Span Overseas Private Ltd., Pune V. Commissioner of Income-tax - III,

ITA 1150/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2868 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Principle of natural justice; Earning of tax free income; Prejudicial to interest
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 1150 /PN/201 4 / ASSESSMENT YEAR : 20 0 9 - 1 0 SPA N OVERSEAS PRIVATE LIMITED, (ERSTWHILE KNOWN AS SPAN OVERSEAS LIMITED) OFFICE NO.5, AMAR AVINASH CORPORATE CITY, BUND GARDEN ROAD, PUNE 4110 0 1 . / APPELLANT PAN: AA BCS4214N VS. THE COMMISSIONER OF INCOME TAX III , PUNE . / RESPONDENT / APPELLANT BY : S HRI KETAN VED / RESPONDENT BY : SHRI S.K. RASTOGI / DATE OF HEARING : 1 3 . 0 1 .201 6 / DATE OF PRONOUNCEMENT: 20 . 0 1 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT - III , PUNE , DATED 3 0 . 0 3 .20 1 4 RELATING TO ASSESSMENT YEAR 20 0 9 - 1 0 PASSED UNDER SECTION 263 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . THE ORDER PASSED BY THE LEARNED CIT IS ULTRA VIRES, BAD IN LAW AND CONTRARY TO THE PROVISIONS OF THE ACT AND FACTS OF THE CASE AND HENCE OU GHT TO BE QUASHED . ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 2 2 . THE LEARNED CIT ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. HE ERRED IN NOT APPRECIATING THAT THE ORDER DROPPING THE PENALTY PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3 . THE LEARNED CIT ERRED IN NOT APPRECIATING THAT THE ISSUE WAS DULY DISCUSSED WITH THE ASSESSING OFFICER AND THAT THE PENALTY PROCEEDINGS WERE DROPPED AFTER DUE APPLICATION OF MIND. 4 . THE LEARNED CIT ERRED IN HOLDING THAT THE ISSUE NEEDS FRESH EXAMINATION A T THE END OF THE ASSESSING OFFICER AND SETTING ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE - EXAMINE THE ISSUE. 5 . THE LEARNED CIT ERRED IN MAKING FOLLOWING OBSERVATIONS WHICH ARE CONTRARY TO THE FACTS OF THE CASE AND IN LAW: ... THOUGH THE ASSESSEE HAS TAKEN SHELTER OF JUDICIAL PRONOUNCEMENTS, BUT HAS NOT FILED ANY APPEAL AGAINST THE WORKING OF THE ASSESSING OFFICER, WHICH MEANS THE WORKING OF THE ASSESSEE WAS NOT AS PER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I. T RULE S, 1962... ... HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY, IT COULD HAVE ESCAPED THE ADDITION, WHICH CLEARLY SUGGEST THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN THE RETURN FILED FOR A. Y. 2009 - 10 ... ... THE ASSESSING OFFICER H AS DROPPED THE PROCEEDINGS SIMPLY ACCEPTING THE SUBMISSION OF THE ASSESSEE, WITHOUT DISCUSSING THE MERIT AND LEGALITY OF THE ISSUE INVOLVED ... ... IT IS FURTHER SEEN THAT THE ASSESSEE HAS NOT PREFERRED ANY APPEAL AGAINST THE SAID ADDITION. THIS CLEARLY SHOWS THAT THE ASSESSEE HAS ACCEPTED THE ADDITION MADE BY THE ASSESSING OFFICER. THE APPELLANT OBJECTS TO THE ABOVE OBSERVATIONS MADE BY THE LEARNED CIT. 6 . EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 7 . THE APPELLANT RESERV ES THE RIGHT TO AMEND, ALTER OR ADD TO THE GROUNDS OF APPEAL. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT AGAINST DROPPING OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) O F THE ACT . 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD FURNISHED RETURN OF INCOME ON 27.09.2009. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 15.12.2011. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RECEIVED TAX FREE DIVIDEND OF RS. 96,09,873/ - AND HAD SUO - ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 3 MOTO DISALLOWED SUM OF RS.4,35,012/ - AS EXPENDITURE RELATABLE TO THE EXEMPT INCOME, IN VIEW OF PROVISIONS OF SECTION 14A OF THE ACT. HOWEVER, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF RULE 8D OF INCOM E TAX RULES, 1962 (IN SHORT THE RULES) AND COMPUTED THE DISALLOWANCE AT RS. 40,92,835/ - . THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ACCEPTED BY THE ASSESSEE AND NO APPEAL WAS FILED AGAINST THE ORDER OF ASSESSING OFFICER. CONSEQUENT TO THE A SSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT . AFTER EXAMINING THE SUBMISSIONS OF THE ASSESSEE AS TO WHY NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD BE LEVIED, THE SAID PENALTY PROCEEDINGS WERE DROPPED VIDE ORDER DATED 20.06.2012. 5. THE COMMISSIONER ON EXAMINATION WAS OF THE VIEW THAT PENALTY ORDER DATED 20.06.2012 SUFFERED FROM ERRORS AND SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE OBSERVING THAT PENALTY ORDER PASSED BY THE ASSESSING OFFICER WAS THE ASSESSEE OBSERVING THAT PENALTY ORDER PASSED BY THE ASSESSING OFFICER WAS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, SINCE THE ASSESSEE HAD NOT FILED ANY APPEAL AGAINST THE WORKING OF ASSESSING OFFICER, WHICH IN TURN, MEANS THAT THE WORKING OF THE ASSESSEE WAS NO T AS PER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THE COMMISSIONER FURTHER OBSERVED THAT IF THE CASE HAD NOT BEEN SELECTED FOR SCRUTINY, IT COULD HAVE ESCAPED THE ADDITION , WHICH CLEARLY SUGGESTS THAT THE ASSESSEE HAD FURNISHED INACCURATE PA RTICULARS OF INCOME IN THE RETURN OF INCOME FILED. THE COMMISSIONER WAS OF THE VIEW THAT THE ORDER DROPPING PENALTY FOR CONCEALMENT BY THE ASSESSING OFFICER WAS WITHOUT DISCUSSING THE MERIT AND LEGALITY OF THE ISSUE INVOLVED. THE COMMISSIONER AFTER CONSI DERING THE REPLY OF THE ASSESSEE WAS OF THE VIEW THAT WHERE THE CASE WAS SELECTED TO EXAMINE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AND AFTER DISALLOWING SUM OF RS.36,57,823/ - UNDER SECTION 14A OF THE ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 4 ACT , THE ASSESSING OFFICER SHOULD HAVE LEVIED PE NALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE COMMISSIONER FURTHER STATED THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE AND IN HIS VIEW, THE ISSUE NEEDS FRESH EXAMIN ATION AT THE END OF THE ASSESSING OFFICER AND HENCE, THE MATTER WAS SET - ASIDE TO THE FILE OF ASSESSING OFFICER WITH DIRECTION TO RE - EXAMINE THE ISSUE. VIDE PARA 4 AT PAGE 5 OF THE ORDER PASSED UNDER SECTION 263 OF THE ACT, THE COMMISSIONER REFERS TO AN OR DER DATED 25.10.2011 FOR ASSESSMENT YEAR 2009 - 10 AND WAS OF THE VIEW THAT THE SAME NEEDS TO BE SET - ASIDE FOR DE NOVO EXAMINATION OF THE FACTS. WHILE CONCLUDING THE ORDER, THE COMMISSIONER SET - ASIDE THE ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT FOR A SSESSMENT YEAR 2009 - 10 UNDER SECTION 263 OF THE ACT FOR DETERMINATION OF INCOME AFTER PROPER EXAMINATION OF THE FACTS AND LEGALITY OF THE CASE. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER PASSED BY THE 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT. 7. T HE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ORDER PASSED BY THE COMMISSIONER WITH DIRECTION TO RE - EXAMINE THE ISSUE IS NOT PROPER, WHERE THE ASSESSING OFFICER HAD ALREADY TAKEN A VIEW AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND HAD DROPPED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT . THE ISSUE OF WHETHER PENALTY IS TO BE LEVIED OR NOT IS ONE POSSIBLE VIEW, WHICH HAS BEEN TAKEN BY THE ASSESSING OFFICER AND THE COMMISSIONER IN EXERCISE OF HIS JURISDICTION U NDER SECTION 263 OF THE ACT COULD NOT CHANGE OR DISTURB THE SAME. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO S LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) AND MALABAR INDUSTRIAL CO. LTD. VS. CIT ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 5 (2000) 243 ITR 83 (SC) . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THERE WAS NO FINDING BY THE COMMISSIONER AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER IN DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS ERRONE OUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. HE HAD JUST SET - ASIDE THE ISSUE IGNORING THE SUBMISSIONS MADE BY THE ASSESSEE MERELY STATING THAT WHERE THE ASSESSEE HAD NOT FILED ANY APPEAL AGAINST THE ADDITION MADE IN THE QUANTUM PROCEEDINGS, PENALTY FOR CONCEALMENT COULD NOT BE DELETED. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 108 (BOM) AND THE DECISION OF MUMBAI BENCH OF TRIBUNAL IN ELDER IT SOLUTIONS PVT. LTD . VS. CIT (2015) 59 TAXMANN.COM 232. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF COMMISSIONER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN EX ERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT IN HOLDING THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . 10. UNDER SECTION 263 OF THE ACT, THE COMMISSIONER CAN INVOKE HIS JURISDICTION WHERE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. AN ERRONEOUS ORDER WHICH HAS RESULTED IN THE ORDER BEING PREJUDICIAL TO THE INTEREST OF REVENUE CAN BE LOOKED INTO BY THE COMMISSIONER, WHILE EXERCISING THE JURISDICTIONAL POWER TO REVIEW THE ORDERS OF THE SUBORDINATE AUTHORITIES. THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. CIT, (2000) 243 ITR 83 (SC) HELD AS UNDER: - ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 6 'THERE CAN BE NO DOUBT THAT THE PROV ISION 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 WIL L 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. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSIO N OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE HIGH COURT OF CALCUTTA IN DAWJEE DADABHOY AND CO. V. S. P. JAIN [1957] 31 ITR 872, THE HIGH COURT OF KARNATAKA IN CIT V. T. NARAYANA PAI [1975] 98 ITR 422, THE HIGH COURT OF BOMBAY IN CIT V. GABRIEL INDIA LTD. [1993] 203 ITR 108 AND THE HIGH COURT OF GUJARAT IN CIT V. SMT. MINALBEN S. PARIKH [1995] 215 ITR 81 TREATED LOSS OF TAX AS PREJUDICIAL TO THE INTERESTS OF THE REVENU E. MR. ABRAHAM RELIED ON THE JUDGMENT OF THE DIVISION BENCH OF THE HIGH COURT OF MADRAS IN VENKATAKRISHNA RICE COMPANY V. CIT [1987] 163 ITR 129 INTERPRETING 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 'THE HIGH COURT HELD (PAGE 138) : 'IN THIS CONTEXT, IT MUST BE REGARDED AS INVOLVING A CONCEPTION OF ACTS OR ORDERS WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVENUE. THERE MUST BE SOME GRIEVOUS ERROR IN THE ORDER PASSED BY THE INCOME - TAX OFFICER, WHICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR ASSE SSMENTS, WHICH ON A BROAD RECKONING, THE COMMISSIONER MIGHT THINK TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRATION.' IN OUR VIEW, THIS INTERPRETATION IS TOO NARROW TO MERIT ACCEPTANCE. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDA NCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME - TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. REVENUE'. 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 T O THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN 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 COMMI SSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. ' 11 . UNDER THE PROVISIONS OF SECTION 263 OF THE ACT, THE TERM ERRONE OUS MEANS A WRONG / INCORRECT DECISION DEVIATING FROM THE LAW. THIS EXPRESSION ALSO POSTULATES AN ERROR WHICH MAKES AN ORDER UN - SUSTAINABLE IN LAW. THE EXPRESSION PREJUDICIAL TO THE INTEREST OF REVENUE IS OF WIDE IMPORT AND IS CONNECTED TO LOSS OF REVEN UE . ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 7 12. THE HONBLE DELHI HIGH COURT IN GEE VEE ENTERPRISES VS. ADDL.CIT & OTHERS, (1975) 99 ITR 375 (DEL) HELD AS UNDER: - 'THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME - TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT. THE STATEM ENTS MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ACCEPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCO ME - TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN T HE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS' IN SECTION 263 EMERGES OUT OF THIS CONTEXT. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME - TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN T HE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING W RONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT.' 13. THE HONBLE SUPREME COURT IN CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) HELD AS UNDER: - THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN SECTION 263 OF THE INCOME - TAX ACT, 1961,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 CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, I T CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 14. THE HONBLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 108 (BOM) HAD HELD AS UNDER: - .. . FROM A RENDING OF SUB - SECTION (1) OF SECTION 263, IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE INCOME - TAX OFFICER IS 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE' . IT IS NOT AN ARBITRARY OR UNCHARTERED POWER, IT CAN BE EXERCISED ONLY ON FULFILLMENT OF THE REQUIREMENTS LAID DOWN IN SUB - SECTION (1). THE CONSIDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST BE BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHIC H IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO START ING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 8 CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL - ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYO ND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI - JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. 15 . THE HONBLE DELHI HIGH COURT IN ITO VS. DG HOUSING PROJECTS LTD. (2012) 343 IT R 329 (DELHI) WHILE REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD. (SUPRA) OBSERVED AS UNDER: - FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME - TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NO T VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME - TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME - TAX OFFICER WHILE MAKING AN ASSESSMENT EXA MINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINI ON THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE INCOME - TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER T O RE - EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE INCOME - TAX OFFICER HAS INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE INCOME - TAX OFFICER HAS EXERCISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE FORM ED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION . . . THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEV ANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED . . 16. THE HONBLE DELHI HIGH COURT IN ITO VS. DG HOUSING PROJECTS LTD. (SUPRA) FURTHER WHILE ELABORATING ON THE POWERS OF THE COMMISSIONER, OBSER VED AS UNDER: - 16. THUS, IN CASES OF WRONG OPINION OR FINDING ON MERITS, THE CIT HAS TO COME TO THE CONCLUSION AND HIMSELF DECIDE THAT THE ORDER IS ERRONEOUS, BY CONDUCTING NECESSARY ENQUIRY, IF REQUIRED AND NECESSARY, BEFORE THE ORDER UNDER SECTION 263 I S PASSED. IN SUCH CASES, THE ORDER OF THE ASSESSING OFFICER WILL BE ERRONEOUS BECAUSE THE ORDER PASSED IS NOT SUSTAINABLE IN LAW AND THE SAID FINDING MUST BE RECORDED. CIT CANNOT REMAND THE MATTER TO THE ASSESSING OFFICER TO DECIDE WHETHER THE FINDINGS REC ORDED ARE ERRONEOUS. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY, AGAIN THE CIT MUST GIVE AND RECORD A FINDING THAT THE ORDER/INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER, MAKING THE ORDER ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 9 UNSUSTAINABLE IN LAW. IN SOME CASES POSSIBLY THOUGH RARELY, THE CIT CAN ALSO SHOW AND ESTABLISH THAT THE FACTS ON RECORD OR INFERENCES DRAWN FROM FACTS ON RECO RD PER SE JUSTIFIED AND MANDATED FURTHER ENQUIRY OR INVESTIGATION BUT THE ASSESSING OFFICER HAD ERRONEOUSLY NOT UNDERTAKEN THE SAME. HOWEVER, THE SAID FINDING MUST BE CLEAR, UNAMBIGUOUS AND NOT DEBATABLE. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS. FINDING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMENT WHICH MUST BE SATISFIED FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT. IN SUCH MATTERS, TO REMAND THE MATTER/ISSUE TO THE ASSESSING OFFICER WOULD IMPLY AND MEAN THE CIT HAS NOT EXAMINED, AND DECIDED WHETHER OR NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THE ASPECT/QUESTION. 17. THIS DISTINCTIO N MUST BE KEPT IN MIND BY THE CIT WHILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT AND IN THE ABSENCE OF THE FINDING THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, EXERCISE OF JURISDICTION UNDER THE SAID SECTION IS NOT SU STAINABLE. IN MOST CASES OF ALLEGED 'INADEQUATE INVESTIGATION', IT WILL BE DIFFICULT TO HOLD THAT THE ORDER OF THE ASSESSING OFFICER, WHO HAD CONDUCTED ENQUIRIES AND HAD ACTED AS AN INVESTIGATOR, IS ERRONEOUS, WITHOUT CIT CONDUCTING VERIFICATION/INQUIRY. T HE ORDER OF THE ASSESSING OFFICER MAY BE OR MAY NOT BE WRONG. CIT CANNOT DIRECT RECONSIDERATION ON THIS GROUND BUT ONLY WHEN THE ORDER IS ERRONEOUS. AN ORDER OF REMIT CANNOT BE PASSED BY THE CIT TO ASK THE ASSESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. AN ORDER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. AN ORDER WILL NOT BECOME ERRONEOUS BECAUSE ON REMIT, THE ASSESSING OFFICER MAY DECIDE THAT THE ORDER IS ERRONEOUS. THEREFORE CIT MUS T AFTER RECORDING REASONS HOLD THAT THE ORDER IS ERRONEOUS. THE JURISDICTIONAL PRECONDITION STIPULATED IS THAT THE CIT MUST COME TO THE CONCLUSION THAT THE ORDER IS ERRONEOUS AND IS UNSUSTAINABLE IN LAW. WE MAY NOTICE THAT THE MATERIAL WHICH THE CIT CAN RE LY INCLUDES NOT ONLY THE RECORD AS IT STANDS AT THE TIME WHEN THE ORDER IN QUESTION WAS PASSED BY THE AS IT STANDS AT THE TIME WHEN THE ORDER IN QUESTION WAS PASSED BY THE ASSESSING OFFICER BUT ALSO THE RECORD AS IT STANDS AT THE TIME OF EXAMINATION BY THE CIT [SEE CIT VS. SHREE MANJUNATHESWARE PACKING PRODUCTS, 231 ITR 53 ( SC)]. NOTHING BARS/PROHIBITS THE CIT FROM COLLECTING AND RELYING UPON NEW/ADDITIONAL MATERIAL/EVIDENCE TO SHOW AND STATE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. 18. 19. IN THE PRESENT CASE, THE FINDINGS RECORDED BY THE TRIBUNAL ARE CORRE CT AS THE CIT HAS NOT GONE INTO AND HAS NOT GIVEN ANY REASON FOR OBSERVING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS. THE FINDING RECORDED BY THE CIT IS THAT 'ORDER PASSED BY THE ASSESSING OFFICER MAY BE ERRONEOUS'. THE CIT HAD DOUBTS ABOUT THE VALUATION AND SALE CONSIDERATION RECEIVED BUT THE CIT SHOULD HAVE EXAMINED THE SAID ASPECT HIMSELF AND GIVEN A FINDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS. HE CAME TO THE CONCLUSION AND FINDING THAT THE ASSESSING OFFICER HAD EXAMINED THE SAID ASPECT AND ACCEPTED THE RESPONDENT'S COMPUTATION FIGURES BUT HE HAD RESERVATIONS. THE CIT IN THE ORDER HAS RECORDED THAT THE CONSIDERATION RECEIVABLE WAS EXAMINED BY THE ASSESSING OFFICER BUT WAS NOT PROPERLY EXAMINED AND THER EFORE THE ASSESSMENT ORDER IS 'ERRONEOUS'. THE SAID FINDING WILL BE CORRECT, IF THE CIT HAD EXAMINED AND VERIFIED THE SAID TRANSACTION HIMSELF AND GIVEN A FINDING ON MERITS. AS HELD ABOVE, A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE ASSESSING OFFIC ER DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER CONDUCTS ENQUIRY BUT FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PREJ UDICIAL TO THE INTEREST OF THE ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 10 REVENUE. IN LATTER CASES, THE CIT HAS TO EXAMINE THE ORDER OF THE ASSESSING OFFICER ON MERITS OR THE DECISION TAKEN BY THE ASSESSING OFFICER ON MERITS AND THEN HOLD AND FORM AN OPINION ON MERITS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE SECOND SET OF CASES, CIT CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. 17 . THE HO NBLE GUWAHATI HIGH COURT IN B & A PLANTATION & INDUSTRIES LTD. & ANOTHER VS.CIT & OTHERS (2007) 290 ITR 395 (GAU) WHILE ELABORATING ON THE POWERS OF THE COMMISSIONER WHILE EXERCISING THE JURISDICTION UNDER SECTION 263 OF THE ACT, HAD HELD THAT IT WAS NOT OPEN TO THE COMMISSIONER TO CONSIDER THE ORDER OF ASSESSING OFFICER AS ERRONEOUS MERELY BECAUSE IN HIS VIEW, CERTAIN AMOUNT OF BONUS SHOULD HAVE BEEN DISALLOWED. WHERE THE COMMISSIONER HAD NOT APPLIED HIS INDEPENDENT MIND TO COME TO THE CONCLUSION THAT TH E ASSESSMENT NEEDS TO BE REVISED, THERE WAS NO MERIT IN THE ORDER PASSED BY THE COMMISSIONER AND THE SAME WAS SET - ASIDE AND QUASHED. THE HONBLE HIGH COURT HELD AS UNDER: - TWO CIRCUMSTANCES MUST CO - EXIST TO ENABLE A CIT TO EXERCISE POWER OF SUO MOTU REVI SION. THESE CIRCUMSTANCES ARE : (I) THE ORDER MUST BE AN ERRONEOUS ONE AND (II) BECAUSE OF BEING AN ERRONEOUS ORDER, THE ORDER MUST HAVE BECOME PREJUDICIAL TO THE INTERESTS OF THE REVENUE. UNLESS BOTH THESE INGREDIENTS ARE PRESENT IN A GIVEN CASE, IT IS NO T LEGALLY PERMISSIBLE FOR A CIT TO INITIATE SUO MOTU PROCEEDING UNDER S. 263. 'ERRONEOUS ASSESSMENT' REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, HENCE, INVALID. THE ERRONEOUS ASSESSMENT PERTAINS TO A DEFECT, WHICH IS JURISDICTIONAL IN NATURE . IT DOES NOT REFER TO THE JUDGMENT OF THE AO IN FIXING THE AMOUNT OR VALUATION OF PROPERTY. 'ERRONEOUS JUDGMENT' MEANS ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF COURT; BUT CONTRARY TO LAW, UPON A MISTAKEN VIEW OF LAW OR UPON AN ERRONEOUS APPLICATIO N OF LEGAL PRINCIPLES. AN ORDER CANNOT BE TERMED ERRONEOUS UNLESS IT CAN BE SHOWN TO BE AN ORDER, WHICH IS NOT IN ACCORDANCE WITH LAW. IF THE ITO, ACTING IN ACCORDANCE WITH LAW, MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE TERMED AS ERRONEOUS BY THE CIT ME RELY BECAUSE, THE ORDER, ACCORDING TO THE CIT, SHOULD HAVE BEEN MORE ELABORATE IN WRITING. SEC. 263 DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE CIT FOR THAT OF THE ITO, WHO MAKES THE ASSESSMENT, UNLESS THE DECISION OF THE ITO IS HELD T O BE AN ERRONEOUS ONE. IT IS AN ESTABLISHED POSITION OF LAW THAT THE CIT, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND IF IT WAS DONE BY THE CIT HIMSELF, THEN HE WOULD HAVE ESTIM ATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE ITO; BUT SUCH OPINION WOULD NOT VEST IN THE CIT THE POWER TO RE - EXAMINE THE ACCOUNTS AND DETERMINE THE SAME AT A HIGHER FIGURE. SEC. 263 DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDG MENT OF THE CIT FOR THAT OF THE SUBORDINATE AUTHORITY WHO PASSED THE ORDER WHICH IS SOUGHT TO BE REVISED. THE ORDER PASSED BY A ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 11 SUBORDINATE AUTHORITY IN EXERCISE OF ITS QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW, CANNOT BE TERMED ERRONEOUS M ERELY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSIONS REACHED. 18 . THE HONBLE GUWAHATI HIGH COURT FURTHER HELD THAT AS UNDER: - VIEWED THUS, IT IS CLEAR THAT EVERY ERROR CANNOT BE AN ERROR OF JURISDICTION AND EVERY ERROR OF AN ASSESSING AUT HORITY IS NOT OPEN TO EXERCISE OF SUO MOTU REVISIONAL POWERS UNDER S. 263. IF AN AUTHORITY WHICH HAS THE POWER TO ASSESS, MAKES AN ASSESSMENT AND COMMITS A MISTAKE OR ALLOWS A DEDUCTION WHICH OUGHT NOT TO HAVE BEEN ALLOWED, SUCH A MISTAKE, UNLESS IT GOES T O THE ROOT OF THE MAKING OF THE ASSESSMENT ORDER, CANNOT BE REVISED UNDER S. 263. THIS POWER CANNOT BE EXERCISED AS A JURISDICTIONALLY CORRECTIVE POWER OR AS A REVIEW OF THE ORDERS PASSED BY SUBORDINATE AUTHORITIES. THIS POWER UNDER S. 263 CAN BE INVOKED O NLY FOR THE PURPOSE OF CORRECTING SUCH WRONGS, WHICH HAVE TAKEN PLACE BECAUSE OF NON - APPLICATION OF LAW OR FOR A WHOLLY INCORRECT APPLICATION OF LAW AND WHEN SUCH APPLICATION OR NON - APPLICATION OF LAW CAUSES PREJUDICE TO THE REVENUE 19 . WHERE THERE IS A FINDING OF FACT AND AS APPARENT FROM THE RECORD OF PROCEEDING THAT THE ASSESSING OFFICER HAD FRAMED THE ASSESSMENT AFTER DUE APPLICATION OF MIND AND HOLDING ENQUIRIES , MERELY BECAUSE, THE COMMISSIONER IS OF THE VIEW THAT NO ENQUIRIES AND / OR NON - SUFFICIEN T ENQUIRIES HAD BEEN CONDUCTED BY THE ASSESSING OFFICER, DOES NOT EMPOWER THE COMMISSIONER TO EXERCISE THE JURISDICTION UNDER SECTION 263 OF THE ACT. IT IS THE RECORD OF PROCEEDINGS FROM WHICH THE PRESUMPTION CAN BE DRAWN AS TO WHETHER THE ASSESSING OFFIC ER HAD APPLIED HIS MIND TO THE VARIOUS ASPECTS OF THE MATTER OR NOT. IN CASE, THE ASSESSING OFFICER HAD APPLIED HIS MIND AND COME TO A CONCLUSION TO WHICH THE COMMISSIONER DOES NOT AGREE AND MERELY ON SUCH GROUNDS CANNOT SATISFY THE TEST OF THE NECESSARY CONDITIONS FOR INVOKING THE JURISDICTION UNDER SECTION 263 OF THE ACT. WHERE THE PERUSAL OF RECORD REFLECTS THAT ENQUIRIES HAVE BEEN MADE BY THE ASSESSING OFFICER AND A PARTICULAR CONCLUSION WAS REACHED BY THE ASSESSING OFFICER, WITH REFERENCE TO SUCH ENQ UIRIES MADE DURING THE COURSE OF ASSESSMENT AND IF THE SAME IS APPARENT FROM THE PERUSAL OF THE RECORD OF PROCEEDINGS, THEN THE INVOCATION OF JURISDICTION BY THE COMMISSIONER UNDER SUCH CIRCUMSTANCES UNDER SECTION 263 OF THE ACT IS ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 12 NOT SUSTAINABLE. IN ANY CASE AS HELD BY THE HONBLE DELHI HIGH COURT IN ITO VS. DG HOUSING PROJECTS LTD. (SUPRA) IN CASES WHERE THERE IS AN INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY, THEN THE COMMISSIONER MUST RECORD A FINDING THAT THE ORDER / ENQUIRY MADE BY THE ASSESSING OFFI CER WAS ERRONEOUS, WHICH CAN ONLY HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE COMMISSIONER AND HE IS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE ASSESSING OFFICER. THE FINDING OF THE COMMISSIONER MUST BE CLEAR, UN - AMBIGUOUS A ND NOT DEBATABLE. THE MATTER CANNOT BE SET - ASIDE TO THE FILE OF ASSESSING OFFICER TO MAKE FURTHER ENQUIRIES WITHOUT A FINDING AS TO THE ORDER BEING ERRONEOUS. IT HAS BEEN HELD BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD. (SUPRA) THAT EX ERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT CANNOT BE INVOKED FOR MAKING SHORT ENQUIRIES OR TO GO INTO THE PROCESS OF ASSESSMENT AGAIN AND AGAIN MERELY ON THE BASIS THAT MORE ENQUIRIES OUGHT TO HAVE BEEN CONDUCTED TO FIND SOMETHING . 20. IN CASES WHERE, TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAD TAKEN ONE VIEW, WITH WHICH THE COMMISSIONER MAY NOT AGREE, THE SAID ORDER CANNOT BE TERMED AS ERRONEOUS AS HELD BY THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. CIT (SUPRA). FURTH ER, THE HONBLE SUPREME COURT HAD OBSERVED THAT THE PHRASE PREJUDICIAL TO INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. HOWEVER, LOSS OF REVENUE AS A CONSEQUENCE TO ORDER OF THE ASSESSING OFFI CER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE HONBLE APEX COURT (SUPRA) FURTHER HELD THAT WHERE THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES PERMISSIBLE AND AVAILABLE TO HIM, WHICH IN TURN, HAD RESULTED IN LOSS TO THE REVEN UE, CANNOT MAKE THE ORDER PREJUDICIAL TO THE INTEREST OF REVENUE. IN CASE, WHERE THE COMMISSIONER GIVES HIS FINDING THAT THE VIEW ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 13 TAKEN BY THE ASSESSING OFFICER IS UN - SUSTAINABLE IN LAW AND THEREFORE, THE ORDER IS ERRONEOUS, WHICH IN TURN, WAS PREJUDICIAL TO THE INTEREST OF REVENUE, THEN THE EXERCISE OF POWER BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT IS TO BE UPHELD. 2 1 . NOW, COMING TO THE FACTS OF THE PRESENT CASE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT, UNDER WHICH THE DISAL LOWANCE WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES AT RS.40,92,835/ - , AS AGAINST SUO - MOTO DISALLOWANCE MADE BY THE ASSESSEE OF RS. 4,35,012 . IN RESPECT OF THE AFORESAID ADDITION, THE ASSESSING OFFICER HAD ISSUED A NOTICE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. HOWEVER, AFTER CONSIDERING THE SUBMISSIONS FILED BY THE ASSESSEE DURING PENALTY PROCEEDINGS, THE ASSESSING OFFICER DROPPED THE SAID PROCEEDINGS VIDE ORDER DATED 20.06.2012. THE ASSES SING OFFICER THUS, EXERCISED A VIEW OF NOT LEVYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE ISSUE OF LEVYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THIS VIEW EXPRESSED BY THE ASSESSING OFFICER CANNOT BE DISTURBED BY THE COMMISSIONER WHILE EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT. THE COMMISSIONER IN ORDER TO EXERCISE HIS POWERS UNDER SECTION 263 OF THE ACT, HAS TO GIVE A FINDING THAT THE VIEW TAKEN BY THE ASSESSING OFFICER WAS UNSUSTAINABLE IN LAW AND HE NCE, THE ORDER WAS ERRONEOUS, WHICH IN TURN, WAS PREJUDICIAL TO THE INTEREST OF REVENUE. THE PERUSAL OF THE ORDER PASSED BY THE COMMISSIONER REFLECTS THAT HE HAS CONSIDERED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, BUT THE COMMISSIONER HAS FAILED TO GIVE A FINDING AS TO FOR WHAT REASON, THE SAME IS ERRONEOUS. FURTHER, DIRECTIONS HAVE BEEN GIVEN BY THE COMMISSIONER THAT THE ISSUE NEEDS FRESH EXAMINATION AT THE END OF ASSESSING OFFICER AND HENCE, THE ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 14 MATTER WAS SET - ASIDE TO THE ASSESSING OFFICER WITH DIRECTION TO RE - EXAMINE THE ISSUE . WE FIND NO MERIT IN THE SAID STAND OF THE COMMISSIONER . W HERE THE SUBMISSIONS MADE BY THE ASSESSEE AS TO WHY PENALTY FOR CONCEALMENT UNDER SECTIO N 271(1)(C) OF THE ACT IS NO T LEVIABLE HAD BEEN CONSIDERED BY THE ASSESSING OFFICER AND PENALTY PROCEEDINGS WERE DROPPED, THE COMMISSIONER ON THE PREMISE THAT NO APPEAL HAD BEEN FILED BY THE ASSESSEE AGAINST THE ADDITIONS MADE IN THE QUANTUM PROCEEDINGS , C ANNOT H O LD THAT THE PENALTY ORDER WAS ERRONEOUS . 22. IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT THE QUANTUM AND PENALTY PROCEEDINGS ARE INDEPENDENT OF EACH OTHER AND MERELY BECAUSE ADDITION HAS BEEN MADE IN A PARTICULAR YEAR, DOES NOT AUTOMATICALLY R ESULT IN LEVY OF PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE IS AT LIBERTY TO EXPLAIN BEFORE THE ASSESSING OFFICER AS TO WHY THE SAID PENALTY IS NOT LEVIABLE AGAINST THE ADDITIONS MADE IN THE QUANTUM PROCEEDINGS. IN THE FACTS OF THE AGAINST THE ADDITIONS MADE IN THE QUANTUM PROCEEDINGS. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE H AD FURNISHED SUCH AN EXPLANATION AND AFTER ACCEPTING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER CAME TO A VIEW THAT NO PENALTY WA S LEVIABLE. THE DECISION OF THE ASSESSING OFFICER CANNOT BE DISTURBED BY THE C OMMISSIONER, ESPECIALLY WHEN NO FINDINGS HAVE BEEN GIVEN AGAINST THE ORDER OF ASSESSING OFFICER AS TO WHY THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. SECONDLY, THE COMMISSIONER HAS NOT COME TO ANY FINDING AND IN THAT RESPECT ALSO, EXE RCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT IS NOT WARRANTED AS THE SAID POWER COULD NOT BE USED FOR CARRYING OUT ANOTHER INVESTIGATION UPON FACTS OF THE CASE. MERELY BECAUSE, THE ORDER OF ASSESSING OFFICER HAD NOT DISCUSSED THE ISSUE AT LENGTH, DO ES NOT MAKE THE ORDER ERRONEOUS AS HELD BY VARIOUS COURTS AND IN THE ABSENCE OF THE ORDER BEING ERRONEOUS, THE SAME EVEN IF , IS PREJUDICIAL TO THE INTEREST OF ITA NO. 1150 /PN/20 1 4 SPAN OVERSEAS PVT. LTD. 15 REVENUE, IS NOT OPEN FOR EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 OF THE AC T. THE COMMISSIONER CANNOT USE THE SAID POWER TO MAKE FURTHER ENQUIRIES , MERELY BECAUSE, HE ENTERTAINS D IFFERENT OPINION IN THE MATTER. IN SUCH CIRCUMSTANCES, THERE IS NO MERIT IN THE EXERCISE OF POWER UNDER SECTION 263 OF THE ACT AND ACCORDINGLY, WE SET - ASIDE THE ORDER PASSED BY THE COMMISSIONER. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 2 3 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D ON THIS 20 TH DAY OF JANUARY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 20 TH JANUARY , 201 6 . / PUNE ; DATED : 20 TH JANUARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APP ELLANT ; 2. / THE RESPONDENT; 3. / THE CIT - III , PUNE ; 4 . , , / DR A , ITAT, PUNE; 5 . / GUARD FILE . / BY ORDER , // TRUE COPY // / S R. PRIVATE SECRETARY , / ITAT, PUNE