUFFER S FROM ANY OF THE AFORESAID VICES, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS 'ADOPTED', IN SUCH AN ORDER, A COURSE P ERMISSIBLE IN LAW OR 'TAKEN' A VIEW WHERE TWO OR MORE VIEWS ARE P OSSIBLE.' 18. IT WAS NEXT CONTENDED BY THE LEARNED AUTHORISE D REPRESENTATIVE THAT THE ASSESSING OFFICER HAD CONSI DERED ALL THE RELEVANT ASPECTS OF THE CASE CAREFULLY WHILE PASSIN G THE ORDER. ACCORDING TO HIM, THE MERE FACT THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS SHORT WOULD NEITHER MEAN FAILURE ON HIS PART ITA NO.1135/16 :- 23 - : IN NOT EXAMINING THE MATTER CAREFULLY NOR WOULD REN DER HIS ORDER ERRONEOUS SO LONG AS THE VIEW TAKEN BY HIM WAS A PO SSIBLE VIEW. IN OUR VIEW, THE AFORESAID SUBMISSION OF THE ASSESSEE MUST FAIL FOR THE REASONS ALREADY EXPLAINED IN THE FOREGOING PARAS OF THIS ORDER AS THE ORDER, WHICH IS SOUGHT TO BE REVISED UNDER SECTION 263 REFLECTS NO PROPER APPLICATION OF MIND BY THE ASSESSING OFFICER AND THUS BE AMENABLE TO REVISION UNDER SECTION 263. IN THIS CAS E BEFORE US, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER LA CKS JUDICIAL STRENGTH TO STAND. IT IS NOT A CASE WHERE THE ORDER IS SHORT BUT IS NOT SUPPORTED BY JUDICIAL STRENGTH. IT IS IN THIS VIEW OF THE MATTER THAT WE FEEL THAT THE LEARNED COMMISSIONER HAS CORRECTLY EX ERCISED HIS REVISIONAL JURISDICTION UNDER SECTION 263. 19. IN OUR OPINION, THE ASSESSING OFFICER HAS BEEN ENTRUSTED THE ROLE OF AN INVESTIGATOR, PROSECUTOR AS WELL AS ADJU DICATOR UNDER THE SCHEME OF THE INCOME-TAX ACT. IF HE COMMITS AN ERRO R WHILE DISCHARGING THE AFORESAID ROLES AND CONSEQUENTLY PA SSES AN ERRONEOUS ORDER CAUSING PREJUDICE EITHER TO THE ASSESSEE OR T O THE STATE EXCHEQUER OR TO BOTH, THE ORDER SO PASSED BY HIM IS LIABLE TO BE CORRECTED. AS MENTIONED EARLIER, THE ASSESSEE CAN H AVE THE PREJUDICE CAUSED TO HIM CORRECTED BY FILING AN APPEAL; AS ALS O BY FILING A REVISION APPLICATION UNDER SECTION 264. BUT THE STATE EXCHEQ UER HAS NO RIGHT OF ITA NO.1135/16 :- 24 - : APPEAL AGAINST THE ORDERS OF THE ASSESSING OFFICER. SECTION 263 HAS THEREFORE BEEN ENACTED TO EMPOWER THE COMMISSIONER TO CORRECT AN ERRONEOUS ORDER-PASSED BY THE ASSESSING OFFICER WHI CH HE CONSIDERS TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE COMMISSIONER HAS ALSO BEEN EMPOWERED TO INVOKE HIS REVISIONAL JURISD ICTION UNDER SECTION 264 AT THE INSTANCE OF THE ASSESSEE ALSO. T HE LINE OF DIFFERENCE BETWEEN SECTIONS 263 AND 264 IS THAT WHILE THE FORM ER CAN BE INVOKED TO REMOVE THE PREJUDICE CAUSED TO THE STATE THE LAT ER CAN BE INVOKED TO REMOVE THE PREJUDICE CAUSED TO THE ASSESSEE. THE PROVISIONS OF SECTION 263 WOULD LOSE SIGNIFICANCE IF THEY WERE TO BE INTERPRETED IN A MANNER THAT PREVENTED THE COMMISSIONER FROM REVISIN G THE ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER, WHICH WAS PR EJUDICIAL TO THE INTEREST OF THE REVENUE. IN FACT, SUCH A COURSE WOU LD BE COUNTER-PRODUCTIVE AS IT WOULD HAVE THE EFFECT OF P ROMOTING ARBITRARINESS IN THE DECISIONS OF THE ASSESSING OFF ICERS AND THUS DESTROY THE VERY FABRIC OF SOUND TAX DISCIPLINE. IF ERRONEO US ORDERS, WHICH ARE PREJUDICIAL TO THE INTEREST OF THE REVENUE, ARE ALL OWED TO STAND, THE CONSEQUENCES WOULD BE DISASTROUS IN THAT THE HONEST TAX PAYERS WOULD BE REQUIRED TO PAY MORE THAN OTHERS TO COMPENSATE F OR THE LOSS CAUSED BY SUCH ERRONEOUS ORDERS. FOR THIS REASON AL SO, WE ARE OF THE VIEW THAT THE ORDERS PASSED ON AN INCORRECT ASSUMPT ION OF FACTS OR INCORRECT APPLICATION OF LAW OR WITHOUT APPLYING TH E PRINCIPLES OF NATURAL ITA NO.1135/16 :- 25 - : JUSTICE OR WITHOUT APPLICATION OF MIND OR WITHOUT M AKING REQUISITE INQUIRIES WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN T HE MEANING OF SECTION 263. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF CIT AND WE CONFIRM THE SAME. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 27 TH FEBRUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 27 TH FEBRUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF