INDIAN OIL CORPORATION LTD, MUMBAI V. CIT 10, MUMBAI

ITA 545/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75579 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 05-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: MILIN THAKARE
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Question of law; Reason to believe; Reassessment proceedings; Capital expenditure
• Section: 43B; 143(3); 263

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . , !'# $ % & , ' !'# !( BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER !. : 545 / / 2012 A.Y. 2006-07 ITA NO. : 545/MUM/2012 (ASSESSMENT YEAR: 2006-07) INDIAN OIL CORPORATION LTD., G-9, ALI YAVAR JUNG MARG, BANDRA (EAST), MUMBAI- 400 051 PAN: AAACI 1681 G VS COMMISSIONER OF INCOME TAX-10, MUMBAI- (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MILIN THAKARE RESPONDENT BY : SHRI P K SHUKLA /DATE OF HEARING : 05-02-2014 / DATE OF PRONOUNCEMENT : 19-02-2014 ' + O R D E R % & , !: PER VIVEK VARMA, JM: THE INSTANT APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER U/S 263 OF INCOME TAX ACT OF CIT-10, MUMBAI, DATED 31.03.2011 , WHEREIN, THE FOLLOWING GROUNDS HAVE BEEN TAKEN: THE APPELLANT OBJECTS TO THE ORDER DATED MARCH 31, 2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX -10, MUMBAI ON THE FOLLOWING A MONG OTHER GROUNDS: PROCEEDINGS UNDER SECTION 263 1. THE ORDER DATED MARCH 31, 2011 PASSED BY THE CO MMISSIONER UNDER SECTION 263 OF THE INCOME-TAX ACT IS INVALID, ULTRA VIRES AND CON TRARY TO THE PROVISIONS OF LAW AND THEREFORE, OUGHT TO BE QUASHED. 2. THE LEARNED COMMISSIONER ERRED IN HOLDING THAT THE AS SESSMENT ORDER DATED DECEMBER 30, 2008 WAS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. 3. THE LEARNED COMMISSIONER ERRED IN SETTING ASIDE THE A SSESSMENT ORDER DATED DECEMBER 30, 2008 ON THE ISSUE OF PRIOR PERIOD EXPENSE S WITH DIRECTION TO THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT. PRIOR PERIOD EXPENSES 1. THE LEARNED COMMISSIONER ERRED IN CONFIRMING THE DISALLO WANCE OF EXPENSES OF RS.13,98,47,361 AS PRIOR PERIOD EXPENSES. 2. THE LEARNED COMMISSIONER OUGHT TO HAVE APPRECIATED TH AT THE EXPENSES APPEARING IN THE AUDITED ACCOUNTS UNDER THE HEADING P RIOR PERIOD EXPENSES INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 2 CRYSTALLISED DURING THE PREVIOUS YEAR AND HENCE OUGHT TO BE ALLOWED AS DEDUCTION. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISS IONER OUGHT TO HAVE APPRECIATED THAT IT IS QUITE NATURAL THAT THERE WOULD BE AN AMOUNT OF OVERFLOW OF INFORMATION AFTER THE CLOSE OF THE ACCOUNTING YEAR. THE REFORE, IN ANY LARGE ORGANIZATION, THERE BOUND TO BE CERTAIN EXPENDITURE PER TAINING TO THE PREVIOUS YEAR WHICH HAS TO BE ACCOUNTED FOR IN THE CURRENT YE AR AND HENCE SUCH EXPENDITURE OUGHT TO BE ALLOWED IN THE CURRENT YEAR. T HE APPELLANT INTER ALIA RELIES ON THE FOLLOWING DECISIONS: I. STERLITE INDUSTRIES (INDIA) LIMITED V. ACIT 6 SOT 4 97 (MUM). II. TOYO ENGG. INDIA LIMITED V. JCIT 5 SOT 616 (MUM.) 4. THE LEARNED COMMISSIONER OUGHT TO HAVE APPRECIATED THAT THE AFORESAID EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND THEREFORE SHOULD BE ALLOWED AS DEDUCTION IN THE CURRENT YEAR. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISS IONER OUGHT TO HAVE APPRECIATED THAT THERE WAS NET PRIOR PERIOD INCOME I.E . EXCESS OF PRIOR PERIOD INCOME OVER PRIOR PERIOD EXPENSES WITHOUT CONSIDERING PR IOR PERIOD DEPRECIATION OFFERED FOR TAX. THEREFORE, THE APPELLANT SUBMITS TH AT THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE DIRECTED THE LEARNED ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.13,98,47,36 1. 6. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION FOR PRIOR PERIOD EXP ENDITURE OF RS.13,98,47,361 IN THE RESPECTIVE YEARS TO WHICH IT PE RTAINS. 7. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OUGHT TO HAVE DIRECTED THE ASSESSING OFFICE TO ALLOW DEDUCTION OF RS.L1.71 CRORE ON THE BASIS OF PAYMENT MADE UNDER SECTION 43B OF THE INCOME TAX ACT, 1961 B EING TAXES, DUTIES ETC OUGHT TO BE ALLOWED ON THE BASIS OF ACTUAL PAYMENT. 2. FROM THE DETAILS, WE FIND THAT REGULAR ASSESSMENT WAS FRAMED U/S 143(3) ON 31.12.2008. 3. THE CIT PERUSING THE ASSESSMENT NOTICED THAT THE A SSESSEE HAD CLAIMED CERTAIN PRIOR PERIOD EXPENSES, WHICH WERE ALLOWED BY THE AO. ACCORDING TO THE CIT, THE AO ALLOWED THESE EXPENSES WITH OUT VERIFICATION. THE CIT(A), THEREFORE, INVOKED THE PROVISION OF SEC TION 263 OF THE INCOME TAX ACT 1961, SHOW CAUSING THE ASSESSEE , OR TO WHY THE ASSESSMENT FRAMED U/S 143(3) ON 31.12.2008, BE NOT HELD T O THE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND WHY THE ASSESSMENT BE NOT SET ASIDE FOR FRAMING FRESH ASSESSMENT. 4. REPLYING TO THE SHOW CAUSE NOTICE, THE ASSESSEE REPLIED, I) THE DETAILS OF PRIOR PERIOD EXPENDITURE WAS SUBMI TTED TO THE ASSESSING OFFICER VIDE LETTER DATED 11.11.2008. THE ASSESSING OFFICER HA S CONSIDERED THE DETAILS OF PRIOR PERIOD EXPENDITURE WHEREIN NET PRIOR PERIOD INCOM E WAS OFFERED TO TAX AND DID NOT MAKE ANY DISALLOWANCE FOR PRIOR PERIOD EXPE NDITURE. II) THE ASSESSING OFFICER HAS EXAMINED THE ISSUE REGARD ING ALLOWABILITY OF PRIOR PERIOD EXPENSES DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. HENCE THE ORDER U/S 143(3) DATED 31.12.2008 IS NOT ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND CANNOT BE REVISED UNDER SECTION 263. III) THE HONBLE SUPREME COURT HAS IN THE CASE OF MALA BAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 HELD THAT WHERE THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 3 WHICH THE COMMISSIONER OF INCOME TAX DOES NOT AGREE, I T CANNOT HE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IV) IN A LARGE ORGANIZATION, THERE IS BOUND TO BE CERT AIN EXPENDITURE PERTAINING TO THE PREVIOUS YEARS WHICH HAVE TO BE ACCOUNTED FOR IN THE CURRENT YEAR. THIS PRIOR EXPENDITURE IS ONLY 0.0097 PERCENT OF THE TOTAL TURNOVE R AND NEGLIGIBLE WHEN COMPARED TO THE TOTAL TURNOVER. FURTHER THE EXPENDIT URE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS . V) IT HAS BEEN HELD IN THE CASE OF STERLITE INDUSTRIES (INDIA) LTD V. ADDL. CIT 6 SOT 497 (MUM) THAT THE ASSESSEE HAS DEMONSTRATED THAT SO ME OF THE BRANCHES WERE SITUATED AT VERY LONG DISTANCE AND THUS IT BECAME INEVIT ABLE THAT SMALL PORTION OF PERIOD EXPENSES HAVE TO BE ACCOUNTED IN THE LATER YEAR. THE ASSESSEE HAD A HUGE TURNOVER AND IT CLAIMED EXPENSES IN CRORES OF RU PEES THEN IT IS NOT JUSTIFIABLE TO DOUBT A SUM OF RS. 46.899/- ONLY. HENCE THE EXPENSES OF RS, 46,889 WERE ALSO LIABLE TO BE ALLOWED. VI) IT HAS BEEN HELD IN THE CASE OF TOYO ENGG. INDI A LTD. V. JCIT S SOT 616 (MUM) THAT IN AN ORGANIZATION WHERE ACTIVITIES ARE CARRIED OUT THROUGH VARIOUS SITE OFFICES, IT IS QUITE NATURAL THAT THERE WOULD BE AN A MOUNT OF OVERFLOW OF INFORMATION AFTER THE CLOSE OF THE ACCOUNTING YEAR. THE REFORE, EVEN THOUGH THEY ARE TREATED TECHNICALLY AS PRIOR PERIOD EXPENSES. IT R ELATES TO A CONTINUOUS FLOW OF EXPENDITURE AND THE DISALLOWANCE OF THE SAID EXPENDIT URE AS NOT JUSTIFIED. VII) THERE WAS NOT MUCH VARIATION IN THE TAX RATES FO R THE PREVIOUS ASSESSMENT YEARS. HENCE, THE PRIOR PERIOD EXPENSES MAY BE ALLOWED AS DEDUCTION IN THE ASSESSMENT YEAR 2006-2007. SIMILARLY, PRIOR PERIOD INCOM E MAY ALSO BE ASSESSED IN THE ASSESSMENT YEAR 2006-2007. 5. TAKING THE ABOVE SUBMISSIONS INTO CONSIDERATION, THE CIT, HELD, 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE ASSESSEE AND HAVE ALSO GONE THROUGH THE CASE RECORDS FOR THE ASSESSMEN T YEAR 2006-2007. ON EXAMINATION OF THE RECORDS. IT IS SEEN THAT THE ASSESSIN G OFFICER HAS NOT EXAMINED WHETHER THE PRIOR PERIOD EXPENSES DEBITED BY T HE ASSESSEE TO THE PROFIT AND LOSS ACCOUNT WAS IN ORDER AND IN ACCORDANCE WITH THE NOTIFICATION NO. SO 69(E) DATED 25.01.1996 ISSUED UNDER SECTION 145(2) OF THE INCOME TAX ACT 1961 PRESCRIBING THE ACCOUNTING STANDARDS TO BE FOLLOWE D BY ALL ASSESSES FOL1OVING THE MERCANTILE SYSTEM OF ACCOUNTING FOR AND F ROM THE ASSESSMENT YEAR 1997-1998. IT HAS BEEN HELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF MADRAS FERTILIZERS LTD. 209 ITR 174 THAT PRIOR PERIOD EX PENSES ARE NOT ELIGIBLE FOR DEDUCTION AND EACH YEAR IS A SELF-CONTAINED PERIOD IN REGARD TO WHICH THE PROFIT OR LOSS HAS TO HE COMPUTED. IT HAS BEEN HELD IN PLETHORA OF CASES THAT WHERE AN ASSESSMENT HAS BEEN MADE WITHOUT PROPER EN QUIRY, THE ORDER WOULD BE BOTH ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND BE REVISED BY THE CIT U/S 263 (COLORCRAFT KASHMIRA CERAMIC COMPOUN D V ITO (ITAT, MUMBAI) L05 ITD 599, ARVEE INTERNATIONAL V. ADDL. CIT (ITAT, MUMBAI) 101 ITD 495. ASHOK LEYLAND LTD. V. CIT 260 ITR 599 (MAD.). JA I BHARAT TANNERS V. CIT 264 ITR 673 (MAD.), CIT V. MEMILLAN & CO. 33 ITR 182 (S C), RAMPYARI DEVI SAROOGI V. CIT 67 ITR 84 SC. THE ORDER U/S 143(3) D ATED 31 .12.2008 IS, THEREFORE, BOTH ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF THE REVENUE. 4.1. IT HAS BEEN HELD BY THE CHENNAI SPECIAL BENCH O F THE ITAT IN THE CASE OF RAJALAKSHMI MILLS LTD. V. ITO, COMPANY CIRCLE III. COIMBATOR E (2009) 121 ITD 343 THAT IT IS NOT NECESSARY FOR THE COMMISSIONER TO M AKE FURTHER ENQUIRIES BEFORE CANCELLING ASSESSMENT ORDER OF AO. IT WAS ALSO F IELD IN THE SAID CASE THAT THE COMMISSIONER CAN REGARD ANY ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER SHO ULD HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING STATEMENT MADE BY THE ASSE SSEE IN HIS RETURN. 5. IN THE LIGHT OF THE DISCUSSION IN THE PRECEDING PAR AGRAPHS. I AM OF THE OPINION THAT THE ORDER U/S 143(3) DATED 31.12.2008 IS BOTH E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE SAID ORDER IS CANCELLED W ITH A DIRECTION TO BE DONE AFRESH BY THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL CALL FOR THE COMPLETE DETAILS OF PRIOR PERIOD EXPENDITURE (INCLUDING TECHNICAL FEES OF RS. 2.08 CRORES) DEBITED IN THE ASSESSMENT YEAR 2006-2007 AND GIVE A FIN DING IN RESPECT OF THE ADMISSIBILITY OF THE SAID EXPENDITURE IN THE ASSESSMENT YEA R 2006-2007 IN THE LIGHT OF THE ACCOUNTING STANDARDS NOTIFIED U/S 145(2) O F THE INCOME TAX ACT, 1961 AND VARIOUS JUDICIAL PRONOUNCEMENTS ON THE ISSUE. THE ASSESSING OFFICER INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 4 SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESS EE AND PASS A SPEAKING ORDER AFTER HEARING THE SUBMISSIONS OF THE ASSESSEE. 6. AS A RESULT, THE CIT SET ASIDE THE ORDER U/S 143(3), FRA MED BY THE AO. 7. AGGRIEVED, THE ASSESSEE IS BEFORE THE ITAT. 8. BEFORE US, THE AR POINTED OUT THAT IN THE REGULAR ASSE SSMENT PROCEEDINGS, THE ISSUE WAS TAKEN UP BY THE AO AND THE ASSESSEE VIDE ITS SUBMISSIONS DATED 11.11.2008 HAD MADE CATEGORICAL SUBM ISSION ON THE ISSUE RAISED BY THE CIT IN 263 PROCEEDINGS. THE AR S UBMITTED THAT THE FOLLOWING REPLY WAS GIVEN BY THE ASSESSEE TO THE AO IN THE ASSESSMENT PROCEEDINGS. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT Y EAR 2006-07, SCHEDULE P OF THE ANNUAL ACCOUNTS RELATED TO INCOME/EXPENSES RELATING TO EARLIER YEARS ARE RS.16.62 CRORES INCLUDING IBP. THE DETAILS ARE AS UNDER: RS/CRORES SR. NO. NATURE OF EXPENDITURE IOCL IBP TOTAL 1 INCOME 18.81 NIL 18.81 2 EXPENSES 2.02 0.17 2.19 NET INCOME (EXPENDITURE ) 16.79 (0.17) 16.62 REFERENCE IS DRAWN TO SCHEDULE P OF THE ANNUAL ACCOUN TS RELATED TO INCOME/EXPENSES RELATING TO EARLIER YEARS. FROM THE AFORESAID SCHEDULE, YOUR GOODSELF MAY OBSERVE THAT PRIOR PERIOD INCOME IS RS.18.81 CRORES WHERE AS PRIOR P ERIOD EXPENSES ARE RS. 2.02 CRORES. FURTHER, OUT OF PRIOR PERIOD EXPENSES OF RS. 2.02 CRORES, DEPRECIATION OF RS. 1.80 CRORES HAS ALREADY BEEN ADDED IN THE STATEMENT OF TOT AL INCOME. THEREFORE, THERE IS NET PRIOR PERIOD INCOME OF RS. 18.49 CRORES (RS. 16.69 C RORES PLUS RS. 1.80 CRORES) WHICH IS OFFERED FOR TAX. WE ARE THEREFORE TO SUBMIT THAT NO FURTHER DISALLOWANCE SHOULD BE MADE IN THIS ASPECT. 9. THE AR POINTED OUT THAT EVEN IN THE PROFIT & LOSS AC COUNT SUBMITTED ALONG THE RETURN OF INCOME, THE DISCLOSURE OF THE IMPUGNED FIGURE MADE IS CLEAR (APB 9 AND 31). AS PER PROFIT & LOSS A CCOUNT THE FIGURE IS SHOWN AS INCOME/(EXPENSES) PERTAINING TO PREVIO US YEARS (NET) (SCHEDULE P) 16.79 CRORES AND IN SCHEDULE P, THE COM PLETE DETAIL HAD BEEN SUBMITTED. ON THESE FACTS, ARE AR SUBMITTED TH AT THE ACTION OF THE CIT INITIATING PROCEEDINGS U/S 263 WAS BAD BECAUSE THE AO HAS MADE ADEQUATE ENQUIRIES, ON WHICH THE ASSESSEE HAD ADEQ UATELY REPLIED IN ITS SUBMISSIONS. IN ANY CASE THE ISSUE WAS CLEAR FROM THE INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 5 ASSESSEES ORIGINAL AND PRIMARY DOCUMENTS, SUBMITTED ALONG WITH THE RETURN. 10. THE AR, ON THESE FACTS, SUBMITTED THAT THE ORDER U /S 143(3) COULD NEITHER BE HELD TO BE ERRONEOUS NOR PREJUDICIAL. TH E AR PLACED RELIANCE ON THE DECISION OF MALABAR INDUSTRIAL CO. LTD. VS CI T, REPORTED IN 109 TAXMAN 66, WHEREIN, HONBLE SUPREME COURT HAS HELD, 6. A BARE READING OF THIS PROVISION MAKES IT CLEAR THA T THE PRE-REQUISITE TO EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED WITH TWIN CONDITIONS, NA MELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONE OUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS AB SENT - IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE - RECOURSE CANNOT BE HAD TO SECTION 263(1). 7. THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSE SSING OFFICER; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTR ACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUST ICE OR WITHOUT APPLICATION OF MIND. 11. THE AR ALSO PLACED RELIANCE ON THE DECISION OF CIT VS GABRIAL INDIA LTD. REPORTED IN 203 ITR 108 (BOM), WHEREIN , IT HAS BEEN HELD, FROM A READING OF SUB-SECTION 1 OF SECTION 263, IT IS C LEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CON SIDERS THAT ANY ORDER PASSED THEREIN BY THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS NOT AN ARBITRARY OR U NCHARTERED POWER. IT CAN BE EXERCISED ONLY ON FULFILLMENT OF THE REQUIREMENTS LAID DOW N IN SUB-SECTION (1). THE CONSIDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REV ENUE, MUST BE BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SA ID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AND WITHOUT JU RISDICTION. THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY- [SEE PARASHURAM POTTERY WORKS CO. LTD . V. ITO [1977] 106 ITR 1 (SC), AT PAGE 10]. 9. AS OBSERVED IN SIRPUR PAPER MILLS LTD. V. ITO [1978] 114 ITR 404 (AP) BY RAGHUVEER, J. (AS HIS LORDSHIP THEN WAS), THE DEPART MENT CANNOT BE PERMITTED TO BEGIN FRESH LITIGATION BECAUSE OF NEW VIEWS THEY ENTER TAIN ON FACTS OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE THE IN FERENCE OR PROPER INFERENCE EITHER OF THE FACTS DISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCES. IF THIS IS PERMITTED, LITIGATION WOULD HAVE NO END, EXCEPT WHEN LE GAL INGENUITY IS EXHAUSTED. TO DO SO, IS. . . TO DIVIDE ONE ARGUMENT INT O TWO AND TO MULTIPLY THE LITIGATION. 10. THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION (1 ) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 6 SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SU B-SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEING E RRONEOUS PREJUDICE HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THER EFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT THE EXPRESSIONS ERRONEOUS, ERRONEOUS ASSESSMENT AND ERRONEOUS JUDGM ENT HAVE BEEN DEFINED IN BLACKS LAW DICTIONARY. ACCORDING TO THE DEFIN ITION/ERRONEOUS, MEANS INVOLVING ERROR; DEVIATING FROM THE LAW. ERRONEO US ASSESSMENT REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, T HEREFORE, INVALID, AND IS A DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, AND DOES NOT REFER TO THE JUDGMENT OF THE ASSESSING OFFICER IN FIXING THE AMOUNT OF VALUATION OF THE PROPERTY. SIMILARLY, ERRONEOUS JUDGMENT MEANS ONE RENDERED ACCORDING TO C OURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW UPON MISTAKEN VIEW OF LAW, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES. 11. FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW, IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNO T BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR T HAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERR ONEOUS. CASES MAY BE VISUALISED WHERE THE ITO WHILE MAKING AN ASSESSMENT EXAMIN ES R ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCU MSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOU NTS OR BY MAKING SOME ESTIMATE HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RE CORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNE D WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER, HE WOULD HAVE ESTIMATED TH E INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE ITO HAS E XERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS S IMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVIS ION BECAUSE THE FIRST REQUIREMENT, VIZ., THAT THE ORDER IS ERRONEOUS, IS ABS ENT. SIMILARLY, IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVER Y ERRONEOUS ORDER CANNOT BE THE SUBJECT-MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. THERE MUST BE SOME PRIMA FADE MATERIAL ON RE CORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT B Y THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTER PRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. 12. AS OBSERVED IN DAWJEE DADABHOY & CO. V. S.P. JA M [1957] 31 ITR 872 (CAL.), AT PAGE 881, THE WORDS PREJUDICIAL TO THE INTERESTS OF T HE REVENUE HAVE NOT BEEN DEFINED, BUT IT MUST MEAN THAT THE ORDERS OF ASSESSM ENT CHALLENGED ARE SUCH AS ARE NOT IN ACCORDANCE WITH LAW, IN CONSEQUENCE WHEREO F THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALISED OR CANNOT BE REALISE D. IT CAN MEAN NOTHING ELSE. THE AFORESAID OBSERVATIONS WERE ALSO APPLIED BY TH E GUJARAT HIGH COURT IN ADD!. CIT V. MUKUR CORPN. [1978] 111 ITR 312 . WE ARE OF THE OPINION THAT THE AFORESAID INTERPRETATION GIVEN BY THE CALCUTTA HIGH COURT TO THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS THE COR RECT INTERPRETATION. 13. WE, THEREFORE, HOLD THAT IN ORDER TO EXERCISE PO WER UNDER SUB-SECTION (1) OF SECTION 263 THERE MUST BE MATERIAL BEFORE THE COMMISSIO NER TO CONSIDER THAT THE ORDER PASSED BY THE ITO WAS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE HAVE ALREADY HELD WHAT IS ERRONEOUS. IT MUST BE AN ORDER WHICH IS NOT IN ACCORDANCE 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 INTERESTS OF THE REVENUE. AN ORDE R CAN BE SAID TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IF IT IS NOT IN ACCORDANCE WITH THE LAW IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE S TATE HAS NOT BEEN REALISED OR CANNOT BE REALISED. THERE MUST BE MATERIAL AVAILABLE ON THE RECORD INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 7 CALLED FOR BY THE COMMISSIONER TO SATISFY HIM PRIMA FADE THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, HE HAS NO AUTHORITY T O INITIATE PROCEEDINGS FOR REVISION. EXERCISE OF POWER OF SUO MOTU REVISION UNDER SUCH CIRCUMSTANCES WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IT IS WELL-SETTLE D THAT WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF C ERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MAT ERIALS ON RECORD TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS C HALLENGED BEFORE THE COURT, IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RE LEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. OUR AFORESAID CONCLUSION GETS FULL SUPPORT FROM A DECISION OF SABYASACHI MUKHARJI, J. (AS HIS LORDSHIP THEN WAS) IN RUSSELL PROPERTIES (P.) LTD. V A. CHOWDHURY, ADDL. CIT [19771 109 ITR 229 (CAL.). IN OUR OPINION, A NY OTHER VIEW IN THE MATTER WILL AMOUNT TO GIVING UNBRIDLED AND ARBITRARY POWER TO T HE REVISING AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION IN EVERY CASE AND START RE-EXAMINATION AND FRESH ENQUIRIES IN MATTERS WHICH HAVE ALREADY BEEN CONCLU DED UNDER THE LAW. AS ALREADY STATED, IT IS A QUASI-JUDICIAL POWER HEDGED IN WITH LIMITATION AND HAS TO BE EXERCISED SUBJECT TO THE SAME AND WITHIN ITS SC OPE AND AMBIT. SO FAR AS CALLING FOR THE RECORDS AND EXAMINING THE SAME IS CONCERN ED, UNDOUBTEDLY, IT IS AN ADMINISTRATIVE ACT, BUT ON EXAMINATION TO CONSIDER OR IN OTHER WORDS, TO FORM AN OPINION THAT THE PARTICULAR ORDER IS ERRONEOUS INSOFA R AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IS A QUASI-JUDICIAL ACT BECAU SE ON THIS CONSIDERATION OR OPINION THE WHOLE MACHINERY OF RE-EXAMINATION AND RECONSIDE RATION OF AN ORDER OF ASSESSMENT, WHICH HAS ALREADY BEEN CONCLUDED AND C ONTROVERSY WHICH HAS BEEN SET AT REST, IS SET AGAIN IN MOTION. IT IS AN IMPO RTANT DECISION AND THE SAME CANNOT BE BASED ON THE WHIMS OR CAPRICE OF THE REVISIN G AUTHORITY. THERE MUST BE MATERIALS AVAILABLE FROM THE RECORDS CALLED FOR BY TH E COMMISSIONER. 14. WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CAS E IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. THE ITO IN THIS CASE HA D MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY T HE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD 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 OR DER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREOVER, IN THE IN STANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEEDINGS F OR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE E XPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE 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 A FTER COMING TO THE CONCLUSION THAT THE EARLIER FINDING OF THE ITO WAS ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WITHOUT DOING SO, HE DOE S NOT GET THE POWER TO SET ASIDE THE ASSESSMENT. IN THE INSTANT CASE, THE COMMISS IONER DID SO AND IT IS FOR THAT REASON THAT THE TRIBUNAL DID NOT APPROVE HIS ACTION AND SET ASIDE HIS ORDER. WE DO NOT FIND ANY INFIRMITY IN THE ABOVE CONCLUSION OF TH E TRIBUNAL. 12. THE AR HAS ALSO PLACED RELIANCE ON THE DECISION OF CI T VS ASHISH RAJPAL, REPORTED IN 320 ITR 647(DELHI), WHEREIN THE HONBLE D ELHI HIGH COURT HAS VERY ELABORATELY DELVED ON THE ISSUE AND HELD, THE PARAMETERS AND PRINCIPLES LAID DOWN BY THE COURTS WHICH GOVERN THE EXERCISE OF POWER BY THE COMMISSIONER UNDER THE PROVI SIONS OF SECTION 263 ARE AS FOLLOWS: (1 ) THE POWER UNDER SECTION 263 IS SUPERVISORY IN NATU RE, WHEREBY THE COMMISSIONER CAN CALL FOR AND EXAMINE THE ASSESSMENT REC ORDS. (II) THE COMMISSIONER CAN REVISE THE ASSESSMENT ORDER IF THE TWIN CONDITIONS PROVIDED IN THE ACT ARE FULFILLED, I.E., THE A SSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT IS ALSO PREJUDICIAL TO THE INTERES T OF THE REVENUE. THE FULFILLMENT OF BOTH CONDITIONS IS AN ESSENTIAL PREREQ UISITE. (III) AN ORDER IS ERRONEOUS WHEN IT IS CONTRARY TO LAW O R PROCEEDS ON AN INCORRECT ASSUMPTION OF FACTS OR IS IN BREACH OF PRINCIP LES OF NATURAL INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 8 JUSTICE OR IS PASSED WITHOUT APPLICATION OF MIND, THAT IS, IS STEREO-TYPED INASMUCH AS THE ASSESSING OFFICER ACCEPTS WHAT IS STATE D IN THE RETURN OF THE ASSESSEE WITHOUT MAKING ANY ENQUIRY CALLED FOR IN THE CIRCUMSTANCES OF THE CASE, I.E., PROCEEDS WITH UNDUE HASTE. (IV) THE EXPRESSION PREJUDICIAL TO THE INTEREST OF THE REVENUE WHILE NOT TO BE CONFUSED WITH THE LOSS OF TAX WILL CERTAINLY INCLUDE AN E RRONEOUS ORDER WHICH RESULTS IN A PERSON NOT PAYING TAX WHICH IS LAWFULLY PAYABLE TO THE REVENUE. (V) EVERY LOSS OF TAX TO THE REVENUE CANNOT BE TREATE D AS BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER TAKES RECOURSE TO ONE OF THE TWO COURSES POSSIBLE, IN LAW, OR WHERE THERE ARE TWO VIEWS POSSIBLE AND THE COMMISSIONER DOES N OT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER WHICH HAS RESU LTED IN A LOSS. (VI) THERE IS NO REQUIREMENT OF ISSUANCE OF A NOTICE BE FORE COMMENCING PROCEEDINGS UNDER SECTION 263. WHAT IS REQUIRED IS ADH ERENCE TO THE PRINCIPLES OF NATURAL JUSTICE BY GRANTING TO THE ASSESSE E AN OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER UNDER SECTION 263. (VII) LF THE ASSESSING OFFICER ACTS IN ACCORDANCE WITH L AW, HIS ORDER CANNOT BE TERMED AS ERRONEOUS BY THE COMMISSIONER, SIMPLY BECA USE ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN M ORE ELABORATELY. RECOURSE CANNOT BE TAKEN TO SECTION 263 TO SUBSTITUT E THE VIEW OF THE ASSESSING OFFICER WITH THAT OF THE COMMISSIONER. (VIII) THE EXERCISE OF STATUTORY POWER UNDER SECTION 26 3 IS DEPENDENT ON EXISTENCE OF OBJECTIVE FACTS ASCERTAINED FROM PRIMA FAD E MATERIAL ON RECORD. THE EVALUATION OF SUCH MATERIAL SHOULD SHOW THA T TAX WHICH WAS LAWFULLY EXIGIBLE WAS NOT IMPOSED. IN THE INSTANT CASE, IT WAS QUITE CLEAR THAT AFTER THE ASSESSEE HAD FILED HIS RETURN, A NOTICE UNDER SECTION 143(2) WAS ISSUED TO HIM FOR THE PURPOSE OF CARRYING OUT A SCRUTINY IN RESPECT OF THE RETURN OF IN COME FILED BY HIM. IN THE COURSE OF SCRUTINY, SEVERAL COMMUNICATIONS WERE ADDRES SED BY THE ASSESSEE TO THE ASSESSING OFFICER, WHEREBY THE INFORMATION, DETAILS AND DOCUMENTS SOUGHT FOR WERE ADVERTED TO AND FILED. THE TRIBUNAL HAD ALSO R ETURNED A FINDING OF FACT THAT THE ASSESSEE HAD SUBMITTED COPIES OF DOCUMENTS A ND DETAILS WITH REGARD TO VARIOUS MATTERS, IN PARTICULAR, WITH RESPECT TO THE PRO PERTIES AT M AS WELL AS THOSE LOCATED AT G AND D. THE REVENUE HAD ARGUED TH AT SINCE THE ASSESSMENT ORDER ADVERTED TO ONLY M PROPERTY AND WAS SILENT WITH RESPECT TO THE PROPERTIES LOCATED AT G AND D, ON THIS SHORT GROUND ALONE THE RE VISIONAL ORDER OF THE COMMISSIONER OUGHT TO BE SUSTAINED. IT WOULD BE IMPORTAN T TO REMIND THAT WHILE THE SUPERVISORY POWER OF THE COMMISSIONER IS WIDE, IT CA NNOT BE INVOKED TO SUBSTITUTE THE VIEW OF THE ASSESSING OFFICER. THE TRIBU NAL ON A PERUSAL OF THE RECORD OBSERVED, BY REFERENCE TO A GENERAL PRACTICE IN VOGUE, THAT MERELY BECAUSE THE ASSESSMENT ORDER DID NOT REFER TO THE QU ERIES RAISED DURING THE COURSE OF THE SCRUTINY AND THE RESPONSE OF THE ASSES SEE THERETO, IT COULD NOT BE SAID THAT THERE WAS NO ENQUIRY AND, HENCE, THE ASSESS MENT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS OBSERV ATION OF THE TRIBUNAL DESERVED DUE WEIGHT, AS IN ITS VAST EXPERIENCE IT WOULD HAVE COME ACROSS SEVERAL SUCH ORDERS. [PARA 15] THE FACT THAT A QUERY WAS RAISED DURING THE COURSE OF SCRUTINY WHICH WAS SATISFACTORILY ANSWERED BY THE ASSESSEE BUT DID NOT GE T REFLECTED IN THE ASSESSMENT ORDER, WOULD NOT, BY ITSELF, LEAD TO A CON CLUSION THAT THERE WAS NO ENQUIRY WITH RESPECT TO TRANSACTIONS CARRIED OUT BY TH E ASSESSEE. THE FACT THAT THERE WAS AN ENQUIRY CAN ALSO BE DEMONSTRATED WITH TH E HELP OF THE MATERIAL AVAILABLE ON RECORD WITH THE ASSESSING OFFICER. IN THE INSTANT CASE, THE MATERIAL, TO WHICH A REFERENCE HAD BEEN MADE, SHOWED THAT THER E WAS NO UNDUE HASTE IN EXAMINING THE MATERIAL PRIOR TO THE PASSING OF THE ASS ESSMENT ORDER DATED 24- 3-2005. AT LEAST FOUR LETTERS WERE ADDRESSED BY THE AS SESSEE TO THE ASSESSING OFFICER GIVING DETAILS, DOCUMENTS AND INFORMATION PERTAININ G TO VARIOUS QUERIES RAISED BY THE ASSESSING OFFICER. THOSE HAD BEEN EXAMIN ED BY THE TRIBUNAL. THERE WAS NO REASON TO BELIEVE THAT EXAMINATION WAS LESS THAN EXACTING. THEREFORE, THE CONCLUSION OF THE COMMISSIONER, THAT T HERE WAS LACK OF PROPER VERIFICATION, WAS UNSUSTAINABLE. [PARA 16] FURTHER, THE NOTICE DATED 11-5-2006 ISSUED BY THE COM MISSIONER BEFORE COMMENCING THE PROCEEDINGS UNDER SECTION 263 REFERRED TO FOUR ISSUES; WHILE THE INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 9 FINAL ORDER DATED 18/19-1-2007 PASSED REFERRED TO NINE ISSUES, SOME OF WHICH OBVIOUSLY DID NOT FIND MENTION IN THE EARLIER NOTICE AND, H ENCE, RESULTED IN THE PROCEEDINGS BEING VITIATED AS A RESULT OF THE BREACH O F THE PRINCIPLES OF NATURAL JUSTICE. [PARA 17] THERE IS NO REQUIREMENT UNDER SECTION 263 TO ISSUE A NO TICE BEFORE EMBARKING UPON A REVISIONARY PROCEEDING. WHAT IS MANDATED UNDER S ECTION 263 IS THAT ONCE THE COMMISSIONER CALLS FOR AND EXAMINES THE RECORD PERTAINING TO THE ASSESSEE AND FORMS A PRIMA FADE VIEW THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS BOTH, ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE, HE IS OBLIGED TO AFFORD AN OPPORTUNITY TO THE ASSESSEE BEFOR E PASSING AN ORDER TO THE PREJUDICE OF THE ASSESSEE. IN THE INSTANT CASE, THE C OMMISSIONER SOUGHT TO ACCORD SUCH AN OPPORTUNITY TO THE ASSESSEE BY PUTTING HIM TO NOTICE AS REGARDS ASPECTS WHICH THE ASSESSING OFFICER HAD FAILED TO SCRUT INIZE. DURING THE COURSE OF THE REVISIONARY PROCEEDINGS, THAT WAS CONVEYED TO THE ASSESSEE BY WAY OF A NOTICE DATED 11-5-2006. IT WAS NOT DISPUTED THAT IN THE ORDER DATED 18/19-1- 2007, THE COMMISSIONER HAD REFERRED TO CERTAIN OTHER IS SUES WHICH DID NOT FORM PART OF THE INITIAL NOTICE DATED 11-5-2006. IT WAS ALWAYS OPEN TO THE COMMISSIONER TO PUT SUCH ISSUES/DISCREPANCIES, FOUND BY HIM BASED ON MATERIAL ON RECORD, TO THE ASSESSEE. HOWEVER, THE AS SESSEE VEHEMENTLY DENIED THAT HE HAD BEEN GIVEN ANY OPPORTUNITY TO MEET ISSUES OTHER THAN THOSE TO WHICH REFERENCE HAD BEEN MADE IN THE COMMISSIONERS NOT ICE DATED 11-5-2006. THERE WAS NOTHING ON RECORD WHICH WOULD SHOW THAT THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO RESPOND TO THOSE DISCREPANCIES WHICH FOR MED PART OF THE ORDER-IN- REVISION DATED 18/19-1-2007, BUT WAS NOT PART OF NOTIC E DATED 11-5-2006. THE REVENUE FAIRLY CONCEDED THAT THERE WAS NOTHING ON RECO RD WHICH WOULD ESTABLISH TO THE CONTRARY. IT WAS, HOWEVER, URGED BY THE REVE NUE THAT THE ASSESSEE WOULD HAVE AN OPPORTUNITY TO GIVE SATISFACTORY REPLIES TO THE DISCREPANCIES RAISED IN THE REVISIONAL ORDER BEFORE THE ASSESSING OFFICER, AND THAT SUCH AN OPPORTUNITY WOULD MEET THE REQUIREMENTS OF THE PROVISION. THAT IS N OT THE POSITION ENVISAGED IN LAW. IF ONE WAS TO PERMIT CORRECTION OF SUCH A GRIEV OUS ERROR IN THE MANNER SUGGESTED, IT WOULD TANTAMOUNT TO, IN A MANNER OF SPE AKING, CLOSING THE STABLE DOORS AFTER THE HORSE HAS BOLTED. THE ASSESSMENTS, U NLESS REOPENED BY PAYING FAITHFUL OBEISANCE TO STATUTORY PROVISIONS AND CONDITION ALITIES PROVIDED THEREIN, WOULD ATTAIN FINALITY ON THEIR CONCLUSION. THE PROVISIONS OF SECTION 263 MANDATE THAT AN ORDER FOR ENHANCING OR MODIFYING THE ASSESSME NT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT CAN ONLY B E PASSED AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH AN ENQUIRY AS IS DEEMED NECESSARY. THE THRE SHOLD CONDITION FOR REOPENING THE ASSESSMENT IS THAT BEFORE PASSING AN OR DER AN OPPORTUNITY HAS TO BE GRANTED TO THE ASSESSEE AND SUCH AN OPPORTUNITY GRANTED TO THE ASSESSEE IS A NECESSARY CONCOMITANT OF THE ENQUIRY WHICH THE COMM ISSIONER IS REQUIRED TO CONDUCT TO COME TO A CONCLUSION THAT AN ORDER FOR EIT HER AN ENHANCEMENT OR MODIFICATION OF THE ASSESSMENT OR, AS IN THE INSTANT CA SE, AN ORDER FOR CANCELLATION OF THE ASSESSMENT IS CALLED FOR, WITH A DIREC TION TO THE ASSESSING OFFICER TO MAKE A FRESH ASSESSMENT THIS DEFECT CANNOT BE CURED BY FIRST REOPENING THE ASSESSMENT AND THEN GRANTING AN OPPORTU NITY TO THE ASSESSEE TO RESPOND TO THE ISSUES RAISED BEFORE THE ASSESSING OFF ICER DURING THE COURSE OF FRESH ASSESSMENT PROCEEDINGS. THEREFORE, TO SUGGEST THAT IT WOULD BE SUFFICIENT COMPLIANCE OF THE PROVISIONS OF SECTION 263, IF AN OPP ORTUNITY TO RESPOND TO THE DISCREPANCIES MENTIONED IN THE ORDER IN REVISION IS GIVEN TO THE ASSESSEE IN REASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER, WAS COMPLETELY UNTENABLE. IT IS THE REQUIREMENT OF SECTION 263 THAT THE ASSESSEE MUST HAVE AN OPPORTUNITY OF BEING HEARD IN RESPECT OF THOSE ERRORS WHICH THE COMMISSIONER PROPOSES TO REVISE. TO ACCORD AN OPPORTUNITY AFTER S ETTING ASIDE THE ASSESSMENT ORDER, WOULD NOT MEET THE MANDATE OF SECTION 263. [PA RA 17.1] THEREFORE, THE IMPUGNED JUDGMENT PASSED BY THE TRIBUN AL DESERVED TO BE SUSTAINED. THE FINDINGS RETURNED BY THE TRIBUNAL WERE P URE FINDINGS OF FACT. NO SUBSTANTIAL QUESTION OF LAW HAD ARISEN FOR CONSIDERATION . HENCE, THE APPEAL OF THE REVENUE WAS LIABLE TO BE DISMISSED. INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 10 13. THE AR ALSO REFERRED TO THE CASE OF CIT VS EXXON M OBILE LUBRICANTS (P) LTD., REPORTED IN 328 ITR 17 (DELHI) ON THE IS SUE OF PRIOR PERIOD EXPENSES, WHEREIN THE AO HAD ALLOWED THE PRIOR PER IOD EXPENSES, IN THE REGULAR PROCEEDINGS. 14. THE AR HAS ALSO PLACED RELIANCE ON NUMBER OF OTHER DECISIONS COMING FROM VARIOUS FORA. 15. THE AR, THEREFORE, SUBMITTED THAT ON LEGALITY ITSELF, THE PROCEEDINGS U/S 263 SHOULD BE HELD TO BE INVALID. 16. THE DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF THE CIT AND STRENUOUSLY JUSTIFIED THE SAME BY SUBMITTING THAT TH E AO DID NOT GO DEEP AND DID NOT DO PROPER ENQUIRY AND THAT IS THE REASON, THE ORDER WAS ERRONEOUS AND NOW THAT THE AO HAS GIVEN EFF ECT TO THE IMPUGNED ORDER, AND BROUGHT TO TAX THE INCOME, THAT, SHO WED THE PREJUDICE TOWARDS THE INTEREST OF THE REVENUE, AS COMMIT TED IN REGULAR ASSESSMENT FRAMED U/S 143(3). THE DR, THEREFORE, SUBMITTED THAT THE CIT WAS CORRECT TO INVOKE THE PROVISIONS OF SECTION 263. 17. WE HAVE HARD THE ARGUMENTS OF THE PARTIES AND HAVE PERUSED T HE ORDER OF THE AO AND THE IMPUGNED ORDER OF THE CIT AND THE DETAILS, FILED BY THE ASSESSEE IN THE APB. 18. IT IS AN UNDISPUTED FACT THAT THE AO, DURING THE ASSE SSMENT PROCEEDINGS ENQUIRED FROM THE ASSESSEE, THE DETAILS ON PR IOR PERIOD EXPENSES. THE ASSESSEE, NOT ONLY POINTED OUT THE PLACEM ENT OF DETAILS IN THE RECORDS OF THE ASSESSEE, FILED ALONG WITH THE RET URN OF INCOME, BUT CATEGORICALLY MADE SUBMISSIONS IN THE WRITTEN SUBMISSI ONS DATED 11.11.2008 (WHICH HAS BEEN ACCEPTED AND MENTIONED BY TH E AO IN THE ASSESSMENT ORDER). THE AR ALSO POINTS OUT THAT THE AO H AS NOTED THE ISSUE IN PARA 5.1 AND PROCEED TO FRAME THE ASSESSMENT. T HE ARGUMENT OF THE DR THAT THE AO FAILED TO MAKE DETAILED ENQUIRY CAN ALSO NOT BE TAKEN TO A SOUND PROPOSITION, BECAUSE, THE ASSESSMENT P ROCEEDINGS INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 11 WENT ON TILL 26.12.2008, WITH THREE INTERVENING DATES ON 02.1 2.2008, 15.12.2008 & 26.12.2008. THEREFORE, THIS ARGUMENT, THAT THE AO DID NOT DO DETAILED ENQUIRY DOES NOT HOLD WATER. THIS ARGUMEN T ALSO GETS NEGATED BECAUSE, THE AO, AFTER NOTING THE COMPLETE DETAILS BEGINS HIS OBSERVATION TO FRAME THE ASSESSMENT, FROM PARA 5.2, WHERE HE OBSERVES, AND BEGINS HIS FINDINGS WITH THE FOLLOWING EXPRESSION , THE ASSESSEES SUBMISSIONS ARE CAREFULLY CONSIDERED . SINCE THE ISSUE WAS RAISED BY THE AO AND APPROPRIATE REPLY GIVEN BY TH E ASSESSEE, THE ISSUE OF THE ASSESSMENT BECOMING ERRONEOUS GETS ECLIPSED . WE DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE DR AND PLACING RELIANC E ON THE DECISION IN THE CASE OF CIT VS SHRI BHAGWAN DAS PERTAININ G TO PROVISIONS OF SECTION 147, POINTING OUT THAT THERE WAS A COMPLETE FAILURE ON PART OF THE AO TO APPLY HIS MIND IN THE O RIGINAL ASSESSMENT PROCEEDINGS, FOR TWO REASON, (A) THE CASE CITED PERTAINS TO PROVISION OF SECTION 147, WHICH OPERATES ON A DIFFERENT PLAYING FIELD & (B) IN THE CASE IN HAND, THE AO TAKES INTO COGNIZANCE, THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND AFTER THREE EFFECTIVE DATES, PROCEEDS TO FRAME THE ASSESSMENT, AND AFTER ASSESSEES SUBMISSIONS ARE CAREFULLY CONSIDERED . 19. IN OUR OPINION, SIMPLY MAKING A BALD STATEMENT BY TH E DR, CANNOT AID THE ACTION OF THE CIT TO INITIATE REVISION PRO CEEDINGS U/S 263. 20. WE MAY MENTION THAT IN THE COURSE OF HEARING, THE ISS UE OF INADEQUATE ENQUIRY AND NO ENQUIRY WAS RAISED. ACCORDING T O US THE SUBMISSIONS MADE BY THE ASSESSEE CANNOT BE COLOURED AS INADEQUATE ENQUIRY BECAUSE SPECIFIC REPLIES WERE GIVEN, BACKED BY COMP LETE DETAILS. WE ALSO CANNOT PLACE RELIANCE ON THE DECISION OF CI T VS SHRI BHAGAWAN DAS REPORTED IN 276 ITR 367(ALL), WHEREIN HONBLE ALLAHABAD HIGH COURT, WHEREIN THE CRUX HAD BEEN LAID ON WITHOUT APPLICATION OF MIND . INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 12 21. WE, SIMPLY TAKING REFERENCE ONLY TO THE FACTS WITHOUT EVEN APPLYING ANY CASE LAWS AS RELIED UPON BY THE AR, HOLD THA T THE ARGUMENT OF THE DR AND THE CASE OF SHRI BHAGAWAN DAS (SUPRA) CANNOT RESCUE THE REVISION PROCEEDINGS. 22. IN THE IMPUGNED ORDER AND THE DR COULD NOT CONCLUSI VELY PROVIDE US WITH A WINDOW TO SEE, THAT HOW THE ASSESSME NT ORDER WAS ERRONEOUS. THIS BEING ONE OF THE LIMBS TO INVOKE THE PRO VISIONS OF SECTION 263, ITSELF GETS CRACKED BECAUSE AS PER THE HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) , BOTH LIMBS OF SECTION 263 MUST CO-EXIST, OTHERWISE THE INITIATION OF REVIS IONARY PROCEEDINGS BECOME INVALID. 22. SINCE WE HAVE DECIDED THE APPEAL ON LEGAL GROUND, WE DO NOT FIND IT NECESSARY TO GO INTO THE MERITS OF THE CASE, WHICH BEC OME INFRUCTUOUS. 23. WE, THEREFORE, CANCEL THE ORDER OF THE CIT 10, MUMBAI D ATED 31.03.2011, PASSED UNDER SECTION 263 AND RESTORE THE OR DER OF THE AO DATED 31.12.2008. 24. APPEAL AS FILED BY THE ASSESSEE, IS THUS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF FEBRUARY 2014 . SD/- SD/- ( . ) ( % & ) !'# !'# (D. KARUNAKARA RAO) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 19 TH FEBRUARY, 2014 / COPY TO:- 1) / THE APPELLANT. INDIAN OIL CORPORATION ITA NO. 545/MUM/2012 13 2) / THE RESPONDENT. 3) ! ! ' - 10 MUMBAI / THE CIT -10, MUMBAI. 4) THE CIT CONCERNED ____, ADDL CIT 10(1), MUMBAI, 5) $%& ' ! , ! ' , ()* / THE D.R. I BENCH, MUMBAI. 6) &+ , COPY TO GUARD FILE. !-./ / BY ORDER / / TRUE COPY / / [ 0 / 1 )2 ! ' , ()* DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *451 . . * CHAVAN, SR. PS