Sh. Sartaj Singh, Bathinda V. The Principal Commissioner of Income Tax, Bathinda

ITA 154/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8849 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SHARDA
• Assessee Lawyers: P N ARORA
• Keywords: Audit objection; Principle of natural justice; Difference of opinion; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 40A(3); 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER I.T.A NO.154(ASR)/2015 ASSESSMENT YEAR: 2010-11 SHRI SARTAJ SINGH 183A/40, GALI NO.5, BHAGGU ROAD, BATHINDA. PAN:ATCPS6877N VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX, BATHINDA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA (ADV.) RESPONDENT BY: SH. R.K. SHARDA (DR.) DATE OF HEARING: 03.02.2016 DATE OF PRONO UNCEMENT: 25.02.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINS T THE ORDER OF LEARNED CIT, BATHINDA, DATED 23.02.2015, FOR THE AS ST. YEAR 2010-11. 2. THE FOLLOWING GROUNDS OF APPEAL HAS BEEN TAKEN B Y ASSESSEE. (I) THAT THE ORDER OF THE COMMISSIONER OF INCOME T AX PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, DATE D 23/02/2015, IS AGAINST THE FACTS OF THE CASE AND UN TENABLE IN LAW. (II) THAT THE LD. CIT DID NOT APPRECIATE THAT THE O RDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, IS BAD IN LAW AND IS LIABLE TO BE CANCELLED. (III) THAT THE LD. CIT FAILED TO APPRECIATE THAT TH E ORDER PASSED BY THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AS SUCH THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AND THE SAME IS LIABLE TO BE CANCELLED. ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 2 (IV) THAT THE LD. CIT DID NOT APPRECIATE THAT THE B OOKS OF ACCOUNTS WERE DULY PRODUCED BEFORE THE AO AND WERE DULY EXAM INED BY THE AO THOROUGHLY AND AFTER SATISFYING HIMSELF THE AO ACCEPTED THE RETURN INCOME, THUS THE AO HAS FULLY APPLIED HI S MIND AND HAS PASSED THE ASSESSMENT AFTER ORDER HAVING REGARD TO THE MATERIAL ON THE RECORD. AS SUCH THE ORDER OF THE LD. CIT IS BAD IN LAW AND THE SAME IS LIABLE TO BE CANCELLED. (V) THAT THE ORDER U/S 263 OF THE LD CIT IS BAD IN LAW BECAUSE THE AUDIT OBJECTION CANNOT BE MADE THE BASIS FOR REVISI ON OF AN ASSESSMENT. THE AO WHILE COMPLETING THE ASSESSMENT HAS ACCEPTED THE BOOKS OF ACCOUNTS AFTER DUE EXAMINATIO N. THUS THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR PREJUDICIA L TO THE INTERESTS OF THE REVENUE AND AS SUCH THE ORDER PASSED BY THE CIT UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, IS ILLEGAL , INVALID & VOID AB-INITIO AND THE SAME LIABLE TO BE CANCELLED. 3. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS A CONTRACTOR AND HIS BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB OF THE INCOME TAX ACT, 1961. THE CASE OF THE A SSESSEE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEE DINGS, AFTER EXAMINATION OF BOOKS OF ACCOUNTS AND AFTER VERIFICA TION OF OTHER DETAILS THE ADDITION WAS MADE TO THE TUNE OF RS.1 LAC. THE LEARNED CIT ISSUED NOTICE U/S 263 AND PASSED ORDER U/S 263 AND SET ASI DE THE ORDER OF ASSESSING OFFICER WITH THE DIRECTIONS TO ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH ON MERITS IN ACCORDANCE WITH LAW. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT THE BASIS ON WHICH PROCEEDINGS BY COMMISSIONER WERE INITIATED U/S 263 FOR THE SO CALLED VIOLATION OF PROVISIONS OF SECTION 40A(3) WAS NOT C ORRECT AS IN FACT THE ASSESSEE HAD NOT MADE PAYMENTS IN VIOLATION OF PROV ISIONS OF SECTION 40A(3) AND THIS ANGLE WAS ALREADY EXAMINED BY ASSES SING OFFICER BEFORE ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 3 PASSING THE ASSESSMENT ORDER. THE LEARNED AR IN THI S RESPECT INVITED OUR ATTENTION TO A COPY OF QUESTIONAIR ISSUED BY AS SESSING OFFICER PLACED AT PAPER BOOK PAGE 12 TO 14 AND OUR SPECIFIC ATTENTION WAS INVITED TO QUESTION NO.19 PLACED AT PAPER BOOK PAGE 13. INVITING OUR ATTENTION TO REPLY TO THIS NOTICE, THE LEARNED AR T OOK US TO PAPER BOOK PAGE 15 TO 17 AND OUR SPECIFIC ATTENTION WAS INVITE D TO REPLY TO QUESTION NO. 19 PLACED AT PAPER BOOK PAGE 17. THE LEARNED AR FURTHER INVITED OUR ATTENTION TO A COPY OF AUDIT REPORT PLACED AT P APER BOOK PAGE 2 TO 11 AND SUBMITTED THAT AUDITOR IN HIS REPORT HAS NOT POINTED OUT ANY VIOLATION IN THE PROVISIONS OF SECTION 40A(3) AND I N THIS RESPECT OUR SPECIFIC ATTENTION WAS INVITED TO PAPER BOOK PAGE 5 . THE LEARNED AR, THEREFORE, SUBMITTED THAT THE NECESSARY EXAMINATION WAS ALREADY DONE BY ASSESSING OFFICER AND THEREFORE, ACTION U/S 263 WAS NOT WARRANTED. FURTHER INVITING OUR ATTENTION TO SHOW CAUSE NOTICE DATED 17.10.2013 PLACED AT PAPER BOOK PAGE 22, THE LEARNED AR SUBMIT TED THAT AFTER PASSING OF ORDER THE ASSESSING OFFICER AGAIN REQUIR ED THE ASSESSEE TO EXPLAIN THE SO CALLED CASH PAYMENTS AND A DETAILED REPLY WAS FILED WHICH IS PLACED AT PAPER BOOK PAGE 24 TO 27. THE LE ARNED AR SUBMITTED THAT IN THIS REPLY THE ASSESSEE HAD ELABORATELY EXP LAINED THAT NO PAYMENT IN CASH IN EXCESS OF RS.20,000/- WAS MADE A ND THEREFORE, THERE WAS NO VIOLATION OF THE SAID SECTION. THE LEA RNED AR FURTHER SUBMITTED THAT ON THE SAME ISSUE THE ASSESSING OFFI CER HAD REOPENED THE CASE U/S 148 AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 4 BOOK PAGE 28-29 WHERE A COPY OF REASONS RECORDED WA S PLACED. THE LEARNED AR SUBMITTED THAT A REPLY TO REASONS RECORD ED WAS FILED A COPY WHICH WAS PLACED AT PAPER BOOK PAGE 30 TO 38, WHERE IN THE ASSESSEE AGAIN EXPLAINED THAT THERE WAS NO VIOLATION OF PROV ISIONS OF SECTION 40A(3). THE LEARNED AR SUBMITTED THAT ON RECEIPT OF SUCH REPLY FROM THE ASSESSEE, THE ASSESSMENT PROCEEDINGS U/S 147 WERE D ROPPED BY ASSESSING OFFICER AND IN THIS RESPECT INVITED OUR A TTENTION TO PAPER BOOK PAGE 39 WHERE A COPY OF SUCH ORDER DROPPING THE PRO CEEDINGS U/S 147 WAS PLACED. THE LEARNED AR SUBMITTED THAT AFTER DRO PPING THE PROCEEDINGS U/S 147 BY THE SAME INCOME TAX OFFICER SH. L.D. BANSAL, THE PROPOSAL FOR INITIATION OF ACTION U/S 263 WAS M ADE ON THE SAME DATE BY THE SAME ASSESSING OFFICER. THE LEARNED AR SUBMI TTED THAT THE ISSUE OF VIOLATION OF PROVISIONS OF SECTION 40A(3) WAS EX AMINED THREE TIMES THAT IS (I) DURING THE ASSESSMENT PROCEEDINGS (II) AFTER ASSESSMENT PROCEEDINGS AND (III) DURING INITIATION OF REASSESS MENT PROCEEDINGS. THE LEARNED AR SUBMITTED THAT IT WAS NOT OPEN TO THE CO MMISSIONER TO INITIATE PROCEEDINGS U/S 263, ONCE THE ISSUE WAS EX AMINED BY ASSESSING OFFICER AND THIS IS A CASE WHERE THE ISSU E WAS EXAMINED THREE TIMES. RELIANCE IN THIS RESPECT WAS PLACED ON THE F OLLOWING CASE LAWS. (I) ROSHAN LALL VEGITABLE PRODUCT (PVT.) LTD. VS. I TO 51 SOT 0001 (ITAT AMRTISAR) (II) CIT VS. GABRIAL INDIA LTD. 203 ITR 0108 (BOM H C) (III) MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 0 083 (SC) ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 5 BESIDES THE ABOVE CASE LAWS THE LEARNED AR FURTHER PLACED HIS RELIANCE ON A NUMBER OF CASE LAWS. 6. WITHOUT PREJUDICE THE LEARNED AR SUBMITTED THAT REASSESSMENT PROCEEDINGS IN THIS CASE WERE INITIATED ON THE BASI S OF AUDIT OBJECTION AND WHICH WERE LATER ON DROPPED HOWEVER, ON THE SAM E DATE OF DROPPING THE REASSESSMENT PROCEEDINGS PROPOSAL FOR INITIATION ACTION U/S 263 WAS INITIATED ON THE BASIS OF SAME AUDIT OB JECTION WHICH WAS NOT WARRANTED BY LAW AS HELD BY PUNJAB & HARYANA HI GH COURT IN THE CASE OF CIT V SOHANA WOOLLEN MILLS ,296 ITR 238 AND IN THIS RESPECT FILED A COPY OF THE CASE LAW REPORTED AT 296 ITR 238 . THE LEARNED AR SUBMITTED THAT DETAILED SUBMISSIONS WERE FILED WITH CIT ALONG WITH RELEVANT CASE LAWS BUT LEARNED CIT IGNORED ALL THE SUBMISSIONS AN D JUDGMENTS AND FINALIZED THE ASSESSMENT U/S 263. IN VIEW OF THE FA CTS AND CIRCUMSTANCES THE LEARNED AR SUBMITTED THAT ORDER P ASSED BY LEANED CIT U/S 263 BE QUASHED. 7. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER DOES N OT TALK ABOUT THE EXAMINATION OF THIS ASPECT AND THEREFORE, THE ACTIO N U/S 263 WAS RIGHTLY TAKEN BY COMMISSIONER. HE SUBMITTED THAT DEPARTMENT HAD DROPPED PROCEEDINGS U/S 147 TO STRENGTHEN ITS CASE FOR ACTI ON U/S 263. 8. THE LEARNED AR, IN HIS REJOINDER SUBMITTED THAT DURING REASSESSMENT PROCEEDINGS U/S 147 THE DEPARTMENT HAD ACCEPTED THAT IT WAS A CHANGE OF OPINION THEREFORE, HAD ADMITTED THA T THIS ISSUE WAS ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 6 ALREADY EXAMINED BY ASSESSING OFFICER. THEREFORE, THE ORDER PASSED BY COMMISSIONER NEEDS TO BE QUASHED. 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSI NG OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS SPECIFICALLY ASKED ABOUT THE VIOLATION OF PROVISIONS OF SECTION 40A(3) VIDE QUESTIONNAIRE NO.19 PLACED AT PAPER BOOK PAGE 13 AND IN REPLY THE ASSESSEE SPECIFICALLY REPLIED THAT THERE WAS NO VIOLATION OF PROVISIONS OF SECTION 40A(3), T HE RELEVANT PORTION OF HIS REPLY IS PLACED AT PAPER BOOK PAGE 17. FURTHERM ORE, WE NOTE THAT THE TAX AUDIT REPORT HAS NOT POINTED OUT ANY PAYMEN T IN VIOLATION OF PROVISIONS OF SECTION 40A(3). WE FURTHER FIND THAT A DETAILED REPLY WAS FILED EVEN AFTER COMPLETION OF ASSESSMENT IN VIEW O F NOTICE BY SAME ASSESSING OFFICER. FURTHERMORE, WE FIND ON THE SAME ISSUE OF VIOLATION OF PROVISIONS OF SECTION 40A(3), THE REASSESSMENT P ROCEEDINGS WERE INITIATED AGAINST WHICH AGAIN THE ASSESSEE FILED DE TAILED OBJECTIONS AND REPLY WHICH WAS PLACED AT PAPER BOOK PAGE 30 TO 38 AND AFTER GOING THROUGH THE REPLY FILED BY ASSESSEE THE PROCEEDINGS U/S 147 WERE DROPPED. FROM THE ABOVE FACTS, WE FIND THAT THE EXA MINATION OF VIOLATION OF PROVISIONS OF SECTION 40A(3) HAS BEEN EXAMINED BY ASSESSING OFFICER ON THREE OCCASIONS AND HE HAD NOT FOUND ANY VIOLATION OF SUCH PROVISIONS. THE REPLY FILED BY TH E ASSESSEE CLEARLY SHOWS THAT TO MANAGE HIS BUSINESS AT VARIOUS PLACES THE ADVANCES WERE MADE TO VARIOUS SUPERVISORS ENGAGED WORKING IN VARI OUS LOCATIONS AND ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 7 THESE SUPERVISORS USED TO SUBMIT THE DETAILS OF MAT ERIAL PURCHASED BY THEM AND FOR MAKING PAYMENTS TO LABOUR AND EACH PAY MENT WAS LESS THAN RS.20,000/- AND THEREFORE, IN FACT, THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 40A(3). THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIAL INDIA LTD. 203 ITR 0108, HAS ELABORATEL Y DEALT WITH THE POWERS U/S 263 AND WHICH VIDE PARA 14 TO 17 HAS HEL D AS UNDER: 14. WE, THEREFORE, HOLD THAT IN ORDER TO EXERCIS E POWER UNDER SUB-S. (1) OF S. 263 OF THE ACT THERE MUST BE MATERIAL BEFORE THE COMMISSIONER TO CONSIDER THAT THE ORDER PASSED BY THE ITO WAS ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE HAVE ALREADY HELD WHAT IS ERRONEOUS. IT MUST BE AN ORDER WHICH IS NOT IN ACCO RDANCE WITH THE LAW OR WHICH HAS BEEN PASSED BY THE ITO WITHOUT MAKING ANY ENQUIRY IN UNDUE HASTE. WE HAVE ALSO HELD AS TO WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. AN ORDER CAN BE SAID TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE IF IT IS NOT IN ACCORDANCE WITH THE LAW IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN RE ALISED OR CANNOT BE REALISED. THERE MUST BE MATERIAL AVAILABLE ON RECOR D CALLED FOR BY THE COMMISSIONER TO SATISFY HIM, PRIMA FACIE, THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, HE HAS NO AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION. EXERCISE OF POWER OF SUO MOTU REVISIO N UNDER SUCH CIRCUMSTANCES WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IT IS WELL- SETTLED THAT WHEN EXERCISE OF STATUTORY POWER IS DE PENDENT 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 AUTHORITY IS CHALLENGED BEFORE THE CO URT IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIV E FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. OUR AFORESAID CONCLUSION GETS FULL SUPPORT FROM A D ECISION OF SABYASACHI MUKHARJI, J. AS HIS LORDSHIP THEN WAS, IN RUSSELL P ROPERTIES PVT. LTD. VS. A. CHOWDHURY, ADDL. CIT (1977) 109 ITR 229 (CAL). I N OUR OPINION ANY OTHER VIEW IN THE MATTER WILL AMOUNT TO GIVING UNBR IDLED AND ARBITRARY POWER TO REVISING AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION IN EVERY CASE AND START RE-EXAMINATION AND FRESH ENQUIRIES I N MATTERS WHICH HAVE ALREADY BEEN CONCLUDED UNDER THE LAW. AS ALREADY ST ATED IT IS QUASI- JUDICIAL POWER HEDGED WITH LIMITATION AND HAS TO BE EXERCISED SUBJECT TO THE SAME AND WITHIN ITS SCOPE AND AMBIT. SO FAR AS CALLING FOR THE RECORDS AND EXAMINING THE SAME IS CONCERNED, UNDOUBTEDLY IT IS AN ADMINISTRATIVE ACT, BUT ON EXAMINATION, 'TO CONSIDE R' OR IN OTHER WORDS, TO FORM AN OPINION THAT THE PARTICULAR ORDER IS ERRONE OUS IN SO 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 MACHINER Y OF RE-EXAMINATION AND RECONSIDERATION OF AN ORDER OF ASSESSMENT, WHIC H HAS ALREADY BEEN CONCLUDED AND CONTROVERSY ABOUT WHICH HAS BEEN SET AT REST, IS AGAIN SET ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 8 IN MOTION. IT IS AN IMPORTANT DECISION AND THE SAME CANNOT BE BASED ON THE WHIMS OR CAPRICE OF THE REVISING AUTHORITY. THE RE MUST BE MATERIALS AVAILABLE FROM RECORDS CALLED FOR BY THE COMMISSION ER. 15. WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CAS E IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. THE I TO IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPEN DITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATI ON IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECO RD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE ITO ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE ITO CANNOT BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREOVER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEED INGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWA NCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. H E SIMPLY ASKED THE ITO TO RE-EXAMINE THE MATTER. THAT, IN OUR OPINION, IS NOT PERMISSIBLE. FURTHER, INQUIRY AND/OR FRESH DETERMINATION CAN BE DIRECTED BY THE COMMISSIONER ONLY AFTER COMING TO A CONCLUSION THAT THE EARLIER FINDING OF THE ITO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE. WITHOUT DOING SO, HE DOES NOT GET THE POWER TO SET ASIDE THE ASSESSMENT. IN THE INSTANT CASE, THE COMMISSIONER DID SO AND IT IS FOR THAT REASON THAT THE TRIBUNAL DISAPPROVED HIS ACTION AND SET ASIDE H IS ORDER. WE DO NOT FIND ANY INFIRMITY IN THE ABOVE CONCLUSION OF THE T RIBUNAL. 16. IN THE LIGHT OF THE FOREGOING DISCUSSION, WE AN SWER THE QUESTION REFERRED TO US IN THE AFFIRMATIVE, THAT IS, IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. 17. .UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WE MAKE NO ORDER AS TO COSTS . SIMILARLY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTIAL CO. LTD. VS. CIT 243 ITR 0083 HAS HELD AS UNDER: A BARE READING OF PROVISIONS OF S.263 MAKES IT CLE AR THAT THE PREREQUISITE TO EXERCISE OF JURISDICTION BY THE CIT SUO MOTU UND ER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIA L TO THE INTEREST OF THE REVENUE. THE CIT HAS TO BE SATISFIED OF TWIN CONDIT IONS NAMELY, (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT-IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NON PREJUDICIAL TO THE REVE NUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-RECOURS E CANNOT BE HAD TO S. 263(1). THERE CAN BE NO DOUBT THAT THE PROVISION CA NNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE AO; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WI LL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 9 SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PR INCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF KIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF A RT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND C OLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENT RUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE ITO, THE REVENU E IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICI AL TO THE INTEREST OF THE REVENUE. THE PHRASE 'PREJUDICIAL TO THE INTERESTS O F THE REVENUE' HAS TO READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS CONSEQUENCE OF AN ORDER OF AO CA NNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE , EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CTT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. IN THE CASE BEFORE US, WE FIND THAT THE ASSESSING OFFICER HAS ALREADY APPLIED HIS MIND AND HAS TAKEN A CONCISE DECISION O F NOT MAKING ADDITION FOR VIOLATION OF PROVISIONS AS THERE WERE NO VIOLATION AT ALL AND THEREFORE, THE ORDER PASSED BY ASSESSING OFFICER WA S NOT ERRONEOUS AND WAS NOT PREJUDICIAL TO THE INTEREST OF REVENUE. 10. FURTHERMORE, WE FIND THAT PROCEEDINGS U/ S 263 WERE INITIATED ON THE BASIS OF AUDIT OBJECTIONS AS IS NOTED BY LEA RNED COMMISSIONER IN HIS ORDER. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SOHANA WOOLLEN MILLS 296 ITR 238 HAS HELD AS UNDER: REVISION-ERRONEOUS AND PREJUDICIAL ORDER-AO TAKING POSSIBLE VIEW- MERE AUDIT OBJECTIONS, AND MERELY BECAUSE A D IFFERENT VIEW CAN BE TAKEN ARE NOT ENOUGH TO HOLD THAT THE ORDER OF THE AO IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REV ENUE-AO ACCEPTED THE CASE OF THE ASSESSEE THAT OUT OF SALE CONSIDERA TION OF THE MACHINERY SOLD BY IT, SUM OF RS.1 LAKH WAS RECEIVED FOR THE SALE OF PERMIT IN RESPECT OF 1,200 SPINDLES- THERE WAS NO E RROR IN THE VIEW TAKEN BY THE AO-CIT NOT JUSTIFIED IN INVOKING JURIS DICTION UNDER S.263 ON THE STRENGTH OF AN AUDIT NOTE. ITA NO.154(AS R)/2015 ASST. YEAR : 2010-11 10 11. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AN D IN VIEW OF THE ABOVE JUDICIAL PRECEDENTS, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:25.02.2016. /PK/PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.