Mcnally Sayaji Engineering Ltd., Kolkata V. CIT, KOL-I, KOLKATA, Kolkata

ITA 1236/KOL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91993 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Court: TRIBUNAL
• Department Lawyers: KAUSHAL KR SRIVASTAVA
• Keywords: Principle of natural justice; Royalty expenses; Right to appeal; Revised return
• Section: 143(3); 263; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE HON BLE SHRI MAHAVIR SINGH, JM & HON BLE SHRI B.P.JAIN, AM ] I.T.A NO.1236/KOL/2014 ASSESSMENT YEAR: 2009 - 10 MCNALLY SAYAJI ENGINEERING LTD. VS. C.I.T., KOL KATA - I, KOLKATA KOLKATA (APPELLANT) ( RESPONDENT) (PAN: AACCS 5491 A) FOR THE APPELLANT : SHRI NAGESWAR RAO, ADVOCATE FOR THE RESPONDENT : SHRI KAUSHAL KR.SRIVASTAVA, CIT DATE OF HEARING : 27 .04.2015. DATE OF PRONOUNCEMENT: 18.06.2015. OR DER PER SHRI B.P.JAIN , AM : THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF LD. CIT - I, KOLKATA PASSED U/S 263 OF THE IT ACT DATED 26.03.2014 FOR ASSESSMENT YEAR 2009 - 10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : . 1. THE IMPU GNED ORDER ISSUED BY THE LEARNED CIT I S BAD IN LAW AND V OID AB INITIO . 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT ERRED IN INITIATING THE REVISION PROCEEDINGS UNDER SECTION 263 OF THE ACT EVEN THOUGH THE CONDITIONS GOVERN ING INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT ARE NOT SATISFIED IN CASE OF THE APPELLANT . 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER OF THE ASSESSING OFFICER IS PREJUDICIAL TO T HE INTERESTS OF THE REVENUE WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAD DULY DEDUCTED AND DEPOSITED THE TDS TO THE CREDIT OF CENTRAL GOVERNMENT ON MANAGEMENT SERVICE FEES AND RO Y ALT Y EXPENSES, AFTER THE DEMERGER ORDER WAS APPROVED BY THE HON ' BLE HIGH COURT BUT BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR AY 2009 - 10. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER ( ' LEARNED A O ' ) IS ERRONEOUS SINC E THE LEARNED AO HAD ALLOWED THE CLAIM OF MANAGEMENT SERVICE CHARGES AND ROYALTY EXPENSES , AFTER PROPER APPLICATION OF HIS MIND AND VERIFYING ALL THE MATERIAL AND FACTS ON RECORD. 5. T HAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT COULD NOT DEDUCT TAXES ON MANAGEMENT SERVICE FEES IN PY 2008 - 09 SINCE THE LIABILITY TOWARDS THESE EXPENSES PERTAINED TO THE PRODUCT DIVISION OF MCNALLY BHARAT ENGINEERING COMPANY LIMITED ( ' MBECL ' ) WHICH W AS UNDER THE DEMERGER PROCESS AND WAS PENDING APPROVAL FROM THE HON ' BLE CALCUTTA HIGH ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 2 COURT AND UPON RECEIPT OF THE ORDER OF THE HON ' BLE CALCUTTA HIGH COURT DATED 26 AUGUST 2013; THE APPELLANT DULY DEDUCTED TAXES ON THE SAID EXPENSES IN SEPTEMB ER 2009 AND DEPOSITED THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME FOR AY 2009 - 10. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT ERRED IN DISREGARDING THE FACT THAT THE APPELLANT HAS NOT CLAIMED ANY DEDUCTION TOWARDS MANAGEMENT SERVICE FEES AND ROYALTY IN THE SUBSEQUENT AY , I.E , AY 2010 - 11 . 7. WITH O UT PREJUDI CE TO TH E A B OV E , T H E LEARNED CI T ERRED I N N OT DIRE CT ING TH A T IF THE SA ID E X PEN S E S T O WARD S M A NAG E M E N T S ER V I CE FE ES A ND R OYA LT Y A RE D I SALL OW ED I N A Y 200 9 - 10 , TH E N T HE SA ME S HOULD BE ALLOWED AS DEDUCTION IN AY 2010 - 11 S INCE T AX E S H AV E BEEN DUL Y DEDUCTED AND DEPOSITED TO THE CREDIT OF CENTRAL GOVERNMENT IN AY 20 I 0 - 11 A ND THE DEDUCTION HA S TO BE ALLO W ED IN AT LEA S T ON E AY . T H E ABOVE GRO UN DS OF APPEAL ARE MUTUA L LY EXC L USIVE AND WITHOUT PREJUDICE TO ONE ANOTHER . T H E APP E LL A N T CRAVES L EAVE TO A DD , A L TER , AME ND , A MPL IFY O R MO DI FY AN Y OR A L L OF THE ABOVE G R O UND S O F A PP E AL AT O R B EF OR E TH E TIM E OF H EA RIN G OF TH E A PP EA L . T H E APPE L LANT P R AYS T HAT A PP RO PR IA T E R E L IEF B E GRA N TED B ASED ON THE GRO U ND S OF A PP EA L A ND FACTS AND CIRCUMSTANCES OF T H E CASE . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR A.YR. 2009 - 10 ON 30 TH SEPTEMBER, 200 9 DISCLOSING A TOTAL INCOME OF RS.18,90,41,880/ - AND CLAIMED A REFUND OF RS.54,48,962/ - . SUBSEQUENTLY THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 30 TH MARCH, 2011 DECLARING AN INCOME OF RS.16,42,34,158/ - . IN THE COMPUTATION OF INCOME AND IN THE RETURN OF INCOME, THE ASSESSEE HAD INTER - ALIA CLAIMED DEDUCTION UNDER THE HEAD MANAGEMENT SERVICE FEE OF RS.3,52,76,000/ - AND PROVISION OF ROYALTY EXPENSES OF RS.1,02,87,073/ - . THE CASE WAS SELECTED FOR SCRUTINY IN CASS AND THE ASSESSMENT ORDER WAS PASSED U/S 1 43(3) OF THE ACT ON 29 TH DECEMBER, 2011 BY MAKING AN ADDITION OF RS.4,06, 06, 745/ - AT RS.20,48,40,903/ - . IT IS PERTINENT TO MENTION HERE THAT THERE WAS NO DISALLOWANCE OF MANAGEMENT SERVICE FEE AND ROYALTY FEE IN THE ASSESSMENT ORDER PASSED BY THE AO. 3.1. THEREAFTER THE ASSESSEE WAS ISSUED NOTICE U/S 263 OF THE ACT DATED 5 TH DECEMBER, 2013 BY THE LD. CIT IN WHICH IT WAS STATED THAT THE ASSESSMENT ORDER DATED 29 TH DECE MBER, 2011 APPEARS TO BE ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN SO FA R THE DEDUCTION WITH RESPECT TO THE PAYMENT S OF MANAGEMENT SERVICE FEE OF R S.3,52,76,000 AND PROVISION FOR ROYALTY EXPENSES FOR RS.1,02,87,073/ - WAS CONCERNED. THE LD. CIT VIDE IMPUGNED ORDER DATED 26 TH MARCH, 2014 SET ASIDE THE ASSESSMENT ORDER ON THESE TW O ASPECTS , WITH THE DIRECTION TO THE AO THAT THE ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 3 ALLOWABILITY OF THESE TWO EXPENSES SHOULD BE RE - ASSESSED AFTER BRINGING ALL THE FACTS ON RECORDS AS PER LAW. 3.2. THE LD. CIT WAS OF THE VIEW THAT THE ASSESSEE HAD NOT DEDUCTED TDS FROM THE PAYMENT OF MANA GEMENT SERVICE FEE DURI NG THE PREVIOUS YEAR AND THE TDS WAS DEDUCTED AND DEPOSITED ON 24 TH SEPTEMBER, 2009 IN CONTRAVENTION OF THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. SIMILARLY FOR ROYALTY AMOUNT OF RS.1,02,87,073/ - THE TDS WAS NOT DEDUCTED DURING T HE PREVIOUS YEAR, WAS INSTEAD DEPOSITED TO THE CREDIT OF THE GOVERNMENT ONLY ON 15 TH SEPTEMBER, 2009. 3.3. THE CASE OF THE ASSESSEE AS ARGUED BY THE LD. COUNSEL IS THAT THE ORDER PASSED BY THE LD. CIT DOES NOT DISCLOSE THAT THE ASSESSMENT ORDER IS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDING TO THE ASSESSEE, ON THIS GROUND ALONE, THE IMPUGNED ORDER SHOULD BE SET ASIDE. TO SUPPORT HIS SUBMISSION THE ASSESSEE HAS RELIED UPON NUMEROUS JUDG MENTS INCLUDING CIT VS KASHI NATH & CO.170 IT R 28 (ALL), CIT VS R.K. METAL WORKS 112 ITR 445 (P&H), DECCANS SAFETY GLASS WORKS PVT. LTD. VS CIT (ITA NO.697/KOL/2014). 4. THE LD. DR, ON THE OTHER HAND, HAD SUBMITTED THAT IN THE NOTICE DATED 5 TH DECEMBER, 2013 AS WELL AS IN THE IMPUGNED ORDER, IT IS CL EARLY MENTIONED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE AND THE JUDGMENTS OF THE VARIOUS COURTS OF LAW RELIED UPON BY THE ASSESSEE AS W ELL. 5.1. WE ARE NOT INCLINED TO ACCEPT THE AFORESAID SUBMISSIONS OF THE ASSESSEE FOR THE REASONS THAT THE JUDGMENTS RELIED UPON ARE CLEARLY DISTINGUISHABLE AS IN THESE CASES, THE LD. CIT FAILED TO FURNISH ANY REASON WHATSOEVER TO EXERCISE POWERS U/S 263 OF THE ACT. THE LD. CIT IN THE IMPUGNED ORDER AS WELL AS IN THE NOTICE U/S 263 OF THE ACT HAD CLEARLY STATED THE GROUNDS ON WHICH THE ASSESSMENT ORDER WAS PROPOSED TO BE REVISED U/S 263 OF THE ACT. HE HAS SPECIFICALLY RECORDED REASONS, WHICH ACCORDING TO H IM ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 4 MAKES THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. CIT HAD STATED THAT AS THE ASSESSEE HAS NOT DEDUCTED TDS ON MANAGEMENT SERVICE FEE AND ROYALTY, THE DEBIT TO THE PROFIT AND LOSS ACCOUNT, WITHIN THE TIME FRAME PRESCRIBED U/S 40(A)(IA) OF THE ACT, THE EXPENSES SHOULD HAVE BEEN DISALLOWED. THEREFORE, ON THIS GROUND ALONE THE IMPUGNED ORDER CANNOT BE SET ASIDE. THE AFORESAID GROUND HAS NOT BEEN SPECIFICALLY PLEADED IN THE GROUNDS OF APPEAL, HOWEVER, THE ASSESSEE HAD TAKEN GEN ERAL GROUNDS OF APPEAL CHALLENGING THE PROCEEDINGS U/S 263 OF THE ACT. 5.2. WE WILL NOW DEAL WITH THE MERITS OF THE CLAIM AND THE TENABILITY OF THE GROUNDS ON WHICH ASSESSMENT ORDER WAS SET ASIDE. IT IS PERTINENT TO REFER TO THE OBSERVATIONS MADE BY THE L D. CIT IN THE IMPUGNED ORDER WITH RESPECT TO THE GROUNDS ON WHICH THE ASSESSMENT ORDER WAS SOUGHT TO BE REVISED. 2. ON PE RU SA L AND E X A MIN A TI O N OF ASSESS M E NT R ECO RD F O R TH E Y EA R UN DE R CONSIDE R A TI O N, T HE F O LL OW IN G OBSE RV A TI O N S W E R E M ADE : I ) I N SCHED UL E 1 9 ( E X PENSES ), M A N AGE M E NT SE R V I CES FEE OF R S .3, 52 , 76 , 000/ - W AS D E BIT E D T O P&L AL C. WHI C H W AS AC T UA LLY PA ID T O M AC NALLY BH A R A T E N G IN EE RIN G CO MP A NY LTD . , TH E H O LDIN G CO M PA NY , O N ACCO UNT O F PUR C H ASE OF SE RVI CES. IT I S A L SO SEE N FR O M C L A U SE 27 (B) O F TAR TH A T N O TD S WA S D E DU C T E D FR O M TH A T P A YM E NT BY TH E ASSESSEE BE F O R E D URIN G TH E PR E VI O U S YEAR . TD S O F R S.3 9 , 9 6 , 77 1/ - U / S. 1 94 J O N TH A T PAY M E NT W AS AC TU A LLY D E DU C T E D BY TH E ASSESSEE IN TH E M O NTH O F SEP T .20 0 9 I N C O NTR A V E NTI O N O F TH E PR O VI S I O N O F SEC TI O N 19 TA R A L SO DO NOT FU RN I S H A NY INF O RMATI O N O N P A Y MEN T OF TDS T O GOV T. A /C. THE PAYMENT OF M A N A G E M E NT SE RVI CES FEE OF R S . 3 ,52, 76,000 / - A TTR AC T E D PROVIS I ONS OF S E CTI O N 40(A)(I A ) A N D W AS R EQU I RED T O B E DI SA LL O W E D A ND A DD E D B AC K TO THE TOTAL INCOM E O F TH E ASSESSEE DUR IN G TH E Y EA R. A S THI S W AS N O T D O N E , TH E R E W AS UND E RA SSESS M E NT O F IN CO M E O F RS.3 , 52 , 7 6,0 0 0/ - . I I ) ROYALTY A MOUNT OF RS. 1 , 0 7 ,0 9 , 0001 - W AS D E BIT E D TO P&L A / C . A ND FR O M TH E C L A U SE 17(F) O F TA R , IT I S O B SE RV ED TH A T A N A M O UNT O F RS. 10, 2 0,38 , 9 0 6/ - W AS IN A DMI SS I B L E U / S . 4 0 ( A ) WHI C H IN C LUD ED A N A M O UNT O F R S . 1,0 2 ,87,0 73 / - O N ACCO UNT OF RO Y A LTY. B UT, THI S A M O UNT O F RS. 1,02, 87 ,0 7 3 / - WA S N O T DI SA LL O W ED BY TH E ASSESSEE AS W E LL AS IN ASSESS M E NT. IN R E PLY TO A QU ES TI O N O N N O N - D EDUC TI O N O F T DS O N RO Y A LTY, TH E ASSESSEE S T A T E D TH AT DURING THE YEAR R E L E VANT TO AY . 20 0 9 - 10 , PR O VI S I O N T O RO Y A LTY A M O UNTIN G T O 1,02,87,073 / - WAS MADE AND THE SAME WAS R EVERSE D IN AY. 2 010 - 11 B E F O R E FILIN G O F R E TURN OF INCOME AND CONSEQUENTLY NO T AX A T SO UR CE W AS D E DU C T E D . TH E R EP LY O F TH E ASSE S SEE W A S ACC E PT E D AND THE EXPE N SES W E R E A LL O W E D. T H E N O N - D ED U C TI O N O F T DS ATTR A CT E D PROVI S I O N O F SEC TI O N 4 0 ( A ). H O W E V E R, PR O VI S I ON F OR EXPE N DIT UR E O N ACCO UNT O F R O Y A LTY P A YM E NT OF RS. 1, 02 , 87 , 0 73/ - W AS NOT A N A LL O W AB L E D E DU C TI O N A ND TH E R E F O RE W AS R E QUIR E D TO BE DI SA LL O W E D A N D A DD E D B AC K T O TOT A L IN CO M E . A S THI S W AS N O T D O N E , TH E R E W AS UND E R ASSESS M E NT O F INCOM E O F R S. 1 , 0 2 ,87,0 73 / - . 3. IN VI E W O F TH E F AC T S N A RR A T E D A BOV E , IT W AS A PP A R E NT TH A T THE A . O. H A D F A IL E D T O ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 5 T AKE NOT I CE O F A LL F AC T S A ND H A D F A IL E D T O E X A MIN E TH E CO RR EC TN ES S OR OTH E RWI SE O F DED U C TI O N S AS C L A IM E D BY TH E ASSESSEE IN IT S R E TURN O F IN C OM E . H E HAD, TH E R E FOR E , F A IL E D T O APP LY HI S MIN D AND DI SC H A RG E HI S DUTY AS A N ASSESS ING OFFI CE R DUR I NG TH E S C RUTINY P R OCEED IN GS U/ S .14 3 ( 3 ) O F TH E 1 . T . . A C T . ,1 96 1. H E N CE TH E ORD E R PA S S E D BY T H E A . O. U /S. 1 43 ( 3 ) W AS E R RO N EO U S IN SO F A R AS IT I S PR E JUDI C I A L T O TH E I NT E R ES T S OF R E V E NU E . I 5.3. THE LD. AR HAD SUBMITTED THAT WITH REGARD TO THE MANAGEMENT SERVICE FEE, THE ASSESSEE HAD DEDUCTED AND DEPOSITED T DS TO THE CREDIT OF THE GOVERNMENT ON 24 TH SEPTEMBER, 2009 BEFORE THE DATE OF FILING OF RETURN OF INCOME FOR THE PREVIOUS YEAR. FURTHERMORE, IT IS THE CASE OF THE ASSESSEE THAT IT HAS NOT CLAIMED THE SAID AMOUNT IN THE SUBSEQUENT ASSESSMENT YEAR 2010 - 11. IT IS FURTHER CONTENDED THAT THE MANAGEMENT S ERVICE FEE FOR A.YR.2009 - 10 PERTAINED TO THE DIVISION OF THE ASSESSEE COMPANY WHICH WAS UNDER THE PROCESS OF THE MERGER BEFORE THE HON BLE CALCUTTA HIGH COURT AND THE ASSESSEE COULD NOT HAVE DEDUCTED TAX ON THES E EXPENSES AS THE TRANSACTIONS HAPPENED BETWEEN THE TWO DIVISIONS OF THE SAME COMPANY POST DEMERGER APPROVAL FROM THE HON BLE CALCUTTA HIGH COURT ON 26 TH AUGUST, 2009. THE ASSESSEE DULY DEDUCTED THE TAX AND DEPOSITED THE SAME BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME IN SEPTEMBER, 2009. 5.4. AS FAR AS THE ROYALTY PAYMENT OF RS.1,02,87,073/ - WAS CONCERNED , THE ASSESSEE SUBMITS THAT THE AGREEMENT WITH RESPECT TO THE AFORESAID EXPENSES WAS ENTERED INTO ON 15 TH OCTOBER, 2008 WHEREBY THE ASSESSEE WAS GR ANTED CERTAIN SERVICES WITH RESPECT TO THE SPECIFIC PRODUCT IN INDI A, B Y USING THE KNOWHOW OF OUTOTECH PVT. LTD, THE LD. AR CONTENDED THAT DURING THE RELEVANT ASSESSMENT YEAR THE PROVISION FOR ROYALTY FEE WAS MADE FOR PAYMENT TO BE MADE TO OUTOT ECH PVT. L TD. HOWEVER, SINCE THE TECHNOLOGY TRANSFER WAS NOT COMPLETE THIS PROVISION WAS REVERSED BACK ON 1 ST APRIL, 2009 AND CONSEQUENTLY NO TAX AT SOURCE WAS DEDUCTED ON THE SAME. ON RECEIPT OF INVOICE DATED 14 TH APRIL, 2009 FROM OUTOT ECH PVT. LTD. TAX WAS DULY DEDUCTED ON THESE EXPENSES AND DEPOSITED TO THE CREDIT OF THE GOVERNMENT ON 15 TH SEPTEMBER, 2009 I.E. BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME FOR THE SUBJECT ASSESSMENT YEAR. 6. THE LD. DR, ON THE OTHER HAND, HAD RELIED UPON THE ORDER PASSED BY THE LD. CIT. ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 6 7. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIES. IN THE LIGHT OF THE FACTS STATED WHAT HAS TO BE EXAMINED IS WHETHER THE INGRADIENTS OF SECTION 263 OF THE ACT ARE ATTRACTED IN AS MUCH AS WHETHER THE ASSESSMENT ORDER U/S 143(3) OF THE AC T WAS SIMULTANEOUSLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENU E AND WHETHER THE ASSESSMENT COULD BE SET ASIDE ON THE GROUND THAT TDS WAS NOT DEPOSITED IN THE TIME LIMIT FRAMED U/S 40(A)(IA) OF THE ACT. THE GROUNDS OF APPEAL RAISED ARE INTER R ELATED AND CAN BE ANSWERED COLLECTIVELY BY US. 7.1. BEFORE ADVERTING TO THE MERITS OF THE ISSUE IN HAND IT IS PERTINENT TO NOTE THE LEGISLATIVE HISTORY OF SECTION 40(A)(IA) OF THE ACT WHICH IS REPRODUCED HEREIN BELOW : - THE PROVISIONS OF SECTION 40(A)(I A) OF THE ACT WERE BROUGHT ON STATUTE BY FINANCE ACT 2004, W.E.F. 01.04.2005, I.E. THE SAME IS APPLICABLE FOR ASSESSMENT YEAR 2005 - 06 AND SUBSEQUENT ASSESSMENT YEARS. UNDER THE EXISTING PROVISIONS OF SUB - CLAUSE (I) OF CLAUSE (A) OF SECTION 40, FAILURE TO M AKE DEDUCTION AT SOURCE FROM PAYMENT OF INTEREST, ROYALTY, FEES FOR TECHNICAL SERVICES OR ANY OTHER SUM WHICH IS PAYABLE OUTSIDE INDIA, OR IN INDIA TO A NON - RESIDENT OR TO A FOREIGN COMPANY OR FAILURE TO MAKE PAYMENT TO THE ACCOUNT OF THE CENTRAL GOVERNMEN T, ATTRACTS DISALLOWANCE OF SUCH PAYMENTS IN THE HANDS OF THE PAYER. DEDUCTION OF SUCH SUM IS, HOWEVER, ALLOWED IN THE COMPUTATION OF INCOME IF TAX IS DEDUCTED, OR AFTER DEDUCTION, PAID IN ANY SUBSEQUENT YEAR IN COMPUTING THE INCOME OF THAT YEAR. SECTION 40(A)(IA) AS INTRODUCED THROUGH FINANCE ACT 2004 SECTION 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 30 TO 38 , THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFE SSION , - ( A ) IN THE CASE OF ANY ASSESSEE (I) (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB - CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR , OR IN THE SUBSEQUENT YEAR BEF ORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB - SECTION (1) OF SECTION 200. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EX PIRY OF THE TIME PRESCRIBED UNDER SUB - SECTION (1) OF SECTION 200 , SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION FOR THE PURPOSES OF THIS SUB - CLAUSE, - ( I ) COMMISSION OR BROK ERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; ( II ) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB - SECTION (1) OF SECTION 9; ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 7 ( III ) PROFESSIONAL SERVICES SHALL HAVE THE S AME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; ( IV ) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SECTION 194C. B Y THE TAXATION LAWS (AMENDMENT) ACT 2006 W.R.E.F. 01.04.2006, RENT AND ROYALTY WAS ALSO BROUGHT WITHIN THE PURVIEW OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WITH A VIEW TO LIBERALIZE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE FINANCE ACT 2008 BROUGHT AMENDMENT W.R.E.F. 01.04.2005 AS UNDER IN SECTION 40 OF THE INCOME TAX ACT, IN CLAUSE (A), - ( A ) IN SUB - CLAUSE (I A), WITH EFFECT FROM THE 1 ST DAY OF APRIL, 2005, - ( I ) FOR THE WORDS, BRACKETS AND FIGURES HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB - SECTION (1) OF SECTION 200 , THE FOLLOWING WORD S, BRACKETS AND FIGURES SHALL BE SUBSTITUTED AND SHALL BE DEEMED TO HAVE BEEN SUBSTITUTED, NAMELY: - HAS NOT BEEN PAID, - ( A ) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR, ON OR BEFORE THE DUE DATE SPECI FIED IN SUB - SECTION (1) OF SECTION 139; OR ( B ) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR . ( II ) FOR THE PROVISO, THE FOLLOWING PROVISO SHALL BE SUBSTITUTED AND SHALL BE DEEMED TO HAVE BEEN SUBSTITUTED, NAMELY : - PROVIDED THAT WHERE IN RESP ECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED ( A ) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER SAID DUE DATE; OR ( B ) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YE AR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID , FURTHER AMENDMENT OF PROVISIONS OF SECTION 40(A)(IA) MADE THROUGH THE FINANCE ACT 2010 THE LEGISLATURE HAS BROUGHT FURTHER LIBERALIZ ATION BY WAY OF AMENDMENT IN PROVISIONS OF SECTION 40(A)(IA) OF THE ACT W.E.F. 01.04.2010 AS UNDER IN SECTION 40 OF THE INCOME - TAX ACT, IN CLAUSE (A), IN SUB - CLAUSE (IA), ( A ) FOR THE PORTION BEGINNING WITH THE WORDS HAS NOT BEEN PAID, - AND ENDING WITH THE WORDS THE LAST DAY OF THE PREVIOUS YEAR , THE WORDS, BRACKETS AND FIGURES HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUBSECTION (1) OF SECTION 139 SHALL BE SUBSTITUTED; ( B ) FOR THE PROVISO, THE FOLLOWING PROVISO SHALL BE SUBSTITUTED, NAMELY PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB - SECTION 91) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION I N COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. 7.2. THE BASIC OBJECT OF BRINGING OUT THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WAS TO AUGMENT COMPLIANCE OF TDS PROVISIONS. BY THE AMENDMENT OF FINANCE ACT 2008, TAX DEDUCT ED IN THE LAST MONTH OF THE FINANCIAL YEAR WAS ALLOWED TO BE PAID TILL THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT AND IN OTHER CASES ON OR BEFORE THE LAST DATE OF THE PREVIOUS YEAR. ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 8 7.3. THE RIGOUR OF THE AFORESAID SECTION WAS FURTHER RELAXED BY THE AMENDMENT BROUGHT FORTH BY FINANCE ACT 2010 WHEREBY IT WAS PROVIDED THAT NO DISALLOWANCE WOULD BE MADE, IF AFTER DEDUCTION OF TAX DURING THE PREVIOUS YEAR, THE SAME HAS BEEN PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME AS SPECIFIED I N SECTION 139(1) OF THE ACT. THE SAID AMENDMENT HAS BEEN HELD RETROSPECTIVE BY VARIOUS JUDICIAL PRONOUNCEMENTS. 7.4. THE ASSESSEE SUBMITS THAT AS IT HAD DEDUCTED AND DEPOSITED TDS BEFORE THE DUE DATE OF FILING OF RETURN, THE PROVISION OF SECTION 40(A)( IA) OF THE ACT ARE NOT ATTRACTED. WE ARE NOT IN AGREEMENT WITH THE CONTENTIONS RAISED BY THE ASSESSEE. THE AMENDMENT MADE BY TH E FINANCE ACT 2010 EXTENDED THE TIME OF PAYMENT OF TAX DEDUCTED TO THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT. THE TA X HAD TO BE DEDUCTED ONLY IN THE PREVIOUS YEAR ONLY TO AVAIL THE BENEFIT OF THE AMENDMENT. ADMITTEDLY IN THE PRESENT CASE, TAX HAD NOT BEEN DEDUCTED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND THEREFORE DISALLOWANCES OUGHT TO HAVE BEEN MADE FOR THE PAYMEN TS MADE FOR MANAGEMENT SERVICE FEE AS WELL AS FOR ROYALTY. THE REASONS STATED BY THE ASSESSEE THAT THE COMPANY WAS GOING THROUGH THE PROCESS OF DEMERGER DOES NOT IMPRESS US AT ALL. THE PROVISION OF DEDUCTION ON TDS ARE MANDATORY AND STRICT IN NATURE AND C ANNOT BE GIVEN A GO - BY AS DONE BY THE ASSESSEE. 7.5. WE ARE IN AGREEMENT WITH THE REASONING GIVEN IN THE IMPUGNED ORDER OF THE LD. CIT THAT THE ASSESSEE HAD FAILED TO DEDUCT TDS DURING THE PREVIOUS YEAR ON PAYMENT S OF MANAGEMENT SERVICE FEE AND ROYALTY DE BITED TO THE PROFIT AND LOSS ACCOUNT. THE ORDER PASSED BY THE AO IS THEREFORE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE TWIN CONDITIONS AS LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO.LTD VS CIT 243 ITR 83) AND THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS VIKASH POLYMERS (2010) 194 TAXMAN 57 (DELHI) ARE SATISFIED SIMULTANEOUSLY IN THE PRESENT CASE. ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 9 7.6. THE ORDER PASSED BY THE AO SUFFERS FROM NON APPLICATION OF MIND IN AS MUCH AS THE MANDATORY STAT UTORY PROVISION OF SECTION 40(A)(IA) OF THE ACT WERE IGNORED. THE LD. CIT WAS WITHIN ITS JURISDICTION TO INVOKE POWERS U/S 263 OF THE ACT. THE OBJECT OF THE PROVISION IS TO CORRECT THE ERRONEOUS ORDER WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS THE DEPARTMENT HAS NO RIGHT TO FILE AN APPEAL AGAINST THE ORDER OF AO. W HETHER THE INGRADIENTS OF THE SECTION ARE SATISFIED WILL DEPEND ON THE FACTS OF EACH CASE. 7.7. THE INTERPRETATION OF THIS SECTION HAS BEEN A SUBJECT MATTER OF DISCUSSION IN VARIOUS JUDICIAL PRONOUNCEMENTS. IN THE CASE OF M ALABAR INDUSTRIAL CO. LTD. (SUPRA) THE H ON BLE SUPREME COURT HAS HELD AS UNDER : - T HERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSES SING OFFICER ; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR E CT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGOR Y FALL ORDERS PASSED W ITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFIN E D IN TH E 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 & CO . VS . S . P . JAIN AND ANOTHER [31 ITR 8 7 2] , THE HIGH COURT OF KARNATAKA IN COMMISSIONER OF INCOME - TAX , M YS ORE V S . T. NARA Y AN A PAI [98 ITR 422], THE HIGH COURT OF BOMBAY IN COM MISSIONER OF INCOME - TA X VS. GABRIEL INDIA LTD . [203 ITR 108] AND THE HIGH COURT OF GUJARAT IN COMMISSIONER OF INCOME - TAX VS . SMT. MINALBEN S, PARIKH [215 ITR 81] TREATED LOSS OF TAX AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE . MR . ABARAHAM RELIED ON THE JUDGMENT OF THE DIVISION BENCH OF THE HIGH COURT OF MADRAS IN VENKATAKRISHNA RICE COMPANY VS. COMMISSIONER OF INCOME - TAX [163 ITR 129] INTERPR E TING PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE HIGH COURT HELD , IN THIS CONTEXT , IT MUST BE REGARDED AS I NVOL V ING A CONCEPTION OF ACTS OR ORDERS WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF RE V ENUE. THERE MU S T BE SOME GRIE V OUS ERROR IN THE ORDER PASSED B Y THE INCOME - TAX OFFICER , W HICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR A SSESSMENT S, WHICH ON A BROAD R ECKONING , TH E COMMISSIONER MIGHT THINK TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRATION. IN O UR V IE W THI S INTERPRETATION IS TOO NARROW TO MERIT AC C EPTANCE . THE SCHEME OF THE ACT IS TO LEV Y AND COLLECT T A X IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE RE V ENUE. IF DUE TO ~ N ERR O N E OU S ORDER OF THE INCOME - TAX OFFICER , THE REVENUE IS LOSING TAX LAWFULL Y PA Y ABLE B Y A P E R S ON , IT WILL CERTAINL Y BE PREJUDICIAL TO THE INTERESTS OF THE RE V ENUE . THE PHRASE PREJUDICIAL TO T HE INTERE S TS O F THE RE V ENUE HAS TO BE READ IN CONJUNCTION W ITH AN ERRONEOUS ORDER PASSED B Y THE ASSESSING OFFICER. EVERY LOSS OF REV E NUE AS A CONSEQUENCE OF AN ORD E R OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FO R EXAMPLE , WHEN AN INCOME - TAX OFFICER ADOPTED ONE OF THE COURSES P E RMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEW S 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 ORD ER ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 10 PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE V IEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED B Y A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING , THE ORDER PASSED B Y THE ASSESSING OFFIC E R ACCEPTING TH E SAM E AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE RE V ENUE. RAMP Y ARI DEVI SARAOGI VS. COMMISSIONER OF INCOME - TAX [67 ITR 84] AND IN SMT . TARA DEV I AGGARWAL VS. COMMISSIONER OF INCOME - TAX , WEST BENGAL [88 ITR 323] . IN THE INSTANT CASE , THE COMMISSIONER NOTED THAT TH E INCOM E - TAX OFFICER PASSED THE ORDER OF NIL ASSESSMENT W ITHOUT APPLICATION OF MIND. INDEED , THE HIGH COURT RECORDED THE FINDING THAT THE INCOME - TAX O FFIC E R FAIL E D TO APPL Y HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED B Y HIM WAS ERR O NEOU S . IT APPEARS THAT THE RESOLUTION PASSED B Y THE BOARD OF THE APPELLANT - COMPAN Y WA S NOT PLACED BEFORE THE ASSESSING OFFICER . THUS , THERE WAS NO MATERIAL T O SUPPORT THE CLAIM OF THE APPELLANT THAT TH E SAID AMOUNT RE PRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME . HE ACCEPTED THE ENTR Y IN THE STATEMENT OF THE ACCOUNT FILED B Y THE APPELLANT IN THE ABSENCE OF AN Y SUPPORTING MATERIAL AND WITHO UT MAKING AN Y INQUIRY. ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE INCOME - TAX OFFICER WAS ERRONEOUS IS IRRESISTIBLE . WE A RE , THEREFORE, OF THE OPINION THAT THE HIGH COURT HAS RIGHTL Y HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER UNDER SECTION 263(1) WAS JUSTIFIED. THE SECOND CONTENTION HAS TO BE REJECTED IN V IEW OF THE FINDING OF FACT RECORDED B Y THE HIGH COURT . IT W AS NOT SH OW N A T AN Y S TAGE OF THE PROCEEDINGS , THE AMOUNT IN QUESTION WAS FIXED OR QUANTIFIED A S L O SS OF AGRI C ULTU RA L I N CO ME AND A DMITTEDL Y IT IS NOT SO FOUND B Y THE TRIBUNAL . 7.8. IN THE CASE OF CIT VS JAWAHAR BHATTACHARJEE 341 ITR 434 (GAUHATI) THE HIGH COURT HAS HELD AS UNDER : - 22. WE HAVE ALREADY REFERRED TO JUDGMENTS OF THIS COURT IN RAJENDRA SINGH AND TWO SINGLE BENCH JUDGM ENTS FOLLOWING THE SAID JUDGMENT IN BONGAIGON REFINERY AND PETROCHEMICALS LTD. AND SHYAM SUNDAR AGARWAL AS ALSO THE SECOND DIVISION BENCH JUDGMENT IN DAGA ENTRADE P.LTD. NO DOUBT, IN RAJENDRA SINGH, AN OBSERVATION WAS MADE THAT ERRONEOUS ASSESSMENT REFERR ED TO THE DEFECT WHICH IS JURISDICTIONAL IN NATURE, AS AGAINST SUBSTITUTION OF ONE VIEW FOR THE OTHER, MERELY ON THE GROUND THAT A DIFFERENT VIEW WAS POSSIBLE. IF READ AS A WHOLE, THE JUDGMENT DOES NOT EXCLUDE ERROR IN ASSESSMENT ORDER, BY IGNORING RELEVAN T MATERIAL. NOT HOLDING SUCH INQUIRY AS IS NORMAL AND NOT APPLYING MIND TO RELEVANT MATERIAL WOULD CERTAINLY BE ERRONEOUS ASSESSMENT WARRANTING EXERCISE OF REVISIONAL JURISDICTION. JUDGMENT HAS TO BE READ AS A WHOLE AND AN OBSERVATION DURING THE COURSE OF REASONING IN THE JUDGMENT SHOULD NOT BE DIVORCED FROM THE CONTEXT IN WHICH IT WAS USED. THE JUDGMENT IS NEITHER TO BE INTERPRETED AS AN ACT OF PARLIAMENT NOR AS A HOLY BOOK. IF THIS PRINCIPLE IS KEPT IN MIND, WE DO NOT FIND ANY CONFLICT IN THE VIEW TAKE N IN RAJENDRA SINGH AND DAGA ENTRADE P.LTD. DISAGREEMENT IN DAGA ENTRADE P.LTD IS ONLY TO THE INTERPRETATION WHICH LIMITS THE RATIO OF THE JUDGMENT BY RELYING ONLY ONE SENTENCE IN ISOLATION DIVORCED FROM THE ENTIRE JUDGMENT. AN INCORRECT ASSUMPTION OF FACT S OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS NON - APPLICATION OF MIND AND OMISSION TO FOLLOW NATURAL JUSTICE IS IN SAME CATEGORY. 7.9. IN THE CASE OF CIT VS DEEPAK KUMAR GARG 299 ITR 435 IT WAS HELD AS UNDER : - ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 11 4 . AFTER HEARING RIVAL SUBMISSIONS AND CONSIDERING MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE TRIBUNAL'S ORDER IS UNSUSTAINABLE. AT THE OUTSET, IT IS CLARIFIED THAT WE HAVE NO QUARREL WITH THE PRINCIPLES LAID DOWN IN THE CASES RE L IED UPON BY THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE. AFTER GOING THROUGH THEM, WE CAN SAFELY SAY THAT NO THUMB RULE OF UNIVERSAL APPLICATION IS EVOLVED OR LAID DOWN FOR THE EXE RCISE OF REVISIONAL POWER UNDER SECTION 263 OF THE ACT. IT WILL DEPEND ON FA CTS OF EACH CASE BUT COMMISSIONER MUST BE SATISFIED OF EXISTENCE OF THE TWIN CONDITIONS, VIZ. THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND THAT IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. WE ARE ALSO CONSCIOUS OF THE FACT THAT SECTION 263 CA NNOT BE R ESORTED TO, TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR, UNLESS AFORESAID TWO ELEMENTS E XIST IN THE ORDER OF ASSESSING OFFICER. IN THE CASE IN HAND, AFTER HEARING AUTHORISED R EPRESENTATIVE, THE COMMISSIONER HAS RECORDED A CLEAR FINDING THAT THE ORDER OF ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. FROM THE ORDER OF THE ASSESSING OFFICER, IT IS CLEAR THAT FOR WANT OF T IME, ASSESSING OFFICER HAD DONE ONLY A SEMBLANCE OF ENQUIRY AND THAT TOO , IN VERY SLIP - SH OD MANNER, AS IS CLEAR FROM THE POST SCRIPT IN T HE ORDER OF ASSESSING OFFICER . ASSESSING OFFICER A CCEPTED THE VERSION OF THE ASSESSEE WITHOUT PROPER ENQUIRY AS A RESULT SUBSTANTIAL A MOUNT OF TAXABLE INCOME WAS NOT BROUGHT TO TAX. IN SUCH CASE ASSESSMENT ORDER WOULD BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE LAW ENJOINS UPON THE ASSESSING OFFICER TO MAKE ASSESSMENT ORDER BRINGING ALL TAXABLE INCOME TO TAX. THE ENQUIRY HELD IN A PERFUNCTORY MANNER COULD NOT BE SAID TO BE A PROPER E NQUIRY BEFORE PASSING THE ASSESSMENT ORDER . THIS CANNOT BE GROUND TO SHUT OUT THE JURISDICTION O F THE COMMISSIONER THAT AN ADEQUATE ENQUIRY WAS CONDUCTED BY THE AS SESSING OFFICER. WE MAY CLARIFY THAT ORDER OF THE COMMISSIONER IS IN TWO PARTS. PART ONE CONS ISTS OF REASONS FOR ISSUING THE SHOW CAUSE NOTICE, AND LATER PART DEALS WITH FINDINGS RECORDED BY THE COMMISSIONER AFTER AFFORDING OPPORTUNITY OF HEARING TO THE ASSESSEE. AS STATED ABOVE, COMMISSIONER HAS RECORDED A CATEGORICAL FINDING THAT ORDER OF ASSES SING OFFICER FOR WANT OF ADEQUATE ENQUIRY, WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND AFTER SETTING ASIDE THE ASSESSMENT OR DER, REMANDED THE MATTER TO THE ASSESSING OFFICER FOR FRESH ASSESSMENT ON MERITS. THE COMMI SSIONER ALSO DIRECTED AS SESSING OFFICER TO OBSERVE RULES OF NATURAL JUSTICE AND TO PROVIDE OPPORTUNITY OF HEARING TO ASSESSEE BEFORE MAKING FRESH ASSESSMENT ORDER ON MERIT. THIS ADE QUATELY SAFEGUARDS THE INTEREST OF THE ASSESSEE AND WOULD CAUSE NO PREJUDICE. IT SEEMS THAT TRIBUNA L WAS CARRIED AWAY BY THE FIRST PART OF THE ORDER OF COMMISSIONER AS A RESULT THE LATER PART OF THE ORDER ESCAPED FROM THE NOTICE O F THE TRIBUNAL AND THE TRIBUNAL BRANDED THE ORDER OF THE COMMISSIONER AS BASED UPON PROBABILITIES, SURMISES AND CONJECTURES. 5. IN VIEW OF THE FOREGOING DISCUSSION, WE HOLD THAT TRIBUNAL ERRED IN LAW IN SETTI NG ASIDE THE ORDER OF THE COMMISSIONER AND ANSWER THE QUESTION I N FAVOUR OF THE REVENUE. IN THE RESULT, THIS APPEAL IS ALLOWED. LET A COPY OF THIS ORDER BE RETAINED IN FIL E AND RECORD OF CONNECTED APPEALS. THERE SHALL BE NO ORDERS AS TO COSTS. 7.10. CONSIDERING THE PRINCIPLES ENUNCIATED IN THE AFORESAID JUDGMENTS, WE ARE FORTIFIED IN THE REASONING GIVEN ABOVE AND WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. CIT. THE GROUN DS RAISED BY THE ASSESSEE ARE ALL INTERCONNECTED AND DISMISSED. ITA NO.1236/KOL/2014 MCNALLY SAYAJI ENGG.LTD. A.YR.2009 - 10 12 8 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDE R PRONOUNCED IN THE COURT ON 1 8.06.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [ B.P.JAIN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 18.06.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . MCNALLY SAYAJI ENGINEERING LIMITED, ECOSPACE, CAMPUS 2B, 11F/12, (OLD PLOT NO.AA II/BLK 3), NEW TOWN, RAJARHAT NORTH 24 PARGANAS, KOLKATA - 7000156, WEST BENGAL. 2 C.I.T. - I, KOLKATA. 3 . CIT(DR) , KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES