S.Rajagopal, Coimbatore V. ITO, Coimbatore

ITA 1647/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86378 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G T VENKATESWARA RAO
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business expenditure; Principle of natural justice; Assessment record
• Section: 143(3); 6; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1647/MDS/2014 ( / ASSESSMENT YEAR : 2009-2010) SHRI. S. RAJAGOPAL, NO.155, PONNURANGAM ROAD WEST, R.S. PURAM, COIMBATORE 641 002. [PAN: ADOPR 6066J] ( %& /APPELLANT) VS THE INCOME TAX OFFICER, WARD III (3), COIMBATORE. ( !'%& /RESPONDENT) / APPELLANT BY : SHRI. T. BANUSEKAR, C.A., / RESPONDENT BY : SHRI. G.T. VENKATESWARA RAO, CIT /DATE OF HEARING : 18.03.2015. ! /DATE OF PRONOUNCEMENT : 27.03.2015. ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX -I, DATED 26.03.2014 PASSED U/S.263 OF THE INCOME TAX ACT. I.T.A.NO1647/MDS/2014. :- 2 -: 2. THE FACTS OF THE CASE ARE THAT THE ASSESSMENT IN TH IS CASE WAS COMPLETED U/S.143(3) ON 30.11.2011. LATER ON OBSER VING ALL THE ASSESSMENT RECORDS, THE COMMISSIONER OF INCOME TAX WAS OF THE OPINION THAT THERE WAS CERTAIN ERRORS IN THE ASSESS MENT ORDER WHICH ARE PRIMA FACIE PREJUDICIAL TO THE INTEREST OF THE REVENUE AS SUCH HE ISSUED NOTICE U/S. 263 DATED 24.01.2014. ACCORDING , TO THE COMMISSIONER OF INCOME TAX, THE ASSESSEE HAS TAKEN LOANS FROM BANKS AND OUT OF WHICH MADE BANK DEPOSITS TO THE TU NE OF D3,09,76,817/- AND THIS WAS NOT UTILIZED FOR THE PU RPOSE OF BUSINESS AND ONLY A SUM OF D2,47,98,393/- WAS USED FOR THE P URPOSE OF BUSINESS. THE INTEREST TO THE TUNE OF D48,39,309/- WAS INCURRED BY THE ASSESSEE ON THE TOTAL LOAN OF D5,57,75,210/-. SINCE THE ASSESSEE USED A PART OF LOAN FOR MAKING DEPOSITS IN BANK, ENTIRE CLAIM OF INTEREST OF D48,39,309/- CANNOT BE ALLOWED AS BUSINESS EXPENSES . ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO DISALLOW THE PORT ION OF INTEREST ON THE BORROWED CAPITAL WHICH WAS NOT USED FOR THE PURPOSE OF BUSINESS. AGAINST THIS, THE ASSESSEE PREFERRED THIS APPEAL BE FORE US. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBM ISSIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US AND ALSO GONE THROUGH ALL THE JUDGMENTS CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP TH E LEGAL ISSUE WITH I.T.A.NO1647/MDS/2014. :- 3 -: REFERENCE TO THE JURISDICTION OF INVOKING THE PROVI SIONS OF SECTION 263 OF THE ACT BY THE LEARNED CIT. THE SCHEME OF THE IT AC T IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF TH E ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO ERRONEOUS ORDER OF THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST OF THE REV ENUE. AS HELD IN THE CASE OF MALABAR INDUSTRIES CO. LTD., VS. CIT (243 ITR 83 (S C), THE COMMISSIONER CAN EXERCISE REVISION JURISDICTIONAL U /S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESSING OFFICERS SOUGHT TO BE REVISED IS (I)ERRONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. THE WORD 'ERRONEOUS' HAS NOT BEEN DEFINED IN THE IN COME TAX ACT. IT HAS BEEN HOWEVER DEFINED AT PAGE 562 IN BLACK'S LAW DICTIONARY (SEVENTH EDITION) THUS; ' ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM THE LAW'. THE WORD 'ERROR' HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY THUS: 'ERROR NO. 1 : A PSYCHOLOGICA L STATE THAT DOES NOT CONFORM TO OBJECTIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TRUE OR THAT WHAT IS TRUE IS FALSE' . 3.1 AT PAGE 649/650 IN P. RAMANATHA AIYER'S LA W LEXICON REPRINT 2002, THE WORD 'ERROR' HAS BEEN DEFINED TO MEAN- ERROR: A MISTAKEN JUDGEMENT OR DEVIATION FROM THE TRUTH IN MATTERS OF FACT, AND FROM THE LAW IN MATTE RS OF I.T.A.NO1647/MDS/2014. :- 4 -: JUDGEMENT 'ERROR' IS A FAULT IN JUDGEMENT, OR IN TH E PROCESS OR PROCEEDING TO JUDGEMENT OR IN THE EXECUTION UPON TH E SAME, IN A COURT OF RECORD; WHICH IN THE CIVIL LAW IS CAL LED A NULLITYIE' (TERMES DE LA LEY). SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INADVERTENCE S.99 CPC AND S.215 CR.PC. 'ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPEC T THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION.' 3.2 AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE SCOPE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAI NED THUS: 'AN ERROR IS ANY DEVIATION FROM THE STANDARD OR COU RSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INT ENTIONAL. A MISTAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSION OF MISCO NCEPTION OF THE NATURE OF A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOWLEDGE, A MISTAKE IS FROM INSUFFICIENT OR FALSE OBSERVATION. BLUNDER IS A PRACTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMIT TED THROUGH GLARING IGNORANCE, HEEDLESSNESS, OR AWKWARDNESS. AN ERROR MAY BE OVERLOOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIE D, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO C AN COUNTERACT. STRICTLY SPEAKING, HALLUCINATION IS AN ILLUSION OF THE PERCEPTION, A PHANTASM OF THE IMAGINATION. THE ONE COMES OF DISOR DERED VISION, THE OTHER OF DISCARDED IMAGINATION. IT IS EXTENDED IN MEDICAL SCIENCE TO MATTERS OF SENSATION, WHETHER THERE IS NO CORRES PONDING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN UNACC OUNTABLE ERROR IN JUDGEMENT OR FACT, ESPECIALLY IN ONE REMARKABLE OTH ERWISE FOR ACCURATE INFORMATION AND RIGHT DECISION. IT IS EXCE PTIONAL ERROR OR MISTAKE IN THOSE OTHERWISE NOT LIKELY TO BE DECEIVE D.' 3.3 IN ORDER TO ASCERTAIN WHETHER AN ORDER SOU GHT TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN W HETHER IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR. IN OUR VI EW, AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 WOULD BE ERRONEOUS AND FALL IN THE AFORESAID CATEGORY OF 'ERRORS' IF IT IS, INTER ALIA , BASED ON AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW OR NON- I.T.A.NO1647/MDS/2014. :- 5 -: APPLICATION OF MIND TO SOMETHING WHICH WAS OBVIOUS AND REQUIRED APPLICATION OF MIND OR BASED ON NO OR INSUFFICIENT MATERIALS SO AS TO AFFECT THE MERITS OF THE CASE AND THEREBY CAUSE PRE JUDICE TO THE INTEREST OF THE REVENUE. 3.4 SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMOVE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFFICER TAK ES A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECO RD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS , WHERE SUCH INQUIRY WAS PRIMA FACIE WARRANT ED. THE COMMISSIONE R WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONEOUS O N THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFF ICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE CLAIM M ADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. UNLI KE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, THE ROLE OF AN ASSESSING OFFICER UNDER T HE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJUDICATOR BUT ALSO OF AN INVE STIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN, WHICH IS AP PARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. HE MUST DISCHARGE BOTH T HE ROLES EFFECTIVELY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHE RE THE FACTS OF THE I.T.A.NO1647/MDS/2014. :- 6 -: CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOU SLY ON THE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCED B Y THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESERVES TO BE NOTED THAT THE P RESENT ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE INCOME-TAX ACT . IN OTHER WORDS, THE ASSESSING OFFICER WAS STATUTORILY REQUIRED TO M AKE THE ASSESSMENT UNDER SECTION 143(3) AFTER SCRUTINY AND NOT IN A SU MMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) OF SECTION 143. BUL K OF THE RETURNS FILED BY THE ASSESSEES ACROSS THE COUNTRY IS ACCEPT ED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTIN Y. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSING OFF ICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOUL D BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. T HE ASSESSING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTEREST OF TH E ASSESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF WHAT IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND , HE HAS A DUTY TO PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THA T NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE T AX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS ON HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS H IS DUTY TO ASCERTAIN I.T.A.NO1647/MDS/2014. :- 7 -: THE TRUTH OF THE FACTS STATED AND THE GENUINENESS O F THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE S UCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJEC TING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESSING OFFICER BE COMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHERE THE INQUIRIES OUGHT TO HAVE BEE N MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE THERE IS ANYTHING WRONG WITH HIS ORDER IF ALL THE FACTS STATED OR CLAIM MAD E THEREIN ARE ASSUMED TO BE COR RECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS NOT ONLY WHEN IT CONTAINS SOME APPARENT E RROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHE N IT IS A STEREO-TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS ST ATED IN HIS RETURN AND FAIL S TO MAKE ENQUIRIES OR EXAMINE THE GENUINE NESS OF THE CLAIM WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CA SE. IN TAKING THE AFORESAID VIEW, WE ARE SUPPORTED BY THE DECISIONS O F THE HON'BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI V. CIT (67 ITR 84) (SC), SMT. TARA DEVI AGGARWAL V. CIT (88 ITR 323) (SC), A ND MALABAR INDUSTRIAL CO. LTD'S CASE ( 243 ITR 83) (SC) . 3.5 IN MALABAR INDUSTRIAL CO. LTD. CASE THE HON' BLE SUPREME COURT HAS HELD AS UNDER: I.T.A.NO1647/MDS/2014. :- 8 -: 'THERE CAN BE NO DOUBT THAT THE PROVISION 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 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 THE ORDE RS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. IN OUR HUMBLE VIEW, ARBITRARINESS IN DECISION - MAKING WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAU SES PREJUDICE TO AN ASSESSEE OR TO THE STATE EXCHEQUER. THE LEGISLAT URE HAS TAKEN AMPLE CARE TO PROVIDE FOR THE MECHANISM TO HAVE SUC H PREJUDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED TH ROUGH REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 264 OR THROUGH APPEALS AND OTHER MEANS OF JUDICIAL REVIEW, THE PRE JUDICE CAUSED TO THE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKI NG REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DECISION-MAKING CAUSING PREJUDICE TO EITHER PARTY C ANNOT THEREFORE BE ALLOWED TO STAND AND STARE AT THE LEGAL SYSTEM. IT IS DIFFICULT TO COUNTENANCE SUCH ARBITRARINESS IN THE ACTIONS OF TH E ASSESSING OFFICER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PROTECT THE INTEREST OF BOTH THE PARTIES, NAMELY, THE ASSES SEE AS WELL AS THE STATE. IF HE FAILS TO DISCHARGE HIS DUTIES FAIRLY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDERS CAN ALWAYS BE CORRE CTED EITHER AT THE INSTANCE OF THE ASSESSEE, IF THE ASSESSEE IS PR EJUDICED OR AT THE INSTANCE OF THE COMMISSIONER, IF THE REVENUE IS PRE JUDICED. WHILE MAKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO PLAY. HE IS THE INVESTIGATOR, PROSECUTOR AS WELL AS ADJUDICATOR. AS AN ADJUDICATOR HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TAXPAY ER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQUIRES TH AT WHEN HE ENQUIRES INTO A SUBSTANTIAL MATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDING ON THE RELEVANT ISSUE GIVING, HOWSOEVER BRI EFLY, HIS REASONS THEREFOR. IN S.N. MUKHERJEE V. UNION OF INDIA AIR 1 990 SC 1984, IT HAS BEEN OBSERVED BY THE HON'BLE SUPREME COURT AS F OLLOWS: 'REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICIAL FUNCTI ONS, WOULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURISDICTION B Y THE APPELLATE OR SUPERVISORY AUTHORITY. BUT THE OTHER CONSIDERATIONS , REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN H OLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR IT S DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THA T THE RECORDING OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVES A SAL UTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OR ARBITRARINESS AND EN SURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECISION- MAKING. THE SA ID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIONS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THEREFORE, THE REQUIREMENT THAT REA SONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AU THORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT M AY, HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOU LD BE AS ELABORATE I.T.A.NO1647/MDS/2014. :- 9 -: AS IN THE DECISION OF A COURT OF LAW. THE EXTENT AN D NATURE OF THE REASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUM STANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICI T SO AS TO INDICATE THAT THE AUTHORITY HAS GIVEN DUE CONSIDERATION TO T HE POINTS IN CONTROVERSY. THE NEED FOR RECORDING OF REASONS IS G REATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. TH E APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUT HORITY AGREES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. ' 3.6 SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE SUPREME COURT IN SIEMENS ENGG. & MFG. CO. LTD. V. UNION OF INDIA AIR 1976 SC 1785 . IT IS SETTLED LAW THAT WHILE MAKING ASSESSMENT ON A SSESSEE, THE ITO ACTS IN A QUASI- JUDICIAL CAPACITY. AN ASSESSMENT O RDER IS AMENABLE TO APPEAL BY THE ASSESSEE AND TO REVISION BY THE COMMI SSIONER UNDER SECTIONS 263 AND 264. THEREFORE, A REASONED ORDER O N A SUBSTANTIAL ISSUE IS LEGALLY NECESSARY. IT WAS HELD THAT ORDERS , WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVENUE, MUST BE REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF THE ASSESSING OFFICERS ARE ALLOWED TO MAKE ASSESSMENTS IN AN ARBITRARY MANNER, THE ADMINISTRATION OF REVENUE IS BOUND TO SUFFER. IF WI THOUT DISCUSSING THE NATURE OF THE TRANSACTION AND MATERIALS ON RECORD, THE ASSESSING OFFICER HAD MADE CERTAIN ADDITION TO THE INCOME OF THE ASSESSEE, THE SAME WOULD HAVE BEEN CONSIDERED ERRONEOUS BY ANY AP PELLATE AUTHORITY AS BEING VIOLATIVE OF THE PRINCIPLES OF N ATURAL JUSTICE WHICH REQUIRE THAT THE AUTHORITY MUST INDICATE THE REASON S FOR AN ADVERSE ORDER. AS A MATTER OF FACT SUCH ORDERS ARE PREJUDIC IAL TO THE INTERESTS OF I.T.A.NO1647/MDS/2014. :- 10 -: BOTH THE PARTIES, BECAUSE EVEN THE ASSESSEE IS DEPR IVED OF THE BENEFIT OF A POSITIVE FINDING IN HIS FAVOUR, THOUGH HE MAY HAVE SUFFICIENTLY ESTABLISHED HIS CASE. 3.7 IN VIEW OF THE FOREGOING, IT CAN SAFELY B E SAID THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNDER SECTION 263 IN T HE FOLLOWING CASES: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERROR O F REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. (II) THE ORDER SOUGHT TO BE REVISED PROCEEDS ON INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLI CATION OF LAW. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING T HE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. (II I) THE ORDER PASSED BY THE ASSESSING OFFICER IS A STEREOTYPE ORDER WHICH S IMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN OR WHERE HE F AILS TO MAKE THE REQUISITE ENQUIRIES OR EXAMINE THE GENUINENESS OF T HE CLAIM WHICH IS CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. 4. IN THIS PRESENT CASE, THE ASSESSING OFFICER COMPLET ED ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT ON 30.1 1.2011 WHICH MEANS THAT THE ASSESSING OFFICER APPLIED HIS MIND A ND CAME TO THE CONCLUSION THAT THE ASSESSEE HAD PROPERLY ACCOUNTED INTEREST I.T.A.NO1647/MDS/2014. :- 11 -: PAYMENTS IN HIS BOOKS OF ACCOUNTS. AFTER HE CAME T O THE CONCLUSION THAT THE WHOLE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS INTEREST PAYMENT OF D48,39,309/-, HE ALLOWED THE SAME AS BUS INESS EXPENDITURE. FOR THIS CONCLUSION REACHED BY THE ASS ESSING OFFICER, THE COMMISSIONER OF INCOME TAX CANNOT FIND FAULT AND H E CANNOT IMPOSE HIS VIEW ON THE ASSESSING OFFICER. THE ASSESSING OF FICER HAS TAKEN ONE POSSIBLE VIEW. THE VIEW TAKEN BY THE ASSESSING OFF ICER CANNOT BE CONSIDERED AS ERRONEOUS IF THE INCOME FROM INTEREST ON FIXED DEPOSIT IS CONSIDERED AS INCOME FROM OTHER SOURCES, THAN TH E INTEREST INCURRED BY THE ASSESSEE ON BORROWINGS USED FOR MAKING DEPOS ITS IS TO BE ALLOWED AS EXPENDITURE. FURTHER, IF THERE IS ANY L OSS UNDER THE HEAD INCOME FROM OTHER SOURCES IT IS TO BE SET OFF AGA INST INCOME FROM ANY OTHER HEAD OF INCOME AS PER PROVISIONS OF SECTI ON 71 OF THE ACT. THEN ALSO, THERE IS NO REVENUE LOSS TO THE DEPARTME NT. FROM THIS POINT OF VIEW, THE ORDER PASSED BY THE ASSESSING OFFICER CANNOT BE PREJUDICE TO THE INTERESTS OF REVENUE. BEING SO, CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE, IN OUR OPINION, THE COMM ISSIONER OF INCOME TAX IS NOT JUSTIFIED IN EXERCISING HIS JURISDICTION U/S. 263 OF THE ACT AND THE ORDER OF THE COMMISSIONER OF INCOME TAX PASSED U/S. 263 IS QUASHED . I.T.A.NO1647/MDS/2014. :- 12 -: 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.1647/MDS/2014 IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 27TH OF MARCH, 20 15, AT CHENNAI. SD/- SD/- ( ! ) (CHALLA NAGENDRA PRASAD) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER '# /CHENNAI. $% /DATED:27.03.2015. KV %& '( )( /COPY TO: 1. * APPELLANT 2. / RESPONDENT 3. + ( )/CIT(A) 4. + /CIT 5. (,- . /DR 6. -/ 0 /GF.