M.Muthusamy & Co., CHENNAI V. DCIT, Trichy

ITA 1215/CHNY/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4627 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 27-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2013
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: S SRIDHAR
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Business income; Principle of natural justice; Deemed to accrue or arise in india
• Section: 69C; 143(3); 68; 69; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 1215/MDS/2013 / ASSESSMENT YEAR : 2008-09 M/S. M. MUTHUSAMY & CO ., 283, CHANDRA BHAVAN, CENTRAL BUS STAND, TIRUCHIRAPALLI. PAN AAKFM1870A ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-I(1), TRICHY. RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI PATHLAVATH PEERYA, CIT ! / DATE OF HEARING : 27.04.2017 '# ! / DATE OF PRONOUNCEMENT : 11.05.2017 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX, DATED 20.3.2013 PASSED UNDER SEC.263 OF THE ACT, FOR THE ASSESSMENT YEAR 2 008-09. - - ITA 1215/13 2 2. THE ASSESSEE IN THIS APPEAL IS CHALLENGING THE J URISDICTION OF THE CIT U/S.263 OF THE ACT AND ALSO MERITS OF TH E ADDITIONS. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE CL AIMED SET OFF OF BUSINESS LOSS FOR AN AMOUNT OF 5 LAKHS, WHICH WAS THE INCOME FROM OTHER SOURCES. IT WAS ALLOWED BY THE A O WHILE FRAMING THE ASSESSMENT U/S.143(3) OF THE ACT. +THE CIT TOOK UP THE ISUSE FORREVISION U/S.263 OF THE ACT AND ACCORD ING TO THE CIT, BUSINESS LOSS CANNOT BE SET OFF AGAINST OTHER SOURC ES AS PER SEC.71 OF THE ACT, UNLESS THE INCOME IS FROM ANY OF FIVE HEADS, THE BENEFIT OF SEC.71 OF THE ACT CANNOT BE GIVEN T O THE ASSESSEE. ACCORDINGLY, THE ASSESSMENT MADE BY THE ASSESSING O FFICER U/S.143(3) IS SET ASIDE BY THE CIT TO THE EXTENT OF CASH CREDIT DISALLOWED AND BENEFIT GIVEN U/S.71 OF THE ACT WAS WITHDRAWN AND HAS ALSO GIVEN THE DIRECTION TO THE AO TO REFR AME THE ASSESSMENT AFTER GIVING AN OPPORTUNITY TO THE ASSES SEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. SECTION 263 OF THE INCOME-TAX ACT SE EKS TO REMOVE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOU S ORDER - - ITA 1215/13 3 PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE CO MMISSIONER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE A SSESSING OFFICER TAKES A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS, WHERE SUCH INQUIRY WAS PR IMA FACIE WARRANTED. THE COMMISSIONER WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER SH OULD 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 ASSESSI NG OFFICER UNDER THE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJ UDICATOR BUT ALSO OF AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE I N THE FACE OF A RETURN, WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. HE MUST DISCHARGE BOTH THE ROLES EFFECTIVELY. IN OT HER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOUSLY ON T HE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCED B Y THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS - - ITA 1215/13 4 UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESER VES TO BE NOTED THAT THE PRESENT ASSESSMENT WAS MADE UNDER SE CTION 143(3) OF THE INCOME-TAX ACT. IN OTHER WORDS, THE A SSESSING OFFICER WAS STATUTORILY REQUIRED TO MAKE THE ASSESS MENT UNDER SECTION 143(3) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) OF SECTION 143. BUL K OF THE RETURNS FILED BY THE ASSESSEES ACROSS THE COUNTRY I S ACCEPTED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCR UTINY. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSI NG OFFICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING O R REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSME NTS. HE SHOULD BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. THE ASSESSING OFFICER HAS GOT TO PROTECT , ON ONE HAND, THE INTEREST OF THE ASSESSEE IN THE SENSE THA T 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 THAT NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE T AX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS O N HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS - - ITA 1215/13 5 HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS OF THE CLAIMS MADE IN THE RETURN WHEN T HE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE IN QUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJECTING THE CLAIM HAS NO 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 WHER E THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUINENE SS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE T HERE IS ANYTHING WRONG WITH HIS ORDER IF ALL THE FACTS STAT ED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORRECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ER RONEOUS NOT ONLY WHEN IT CONTAINS SOME APPARENT ERROR OF REASON ING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO-TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED I N HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMINE THE GENUINEN ESS OF THE CLAIM WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. 4. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAID THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS A ND - - ITA 1215/13 6 PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNDER S ECTION 263 IN THE 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 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 ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH IS CALLE D FOR IN THE CIRCUMSTANCES OF THE CASE. 5. ADVERTING TO THE PRESENT CASE, THE AO TREATED T HE UNEXPLAINED CASH CREDIT OF ` 5 LAKHS AS INCOME OF ASSESSEE. LATER HE ALLOWED THE SET OFF OF BUSINESS LOSS OUT O F THIS INCOME OF ` 5 LAKHS. THE CIT WAS OF THE OPINION THAT THIS UNEX PLAINED INCOME CANNOT BE SET OFF AGAINST THE BUSINESS LOSS OF THE ASSESSEE U/S.71 OF THE ACT. FOR THIS PURPOSE LD. D .R RELIED ON THE - - ITA 1215/13 7 JUDGEMENT OF GUJARAT HIGH COURT IN THE CASE OF FAKI R MOHMED HAJI HASAN VS. CIT REPORTED IN [2001] 247 ITR 290( GUJARAT) WHEREIN HELD THAT:- THE SCHEME OF SECTIONS 69 , 69A , 69B AND 69C OF T HE INCOME- TAX ACT, 1961, WOULD SHOW THAT IN CASES WHERE THE N ATURE AND SOURCE OF INVESTMENTS MADE BY THE ASSESSEE OR THE N ATURE AND SOURCE OF ACQUISITION OF MONEY, BULLION, ETC., OWNE D BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY T HE ASSESSEE ARE NOT EXPLAINED AT ALL, OR NOT SATISFACTORILY EXP LAINED, THEN, THE VALUE OF SUCH INVESTMENTS AND MONEY OR VALUE OF ART ICLES NOT RECORDED IN THE BOOKS OF ACCOUNT OR THE UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF SUCH ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOU T SUCH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD S TAND DISCLOSED AND WILL, THEREFORE, BE KNOWN AND THE INC OME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF INCOME FOR AS SESSMENT AS PER THE PROVISIONS OF THE ACT. WHEN THE INCOME CANN OT BE SO CLASSIFIED UNDER ANY ONE OF THE HEADS OF INCOME UND ER SECTION 14 , IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCT IONS UNDER THE PROVISIONS WHICH CORRESPOND TO SUCH HEADS OF INCOME WILL NOT ARISE. THE PROVISIONS OF SECTIONS 69 , 69A , 69B AN D 69C , TREAT UNEXPLAINED INVESTMENTS, UNEXPLAINED MONEY, BULLION , ETC., AND UNEXPLAINED EXPENDITURE AS DEEMED INCOME WHERE THE NATURE AND SOURCE OF INVESTMENT, ACQUISITION OR EXPENDITUR E, AS THE CASE MAY BE, HAVE NOT BEEN EXPLAINED OR SATISFACTORILY E XPLAINED. THEREFORE, IN THESE CASES, THE SOURCE NOT BEING KNO WN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD IN COME FROM OTHER SOURCES. THEREFORE, THE CORRESPONDING DEDUCT IONS WHICH ARE APPLICABLE TO THE INCOMES UNDER ANY OF THESE VA RIOUS HEADS, - - ITA 1215/13 8 WILL NOT BE ATTRACTED IN THE CASE OF DEEMED INCOMES WHICH ARE COVERED UNDER THE PROVISIONS OF SECTIONS 69 , 69A , 69B AND 69C OF THE ACT IN VIEW OF THE SCHEME OF THOSE PROVISION S : HELD, ON THE FACTS, THAT IT WAS CLEAR THAT WHEN THE INVESTMENT IN OR ACQUISITION OF GOLD, WHICH WAS RECOVERED FROM THE A SSESSEE WAS NOT RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESS EE OFFERED NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH INV ESTMENT OR ACQUISITION AND THE VALUE OF SUCH GOLD WAS NOT RECO RDED IN THE BOOKS OF ACCOUNT, NOR THE NATURE AND SOURCE OF ITS ACQUISITION EXPLAINED, THERE COULD ARISE NO QUESTION OF TREATIN G THE VALUE OF SUCH GOLD, WHICH WAS DEEMED TO BE THE INCOME OF THE ASSESSEE, AS A DEDUCTIBLE TRADING LOSS ON ITS CONFISCATION, B ECAUSE SUCH DEEMED INCOME DID NOT FALL UNDER THE HEAD OF INCOME PROFITS AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, THE TR IBUNAL WAS PERFECTLY RIGHT IN HOLDING THAT THE VALUE OF THE GO LD WAS LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AS THE SOURC E OF INVESTMENT IN THE GOLD OR OF ITS ACQUISITION WAS NO T EXPLAINED AND THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM THAT TH E VALUE OF THE GOLD SHOULD BE ALLOWED AS A DEDUCTION FROM HIS INCO ME. 6. FURTHER, LD.D.R RELIED ON THE ORDER OF CHANDIGAR H TRIBUNAL IN THE CASE OF ITO VS. DULARI DIGITAL PHOTO SERVICES (P.) LTD. IN [2012] 53 SOT 210(CHANDIGARH)(URO). HE ALSO RELIED ON THE ORD ER OF CHENNAI TRIBUNAL IN THE CASE OF ITO VS. M/S.AKR POLY INDUST RIES IN ITA NO.1042/MDS./2012 VIDE ORDER DATED 29.01.2013 WHERE IN HELD THAT:- THE LEGAL POSITION AS IT EMANATES FROM CATENA OF A BOVE CASE LAWS IS THAT SINCE AN ADDITION UNDER SECTION 68 OR FOR THAT PURPOSE CANNOT BE TAKEN AS INCOME UNDER ANY SPECIFIC HEADS OF INCOME, IT CANNOT ALSO BE - - ITA 1215/13 9 TREATED AS BUSINESS INCOME. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE ADDITION UNDER SECTION 68 OF THE ACT IN ASSESSEES CASE IS LIABLE TO BE TREATED AS ASSESSEES BUSINESS INCOME. THEREFORE, WE ALLOW THE INSTANT APPEAL AND RESTORE THE FINDINGS OF THE ASSESSING OFFICER. 7. WE CAME ACROSS THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHENSING VENTURES IN (2007) 291 ITR 0258 WHEREIN HELD THAT:- BEING SO, THE TWO VIEWS ARE POSSIBLE ON THIS ISSUE AND THERE IS NO CONCLUSIVE DECISION ON THIS ISSUE. HENCE, IT CANNOT BE SAID THAT THERE IS AN ERROR IN THE ORDER OF THE AO WITH REGARD TO TREATMENT OF PORTFOLIO MANAGEMENT SERVICES. 8. IT WAS HELD BY THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. IN [2000] 243 ITR 83 (SC) WHERE IN HELD THAT:- A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCI SE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CO MMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS - - ITA 1215/13 10 ABSENTIF THE ORDER OF THE INCOME-TAX OFFICER IS ER RONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRO NEOUS BUT IS PREJUDICIAL TO THE REVENUERECOURSE CANNOT BE HAD T O SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y 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 INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL OR DERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO TH E INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NO T DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS O F WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF T HE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE T O AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVENUE IS LOS ING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUN CTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EV ERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, - - ITA 1215/13 11 FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE IN COME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIO NER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORD ER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAK EN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 8.1 FURTHER, HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD.IN [2007] 295 ITR 282 (SC) WHEREIN HELD T HAT:- THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE IN SECTION 263 OF THE INCOME-TAX ACT, 1961,HAS TO BE R EAD IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER P ASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A C ONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREA TED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EX AMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PER MISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHER E TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ON E VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE, U NLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABL E IN LAW. - - ITA 1215/13 12 8.2 FURTHER, THE BOMBAY HIGH COURT IN THE CASE OF GABRIEL INDIA LTD. IN [1993] 203 ITR 108 (BOM) WHEREIN HELD THAT: - THE POWER OF SUO MOTU REVISION UNDER SUB-S. (1) OF S. 263 IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THERE IN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUB-SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEI NG ERRONEOUS PREJUDICE HAS BEEN CAUSED TO THE INTEREST OF THE RE VENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSM ENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSI ONER SIMPLY BECAUSE ACCORDING TO HIM THE ORDER SHOULD HA VE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VIS UALISE A CASE OF SUBSTITUTION OF JUDGMENT OF THE COMMISSIONER FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS H ELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE ITO WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOU NTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTI MATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND, LE FT TO THE COMMISSIONER, HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE ITO. THAT WOU LD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOU NTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE - - ITA 1215/13 13 THE ITO HAS EXERCISED THE QUASI-JUDICIAL POWER VEST ED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE C ONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF T HE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL T O THE INTEREST OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOU GH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BE CAUSE THE FIRST REQUIREMENT, NAMELY, THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRONEOUS BUT NOT PREJUDIC IAL TO THE INTEREST OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEO US ORDER CANNOT BE SUBJECT-MATTER OF REVISION BECAUSE THE SE COND REQUIREMENT ALSO MUST BE FULFILLED. THERE MUST BE S OME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLIC ATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTE RPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. THE RE MUST BE MATERIAL AVAILABLE ON RECORD CALLED FOR BY THE COMM ISSIONER TO SATISFY HIM, PRIMA FADE, THAT THE AFORESAID TWO REQ UISITES ARE PRESENT. IF NOT, HE HAS NO AUTHORITY TO INITIATE PR OCEEDINGS FOR REVISION. EXERCISE OF POWER OF SUO MOTU REVISION UND ER SUCH CIRCUMSTANCES WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IT IS WELL-SETTLED THAT WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORDS TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUT HORITY IS CHALLENGED BEFORE THE COURT, IT WOULD BE OPEN TO TH E COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AU THORITY. ANY - - ITA 1215/13 14 OTHER VIEW IN THE MATTER WILL AMOUNT TO GIVING UNBR IDLED AND ARBITRARY POWER TO REVISING AUTHORITY TO INITIATE P ROCEEDINGS FOR REVISION IN EVERY CASE AND START RE-EXAMINATION AND FRESH ENQUIRIES IN MATTERS WHICH HAVE ALREADY BEEN CONCLU DED UNDER THE LAW. IT IS QUASI-JUDICIAL POWER HEDGED WITH LIM ITATION AND HAS TO BE EXERCISED SUBJECT TO THE SAME AND WITHIN ITS SCOPE AND AMBIT. SO FAR AS CALLING FOR THE RECORDS AND EX AMINING THE SAME IS CONCERNED, UNDOUBTEDLY IT IS AN ADMINISTRAT IVE ACT, BUT ON EXAMINATION, TO CONSIDER, OR IN OTHER WORDS, T O FORM AN OPINION THAT THE PARTICULAR ORDER IS ERRONEOUS IN S O FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS A QU ASI-JUDICIAL ACT BECAUSE ON THIS CONSIDERATION OR OPINION THE WHOLE MACHINERY OF REEXAMINATION AND RECONSIDERATION OF AN ORDER OF AS SESSMENT, WHICH HAS ALREADY BEEN CONCLUDED AND CONTROVERSY AB OUT WHICH HAS BEEN SET AT REST, IS AGAIN SET IN MOTION. IT IS AN IMPORTANT DECISION AND THE SAME CANNOT BE BASED ON THE WHIMS OR CAPRICE OF THE REVISING AUTHORITY. THERE MUST BE MATERIALS AVAILABLE FROM RECORDS CALLED FOR BY THE COMMISSIONER. PARASHURAM POTTERY WORKS CO. LTD. VS. ITO 1977 CTR (SC) 32 : (1977) 10 6 ITR 1 (SC), SIRPUR PAPER MILLS LTD. VS. ITO 1977 CTR (AP) 138 : (1978) 114 ITR 404 (AP), DAWLEE DADABHOY & CO. VS. S.P. JA M & ANR. (1957) 31 ITR 872 (CAL) AND RUSSELL PROPERTIES PVT. LTD. VS. A. CHOWDHURY, ADDL. CIT (1977) 109 ITR 229 (CAL) RELIE D ON. 9. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THA T THERE IS A DIVERGENT VIEW ON THE ISSUE OF SET OFF OF BS LOSS O UT OF UNEXPLAINED INCOME U/S.71 OF THE ACT WHILE COMPUTING THE INCOME OF ASSESSEE. BEING SO, THE AO HAD TAKEN ONE OF THE POSSIBLE VIEW S, WHICH IS - - ITA 1215/13 15 SUPPORTED BY THE JUDGEMENT OF JURISDICTIONAL HIGH C OURT IN THE CASE OF CHENSIGN VENTURES (SUPRA) AND WE ARE OF THE OPINIO N THAT THE LD.CIT IS NOT JUSTIFIED IN EXERCISING THE JURISDICTION U/S .263 OF THE ACT ON THIS ISSUE. ACCORDINGLY, THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX U/S.263 OF THE ACT IS QUASHED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 11 TH MAY, 2017 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 11 TH MAY, 2017. K S SUNDARAM ;D EFGF / COPY TO: 1 . / APPELLANT 3. H3 / CIT(A) 5. FIJ K / DR 2. / RESPONDENT 4. H / CIT 6. JLM / GF