M/s. Lotus Capital Financial Services Ltd., Kolkata V. ITO, Ward - 6(2), Kolkata, Kolkata

ITA 479/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54595 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 22-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: S M SURANA
• Keywords: Opportunity of being heard; Source of fund
• Section: 143(3); 115JB; 133(6)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , . !' . ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] # # # # / I.T.A NO. 479/KOL/2011 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR : 2006-07 M/S. LOTUS CAPITAL FINANCIAL SERVICES LTD. VS. INCOME-TAX OFFICER, WD-6(2), KOLKATA (PAN-AAACL 4520 B) ()* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI S. M. SURANA FOR THE RESPONDENT: SHRI NIRAJ KUMAR DATE OF HEARING: 27.09.2011 DATE OF PRONOUNCEMENT: 21.10.2011 - / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT, KOLKATA-II PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS THE ACT) IN M. NO. CIT/KOL- II/U/S.263/C-6/2010-11/5122-24 DATED 10.02.2011. AS SESSMENT WAS FRAMED BY ITO, WD-6(2), KOLKATA U/S. 143(3) OF THE ACT FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 08.05.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE REVISION ORDER OF CIT, KOLKATA-II PASSED U/S. 263 OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING EFFECTIVE GROUND NOS. 2 TO 7: 2. FOR THAT THE LD. C.I.T ERRED IN INITIATING PROC EEDINGS U/S. 263 WHEN THE ASSESSMENT WAS COMPLETED AFTER DUE ENQUIRY AND IN ACCORDANCE W ITH LAW. 3. FOR THAT THE LD. C.I.T ERRED IN SETTING ASIDE TH E ASSESSMENT WHEN THE ORDER PASSED BY THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE AND BOTH THE CONDITIONS TO INVOKE SEC. 263 WERE NOT PRESENT. 4. FOR THAT THE LD. C.I.T ERRED IN HOLDING THAT REC EIPT OF SHARE CAPITAL WAS NOT PROPERLY INVESTIGATED WHEN THE AO DULY EXAMINED THE CAPITAL AND THE LD. CIT CANNOT IMPOSE HIS OWN VIEW OF THE MANNER IN WHICH ENQUIRY WAS TO BE C ONDUCTED. 5. FOR THAT THE LD. C.I.T ERRED IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO THE CREDIT U/S. 88E WHILE DETERMINING TAX LIABILITY U/S. 115JB WHEN THE SAME WAS CORRECTLY ALLOWED BY THE AO IN ACCORDANCE WITH LAW AND IN ANY CASE TW O VIEWS WERE ALWAYS POSSIBLE WITH REGARD TO THE ALLOWABILITY THEREOF. 6. FOR THAT THE LD. C.I.T ERRED IN INVOKING PROVISI ONS OF SEC. 263 FOR PAYMENT OF THE STAFF SALARY WHEN THE SALARY PAID WAS QUITE FAIR AND REAS ONABLE CONSIDERING THE VOLUME OF THE BUSINESS AND EVEN OTHERWISE THE SAME WAS DULY CERTI FIED BY THE AUDITOR TO HAVE BEEN INCURRED FOR BUSINESS PURPOSES AND THERE WAS NO EVI DENCE ON RECORD THAT THE CLAIM WAS NOT GENUINE. 2 ITA 479/K/2011M/S. LOTUS CAPITAL FINANCIAL SERVICES LTD..A.Y. 06-07 7. FOR THAT THE LD. CIT ERRED IN INVOKING THE PROVI SIONS OF SEC. 263 WHEN ALL THE INVESTMENT IN MUTUAL FUNDS WERE DULY VERIFIED FROM THE BANK ACCOUNTS BY THE A.O AND SUCH BANK STATEMENT WERE ALSO FILED BEFORE THE LD. CIT FOR HIS SATISFACTION. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS OF THE CASE ARE THAT ORIGINAL ASSESSMEN T WAS FRAMED U/S. 143(3) OF THE ACT FOR THE RELEVANT ASSESSMENT YEAR 2006-07 BY ITO, WARD-6(2), KOLKATA VIDE ORDER DATED 08.05.2008. SUBSEQUENTLY, CIT, KOL-II ISSUED SHOW CAUSE NOTICE TO REVISE THE SAID ASSESSMENT U/S. 263 OF THE ACT STATING THE REASON THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 88E OF THE ACT IN CASE THE ASSESSEES TAX PAYABLE IS UNDER MAT U/S. 1 15JB OF THE ACT. THE RELEVANT SHOW CAUSE NOTICE NO. CIT/KOL-II/U/S.263/C-6/2010-11/2968 DATE D 10.09.2010 READS AS UNDER: FROM RECORDS, IT APPEARS THAT THE ASSESSMENT ORDER FOR THE CAPTIONED ASSESSMENT YEAR WAS PASSED U/S. 143(3) OF THE I.T. ACT ON 08.05.2008 AT A TOTAL INCOME OF RS. 1,52,29,080/-. DURING THE COURSE OF REVIEW OF ASSTT. PROCEEDINGS, IT WAS NOTICED THAT AT THE TIME OF FRAMING OF ASSESSMENT ORDER, THE A.O HAD FAILED TO APPLY THE P ROVISIONS OF SEC. 115JB, AS A RESULT OF WHICH YOUR TAX LIABILITY WAS ASSESSED AS NIL UNDER NORMAL PROVISION AFTER DEDUCTING REBATE OF RS.44,56,506/- U/S. 88E OF THE I. T. ACT. IT HAS FU RTHER BEEN ASCERTAINED THAT MAT OF RS.12,50,050/- BEING THE HIGHER TAX LIABILITY WAS R EQUIRED TO BE LEVIED AT THE TIME OF FINALIZATION OF ASSESSMENT ORDER. FAILURE ON THE PART OF A.O IN DOING SO RESULTED IN UNDER CHARGE OF TAX LIABILITY OF RS.12,50,050/-. THIS WRONG COMPETITION ON THE PART OF THE A.O HAS RENDERED THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF REVENUE. SUBSEQUENTLY, CIT, KOL-II FURTHER ISSUED SHOW CAUSE -NOTICE NO. CIT/KOL-II/U/S.263/C-6/2010- 11/3520 DATED 04.10.2010 WHEREBY HE RAISED ADDITION AL ISSUES AS UNDER: 1. SHARE CAPITAL HAS BEEN INCREASED TO RS.9,00,00, 000/- AS ON 31-03-2006 FROM RS.3,11,00,000/- AS AT 31/03/2005. 2. RESERVE AND SURPLUS HAS BEEN INCREASED TO RS.36, 95,46,512/- AS ON 31/03/2006 FROM RS.12,41,76,000/- AS AT 31/03/2005 AS A RESULT OF A DDITION IN SHARE PREMIUM ACCOUNT OF RS.23,30,00,000/- DURING THE YEAR UNDER CONSIDERATI ON. 3. EXPENDITURE ON ACCOUNT OF STAFF SALARY, BONUS AN D ALLOWANCES HAS BEEN INCREASED TO RS.2,16,000/- AS ON 31/03/2006 FROM RS.1,08,000/- A S AT 31/03/2005. FURTHER, IT WAS NOTED THAT YOU HAVE PAID RS.2 LAKHS OR MORE FOR PUR CHASE OF MUTUAL FUNDS FROM (I) SUNDARAM BNP PARIBAS MUTUAL FUND; AND (II) ICICI PR UDENTIAL MUTUAL FUND. THE CIT, KOL-II NOTED THAT ASSESSING OFFICER HAS NO T VERIFIED THE SOURCE OF FUNDS IN RESPECT OF THE ABOVEMENTIONED INVESTMENT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND INACTION ON THE PART OF ASSESSING OFFICER RENDERED THE IMPUGNED ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN RESPECT TO FIRST SH OW CAUSE NOTICE, THE ASSESSEE REPLIED THAT THE ASSESSEE IS ELIGIBLE FOR REBATE OR DEDUCTION OF TAX U/S. 88E OF THE ACT EVEN THOUGH INCOME IS COMPUTED UNDER PROVISIONS OF MAT U/S. 115JB OF THE ACT. HE STATED THAT SECTION 88E OF THE ACT PROVIDES THAT THE ASSESSEE SHALL BE ENTITLED TO DED UCTION FROM THE AMOUNT OF INCOME TAX ON SUCH INCOME WHICH ARISES FROM PROFITS AND GAINS FROM BUS INESS OR PROFESSION ON ACCOUNT OF SECURITY TRANSACTION. HE STATED THAT SECTION 88E OF THE ACT SIMPLY ALLOWS CREDIT FOR SECURITY TRANSACTION TAX PAID AGAINST INCOME ON WHICH TAX IS PAYABLE BY ASSESSEE AND HERE SAME IS NOT IN DISPUTE. IN 3 ITA 479/K/2011M/S. LOTUS CAPITAL FINANCIAL SERVICES LTD..A.Y. 06-07 RESPECT TO OTHER SHOW CAUSE NOTICE THE ASSESSEE CON TENDED THAT IN SO FAR AS SHARE CAPITAL RAISED DURING YEAR IS CONCERNED, AO MADE SPECIFIC QUERY VI DE POINT NO. 2 OF HIS LETTER DATED 11.9.2006. IN REPLY THERE TO, ASSESSEE DULY FILED NAME, ADDRES S, NO. OF SHARES APPLIED FOR AND ALLOTTED, CHEQUE NUMBERS AND NAME OF THE BANK ON WHICH CHEQUE S WERE ISSUED BY THE SHAREHOLDERS. THE DETAILS IN RESPECT RETURNS OF ALLOTMENT WERE ALSO F ILED. ASSESSEE ALSO FILED CONFIRMATION LETTERS WITH PAN ALONG WITH BALANCE SHEET AND ACKNOWLEDGEME NT SLIP OF FILING OF RETURNS OF THE SHAREHOLDERS. THUS THE IDENTITY OF SHAREHOLDER AND THE GENUINENESS OF TRANSACTIONS WERE DULY PROVED. THE ASSESSING OFFICER, HOWEVER, NOT SATISFI ED WITH THE SAME, HE ISSUED U/S. 133(6) ALL THE SHAREHOLDERS AND ALL OF THEM DULY REPLIED ACCEP TING THE CONTRIBUTION MADE BY THEM AND ALSO FILED REQUISITIONS MADE BY ITO INCLUDING SOURCE OF CAPITAL AND BANK STATEMENTS. THEREFORE, IT CANNOT BE SAID THAT NO ENQUIRY WAS MADE BY AO. THE AO ALSO ISSUED NOTICE DATED 27.8.2005 AND RAISED A QUERY WITH REGARD TO THE BANK ACCOUNT DETA ILS OF THE ASSESSEE COMPANY. THE ASSESSEE ALSO FILED ENTIRE BANK STATEMENT BEFORE AO VIDE HIS LETTER DATED 19.9.2005. THE AO DULY VERIFIED THE INFORMATION IN CASS AND THE ENTRIES WE RE FOUND RECORDED IN THE BANK STATEMENT OF HDFC BANK WHICH IS ON RECORD. FOR THE PURPOSE OF RE BATE U/S. 88E IN RESPECT TO COMPUTATION OF INCOME UNDER MAT PROVISIONS OF SECTION 115JB OF THE ACT, LD. COUNSEL RELIED ON THE DECISION OF BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. HORIZON CAPITAL LIMITED VS. ITO, ITA NO.592(BNG).10, ASSESSMENT YEAR 2005-06 DATED 16 TH JULY, 2010. 4. THE LD. CIT-DR, HOWEVER, ONLY ARGUED THE ISSUE T HAT NON-ENQUIRY OR INACTION ON THE PART OF THE ASSESSING OFFICER RENDERS THE ASSESSMEN T ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ARGUED THAT THE ORDER OF AS SESSING OFFICER IS NOT A SPEAKING ORDER AND HE HAS NOT MADE ANY ENQUIRY IN RESPECT TO INCREASE IN SHARE CAPITAL. HE STATED THAT EVEN THERE IS NO VERIFICATION CARRIED OUT IN RESPECT OF INFORMATION RECEIVED FROM SHARE APPLICANTS U/S. 133(6) OF THE ACT. ACCORDINGLY, HE URGED THAT CIT HAS RIGHTL Y INVOKED THE JURISDICTION U/S. 263 OF THE ACT FOR SETTING ASIDE THE ASSESSMENT AND DIRECTING THE ASSESSING OFFICER TO REDO THE SAME AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. WE FIND THAT THE ISSUE OF REBATE/DEDUCTION U/S. 88E OF THE ACT IN RESPECT TO CREDIT FOR SECURITY TRANSACTION TAX WHILE COMPUTING INCOME BEI NG MAT PROVISIONS OF SECTION 115JB OF THE ACT, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE BY THE DECISION OF BANGALORE BENCH IN THE CASE OF M/S. HORIZON CAPI TAL LIMITED (SUPRA), WHEREIN THE TRIBUNAL VIDE PARA 6 HAS HELD AS UNDER: 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE ONLY DISPUTE IS WHETHER THE REBATE OF STT PAID BY THE ASSESSEE IS ALLOWABLE FROM THE INCOME TAX COMPUTED AGAINST THE TOTAL INCOME COMPUTED UNDER SE CTION 115JB OF THE INCOME TAX ACT, 1961. 4 ITA 479/K/2011M/S. LOTUS CAPITAL FINANCIAL SERVICES LTD..A.Y. 06-07 THE TERM TOTAL INCOME HAS BEEN DEFINED UNDER THE INCOME TAX ACT, 1961 AS THE TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MA NNER LAID DOWN IN THIS ACT. SECTION 5 OF THE INCOME TAX ACT, 1961 DEFINES THE SCOPE OF THE TOTAL INCOME OF A RESIDENT OR A NON-RESIDENT PERSON. THE TOTAL INCOME OF THE ASSESSEE HAS TO BE COMPUTED UNDER THE REGULAR PROVISIONS OF THE INCOME TAX ACT, 1961 AND IN THE CASE OF A COMPANY IT CAN B E ARRIVED AT BOTH UNDER THE REGULAR PROVISIONS OF THE INCOME TAX ACT AND UNDER THE DEEMING PROVISI ON UNDER SECTION 115JB OF THE ACT. IT HAS BEEN PROVIDED THAT WHERE THE INCOME TAX PAYABLE BY THE A SSESSEE ON THE TOTAL INCOME COMPUTED UNDER REGULAR PROVISIONS OF THE ACT IS LESS THAN 7 1/2% OF THE BOOK PROFIT PREPARED IN ACCORDANCE WITH THE COMPANIES ACT, THE HIGHER OF THE TAX I.E. THE B OOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND TAX PAYABLE BY THE ASSESSEE SHA LL BE THE AMOUNT OF INCOME TAX AT THE SPECIFIED RATE. WHEN WE LOOK AT THE PROVISIONS OF SECTION 87 OF THE INCOME TAX ACT, 1961, WE FIND THAT THE REBATE IS TO BE GRANTED FROM THE AMOUNT OF INCOME T AX CHARGEABLE ON THE TOTAL INCOME OF THE ASSESSEE. THE INCOME TAX IS COMPUTED AFTER ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE AND SECTION 87 OF THE INCOME TAX ACT, 1961 DOES NOT DIFFERENTIA TE BETWEEN THE TOTAL INCOME COMPUTED UNDER THE REGULAR PROVISIONS OF THE ACT OR UNDER SECTION 115J B OF THE INCOME TAX ACT, 1961. EVEN THOUGH THE SUB SECTION (1) OF SECTION 115JB STARTS WITH THE NO N-ABSTANTE CLAUSE, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WE F IND THAT IT IS ONLY FOR THE COMPUTATION OF THE TOTA L INCOME AND THE SUB SECTION (5) OF SECTION 115JB PRO VIDES FOR A SAVING CLAUSE THAT THE REST OF THE PROVISIONS OF THE INCOME TAX ACT RELATING TO DEDUCT IONS, REBATE, ETC THE OTHER PROVISIONS OF THE INCOME TAX ACT SHALL APPLY. THEREFORE IT IS CLEAR T HAT THE PROVISION OF SECTIONS 87 AND 88A TO 88E ALSO APPLY AFTER THE TOTAL INCOME IS COMPUTED UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961 AND SINCE THE ASSESSEES TOTAL INCOME INCLUDES THE INCO ME FROM THE TAXABLE SECURITIES TRANSACTIONS, THE ASSESSEE IS ENTITLED TO A DEDUCTION OF THE AMOUNT E QUAL TO THE STT PAID BY HIM IN RESPECT OF THE TAXABLE SECURITIES TRANSACTIONS ENTERED INTO IN THE COURSE OF BUSINESS DURING THE PREVIOUS YEAR. THE ASSESSEES APPEAL IS THUS ALLOWED AND THE ASSES SING OFFICER IS DIRECTED TO GIVE REBATE UNDER SECTION 88E FOR THE STT PAID BY THE ASSESSEE. SINCE THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE ON MERITS, THERE IS NO QUESTION OF ANY REVISION ON THIS ASPECT BY CIT OF THE ASSESSMEN T ORDER. ONCE THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE, CIT HAS WRONGLY INVOKED THE REVISION PROCEEDING U/S. 263 OF THE ACT. 6. IN RESPECT TO INCREASE IN SHARE CAPITAL DURING T HE RELEVANT YEAR, THE ASSESSEE COMPANY CLAIMED THAT IT HAS FURNISHED COMPLETE NAMES, ADDRE SSES, CHEQUE NOS. NAME OF BANK OF THE PROSPECTIVE SHAREHOLDERS TO PROVE THE IDENTITY OF S HAREHOLDERS AS WELL AS GENUINENESS OF TRANSACTIONS ENTERED INTO. WE FIND FROM PAPER BOOK FILED BEFORE US THAT THE ASSESSING OFFICER HAS ISSUED VERIFICATION NOTICES U/S. 133(6) OF THE ACT TO (I) BOTHRA FINVEST PVT. LTD., (II) B. S. PROMOTERS PVT. LTD., (III) ZIPPER MERCANTILES PRIVA TE LTD., (IV) MIDPOINT MARKETING PVT. LTD., (V) NIHAR VINIYOD PRIVATE LIMITED, AND (VI) NANDAN MERCANTILES PVT. LTD. AND ALL OF THEM SUBMITTED INFORMATION U/S. 133(6) OF THE ACT TO ASS ESSING OFFICER AS IS EVIDENT FROM THE LETTERS AVAILABLE ON RECORD. EVEN THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER RECORDED FACT THAT NOTICES U/S. 133(6) OF THE I. T. ACT, 1961, WERE IS SUED TO VARIOUS PARTIES FOR VERIFICATION OF SHARE CAPITAL INTRODUCTION. REPLIES RECEIVED FROM THEM ARE TEST CHECKED AND KEPT ON RECORD. 7. WE FIND THAT CIT HAS GIVEN REASONING FOR REVISIO N IN ASSESSMENT FRAMED BY ASSESSING OFFICER U/S. 143(3) THAT MERE ISSUE OF NOTICES U/S. 133(6) OF THE ACT DOES NOT ABSOLVE THE 5 ITA 479/K/2011M/S. LOTUS CAPITAL FINANCIAL SERVICES LTD..A.Y. 06-07 ASSESSING OFFICER FROM HIS RESPONSIBILITY OF VERIFI CATION OF REPLIES FURNISHED BY PROSPECTIVE SHAREHOLDERS RATHER THIS INACTION ON THE PART OF AS SESSING OFFICER NOT TO VERIFY THIS INFORMATION AND ACCORDINGLY, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN RESPECT TO AIR INFORMATION IN REGARD TO PURCHASE OF MUTUAL FUND FROM (I) SUNDARAM BNP PARIVAS MUTUAL FUND AND (II) ICICI PRUDENTIAL MUTUA L FUND, THE ASSESSEE HAS FILED COMPLETE DETAILS ALONG WITH BANK STATEMENT OF HDFC, WHICH IS ON RECORD EVEN BEFORE US AND THE ASSESSING OFFICER AFTER VERIFYING THE SAME KEPT ON RECORDS. THE ALLEGATION OF CIT FOR REVISING THE ASSESSMENT IS THAT THE ASSESSING OFFICER HAS NO T FURNISHED REQUISITE DETAILS IN RESPECT TO PURCHASE OF MUTUAL FUNDS AND INCREASE IN SHARE CAPI TAL FOR THE RELEVANT PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. WE ARE OF THE VIEW THAT THE ASSESSEE HAS FILED COMPLETE DETAILS NAMES, ADDRESSES, NO. OF SHARES APPLIED FOR AND ALLOTTED, CHEQUE NOS., NAME OF BANK ON WHICH CHEQUES WERE ISSUED TO SHAREHOLDERS AND EVEN THIS WAS VERIFIED THROUGH NOTICES U/S. 133(6) OF THE ACT AND IN RESPONSE TO THESE NOTICES, THE PROSPECTIVE SHAREHOLDERS ALSO REPLIED TO THE ASSESSEE, AND THE CONFIRMATIONS ARE ON RECORD E VEN BEFORE US, THE SAME CLEARLY REVEALS THAT COMPLETE INFORMATION WAS AVAILABLE BEFORE THE ASSES SING OFFICER AT THE TIME OF FRAMING OF ASSESSMENT AND HE HAS GIVEN THIS FINDING IN HIS ORD ER PASSED U/S. 143(3) OF THE ACT. WE, AFTER GOING THROUGH PROVISIONS OF SECTION 263 OF THE ACT, FIND THAT COMMISSIONER CAN REVISE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER ONLY I F (I) IT IS ERRONEOUS, AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. IF THE ORDER SOUGHT TO BE REVISED IS NOT PREJUDICIA L TO THE INTERESTS OF THE REVENUE, COMMISSIONER HAS NO JURISDICTION TO REVISE IT. FOR INSTANCE, AN ORDER OF ASSESSMENT PASSED BY AN ASSESSING OFFICER WITHOUT COMPLYING WITH THE PROCEDURE LAID D OWN IN THE PRE 1989 SECTION 144B OF THE ACT IS ERRONEOUS, BUT CANNOT BE SAID TO BE PREJUDIC IAL TO THE INTERESTS THE REVENUE. SIMILARLY, FAILURE OF THE ASSESSING OFFICER TO DEAL WITH THE C LAIM OF THE ASSESSEE IN THE ASSESSMENT ORDER MAY BE AN ERROR, BUT AN ERRONEOUS ORDER BY ITSELF I S NOT ENOUGH TO GIVE JURISDICTION TO COMMISSIONER TO REVISE IT UNDER SECTION 263 OF THE ACT. IT MUST FURTHER BE SHOWN THAT THE ORDER WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND IT IS NOT EACH AND EVERY ORDER PASSED BY THE ASSESSING OFFICER WHICH CAN BE REVISED UNDER SECTIO N 263 OF THE ACT. A BARE READING OF SECTION 263(1) MAKES IT CLEAR THAT THE PRE-REQUISITE TO EXE RCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE AO IS ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO B E SATISFIED WITH TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERR ONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE ORD ER OF THE AO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOU S BUT IS PREJUDICIAL TO THE REVENUERECOURSE 6 ITA 479/K/2011M/S. LOTUS CAPITAL FINANCIAL SERVICES LTD..A.Y. 06-07 CANNOT BE HAD TO SECTION 263(1). THIS VIEW IS TAKEN BY HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (2000) 243 ITR 8 3, 87 (SC). ACCORDINGLY, IN THE PRESENT CASE BEFORE US, THE ASSESSMENT FRAMED BY AO IS NEIT HER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE AND THIS IS CLEARLY DEMONSTRATED BY FACT S DISCUSSED BY AO IN HIS ORDER AND DOCUMENTS PRODUCED BEFORE US BY ASSESSEE. ACCORDIN GLY, WE SET ASIDE THE ORDER OF CIT PASSED U/S. 263 OF THE ACT BEING NOT AS PER LAW. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 9. ORDER PRONOUNCED IN OPEN COURT ON 21.10.2011 SD/- SD/- . !' !'!' !' . , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ' ) )) ) DATED : 21ST OCTOBER, 2011 ./ $01 2 JD.(SR.P.S.) - 3 +4 54&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT M/S. LOTUS CAPITAL FINANCIAL SERVICES L TD., 3A, POLLOCK STREET, 1 ST FLOOR, R. NO. 29, KOLKATA-700 001. 2 +,)* / RESPONDENT, ITO, WARD-6(2), KOLKATA. 3 . -$ ( )/ THE CIT(A), KOLKATA 4. -$ / CIT, KOLKATA 5 . => +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, -$?/ BY ORDER, 1 /ASSTT. REGISTRAR .