Sun Minerals, Hyderabad V. Addl. CIT, Range-6, Hyderabad

ITA 741/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66372 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: I RAMA RAO
• Keywords: Principle of natural justice; Right to appeal
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 741/HYD/2012 ASSESSMENT YEAR 2007-08 M/S. SUN MINERALS HYDERABAD PAN: ABGFS5262D VS. THE ADDL. CIT RANGE-6 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI I. RAMA RAO REVENUE BY: SRI V. SRINIVAS DATE OF HEARING: 30.08.2012 DATE OF PRONOUNCEMENT: 19.10.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT-III, HYDERABAD DATED 27.3.2012 PASSED U/ S. 263 OF INCOME-TAX ACT, 1961 FOR ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE RAISED THE GROUND THAT THE CIT ERRED I N ASSUMING JURISDICTION U/S. 263 OF THE ACT THEREBY D IRECTING THE ASSESSING OFFICER TO DISALLOW PAYMENT OF RS. 4,18,8 0,995 INCURRED TOWARDS COMMISSION OUT OF COMMERCIAL EXPED IENCY ON ACCOUNT OF A TRADE PRACTICE. 3. BRIEF FACTS OF THE ISSUE ARE THAT IN THIS CASE THE ASSESSMENT WAS COMPLETED DETERMINING TOTAL INCOME A T RS. 6,10,74,327 U/S. 143(3) OF THE ACT WHEREIN THE ASSE SSING OFFICER ACCEPTED DECLARED INCOME BY THE ASSESSEE. THE CIT ON EXAMINING THE RECORD FOUND THAT THE ASSESSEE INCURR ED EXPENDITURE OF RS. 4,18,80,995 AS COMMISSION PAID T O THE FOLLOWING PARTIES: I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 2 NAME OF THE PARTY COMMISSION PAID (RS.) R.K. MARKETING SERVICE 99,59,139 VIJAY MINING PVT. LTD. 99,59,139 LAKSHMI MINES & MINERALS 2,03,895 B. BHAGYALAKSHMI 1,99,10,281 K. ANNAPURNA 18,56,501 TOTAL 4,18,80,995 4. THE ASSESSEE ONLY FURNISHED CONFIRMATION LETTERS FR OM THE PARTIES CONCERNED. HOWEVER, NOT FURNISHED ANY DETA ILS REGARDING THE SERVICES RENDERED BY THESE PARTIES. ACCORDING TO THE CIT, THE ASSESSING OFFICER ACCEPTED THESE PAYME NTS AS INCURRED TOWARDS CARRYING ON THE BUSINESS OF THE AS SESSEE AND HE HAS NOT ENQUIRED INTO THE GENUINENESS OF THE COM MISSION PAYMENT WITH REFERENCE TO THE SERVICES RENDERED BY THESE PARTIES. BEING SO, THE CIT WAS OF THE OPINION THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY AFTER GIVING ADEQUATE OP PORTUNITY OF HEARING TO THE ASSESSEE, HE DIRECTED THE ASSESSING OFFICER TO DISALLOW THE PAYMENTS. THEREBY THE INCOME OF THE A SSESSEE WAS DETERMINED AT RS. 10,29,55,322. AGAINST THIS THE A SSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR SUBMITTED THAT THE PRESENT APPEAL IS FILED AGAINST THE ORDER UNDER SECTION 263 OF INCOME TAX A CT, 1961, DATED 27.03.2012 PASSED BY THE COMMISSIONER OF INCO ME-TAX- ILL, HYDERABAD. THE COMMISSIONER OF INCOME-TAX VIDE THE IMPUGNED ORDER, REVISED THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 FOR DISALLOW ANCE OF COMMISSION PAYMENT OF RS. 4,18,80,995. AGGRIEVED BY THIS REVISION, THE PRESENT APPEAL IS PREFERRED BEFORE TH IS TRIBUNAL. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE B USINESS OF TRADING IN IRON ORE. DURING THE COURSE OF BUSINESS OPERATIONS, I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 3 THE ASSESSEE HAD INCURRED EXPENDITURE IN THE FORM O F COMMISSION PAID TO VARIOUS PARTIES FOR SERVICES REN DERED DURING THE COURSE OF SALE OF IRON ORE. THIS COMMISSION WA S PAID FOR THE SERVICES RENDERED IN PROCURING THE BUSINESS AS WELL AS FOR PROMOTING SALES. IT IS A NORMAL TRADE PRACTICE IN THIS LINE OF BUSINESS TO PAY THIS KIND OF COMMISSION. 6. THE AR SUBMITTED THAT THE BOOKS OF ACCOUNT AND VOUC HERS WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCE EDINGS. ALL THE COMMISSION PAYMENTS WERE MADE THROUGH ACCOUNT P AYEE CHEQUES AND TAX WAS DULY DEDUCTED AT SOURCE FROM CO MMISSION PAYMENTS. THE ASSESSING OFFICER VERIFIED THESE DETA ILS AND HE WAS SATISFIED WITH REGARD TO VARIOUS EXPENSES INCLU DING COMMISSION PAID TO VARIOUS PARTIES FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AFTE R DUE APPLICATION OF MIND AND COMPLETED THE ASSESSMENT WI THOUT ANY ADDITIONS. HOWEVER, THE CIT VIDE SHOW-CAUSE-NOTICE DATED 23.02.2011 SOUGHT TO REVISE THE ASSESSMENT ORDER ON THE GROUND THAT THE LEARNED ASSESSING OFFICER HAD NOT C ARRIED OUT FURTHER ENQUIRIES WITH REGARD TO THE COMMISSION PAY MENTS. THE ASSESSEE HAD OPPOSED THE REVISION ON THE GROUND THA T THE VERY SAME ISSUE WAS EXAMINED AND CONSIDERED BY THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE THE QUESTIONNAIRES DATED 22.06.2009, 12.10.2009 AND 16. 10.2009. AFTER CONSIDERING THE EXPLANATION FURNISHED BY THE ASSESSEE IN RESPONSE TO THE SAID QUESTIONNAIRES, THE LEARNED AS SESSING OFFICER, ON BEING SATISFIED WITH SUCH EXPLANATION, CHOSE NOT TO MAKE ANY ADDITION IN RESPECT OF THE SAME AND THUS C OMPLETED THE ASSESSMENT. THEREFORE, THE ASSESSMENT ORDER CAN NOT BE TERMED AS 'ERRONEOUS' AND THEREFORE, JURISDICTION U NDER SECTION 263 OF INCOME TAX ACT, 1961, CANNOT BE EXERCISED. HOWEVER, THE CIT NOT HAVING BEEN SATISFIED WITH THE EXPLANATION FURNISHED IN RESPONSE TO THE SHOW CAUSE NOTICE, HAD PASSED AN OR DER UNDER I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 4 SECTION 263 ON 27.03.2012 DISALLOWING THE COMMISSIO N PAYMENT OF RS. 4,18,80,995. 7. THE AR SUBMITTED THAT THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX IS AGAINST THE B ASIC TENETS OF PROVISIONS OF SECTION 263 OF INCOME TAX ACT, 196 1 ON THE FOLLOWING ASPECTS OF LAW GOVERNING THE FACTS OF THE CASE:- (A) THE ASSESSMENT ORDER PASSED CANNOT BE TERMED A S 'ERRONEOUS' INASMUCH AS THE ASSESSING OFFICER HAS P ASSED THE ORDER AFTER APPLICATION OF HIS MIND ON THE VERY SAME ISSUE, AFTER CONSIDERING ALL THE INFORMATION, EXPLA NATION FILED. THE COMMISSIONER OF INCOME TAX CANNOT SUBSTI TUTE HIS OWN VIEWS ON THE ISSUE IN EXERCISE OF THE JURIS DICTION UNDER SECTION 263 OF INCOME TAX ACT, 1961. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS : 1. CIT V. VALLIAMMAL (D) 230 ITR 695 (MAD); 2. CIT V. RATLAM COAL ASH CO., 171 ITR 141 (MP); 3. ASHOK KUMAR PARASRAMKA V. ACIT, 65 ITD 1 (CAL); 4. CIT V. MEHROTRA BROTHERS, 270 ITR 157 (MP); 5. CIT V. PARAMESHWAR BOHRA, 267 ITR 698 (RAJ.); 6. PAUL MATHEWS AND SONS V. CIT, 263 ITR 101 (KER.); 7. CIT V. ARVIND JEWELLERS, 259 ITR 502 (GUJ); 8. CIT V. HASTINGS PROPERTIES, 253 ITR 124 (CAL); 9. CIT V. GOAL (J.P.) (HUF), 247 ITR 555 (COL); 10. CIT V. AMALGAMATIONS LTD., 238 ITR 963 (MAD); 11. CLT V. MACNEILL MAGORE LTD., 232 ITR 945 (COL.) (B) SIMPLY BECAUSE THE COMMISSIONER OF INCOME TAX FELT THAT THE ASSESSMENT ORDER IS PREJUDICIAL TO THE INTEREST S OF REVENUE BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTO REVISION BECAUSE THE FIRST REQUIREMENT OF SECTION, NAMELY, T HE ORDER IS 'ERRONEOUS' IS LACKING. RELIANCE IS PLACED ON T HE FOLLOWING DECISIONS: 1. CIT V. GABRIEL INDIA LTD. 203 ITR 108 (BOM); 2. BCCI V. DIRECTOR OF IT (EXEMPTIONS), 278 ITR (AT) 8 3 (MUM); 3. JK INDUSTRIES LTD. V. ACIT, 283 ITR 101 (CAL); I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 5 4. CIT V. THANGAMALIGAI (GR), 259 ITR 129 (MAD); 5. CIT V. GIRDHARI LAL, 258 ITR 331 (RAJ); AND 6. CIT V. GIRIDHAR LAL, 258 ITR 231 (RAJ). (C) THE IMPUGNED ORDER UNDER SECTION 263 OF INCOME TAX ACT, 1961 IS NOT MAINTAINABLE FOR THE REASON THAT THE SH OW CAUSE NOTICE WAS ISSUED FOR ALLEGED FAILURE OF FURT HER ENQUIRY INTO THE MATTER, EVEN IN THE BODY OF THE IM PUGNED ORDER IT GOES TO SHOW THAT THE ASSESSMENT ORDER WAS PROPOSED TO BE REVISED FOR FURTHER ENQUIRY INTO THE MATTER. THE CASE LAWS RELIED BY THE LEARNED COMMISSIONER AR E ONLY FOR THE PROPOSITION THAT IN CASE NO ENQUIRY WA S MADE BY THE ASSESSING OFFICER, REVISION WAS JUSTIFIED. I N SPITE OF THIS, THE LEARNED COMMISSIONER FINALLY SETTLED THE CONTROVERSIAL ISSUE VIDE OPERATIVE PORTION OF THE I MPUGNED ORDER AND DISALLOWED THE COMMISSION PAYMENT OF RS. 4,18,80,995. THUS, THE IMPUGNED ORDER HAD TRAVELLED BEYOND THE SCOPE AND AMBIT OF SHOW CAUSE NOTICE AND THEREFORE, THE ORDER UNDER SEC. 263 OF INCOME TAX A CT, 1961 IS NULL AND VOID AND IS LIABLE TO BE QUASHED. (D) EVEN ASSUMING THAT THE ENQUIRIES MADE BY THE A SSESSING OFFICER ARE INADEQUATE, THE JURISDICTION UNDER SEC . 263 OF INCOME TAX ACT, 1961 CANNOT BE ASSUMED AS IT WAS ON LY IN THE CASES OF LACK OF ENQUIRIES THAT THE JURISDIC TION UNDER SEC. 263 OF INCOME TAX ACT, 1961 CAN BE ASSUM ED. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS: 1. CIT V. ANIL KUMAR SHARMA - 335 ITR 83 (DELHI); 2. CIT V. SUNBEAM AUTO LTD. 332 ITR 167 (DELHI); 3. CIT V. GABRIEL INDIA LTD. 203 ITR 108 (BOM) 8. THE AR SUBMITTED THAT IN GABRIEL INDIA LTD., 203 IT R 108 (BORN), LAW ON THIS ASPECT WAS DISCUSSED IN THE FOL LOWING MANNER (PAGE 113) : I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 6 'FROM READING OF SUB-SECTION (1) OF SECTION 263, IT IS CLEAR THAT THE POWER OF SUO MOTO REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY ORDER PASSED THEREI N BY THE INCOME-TAX OFFICER IS 'ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. IT IS NOT AN ARBITRARY OR UNCHARTERED POWER; IT CAN BE EXERCISED ONLY ON FULFILMENT OF THE REQUIREMENTS LA ID DOWN BY SUB-SECT ION (1). THE CONSIDERATION OF THE COMMISSIONER, AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, 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 CA N B E SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEG AL AND WITHOUT JURISDICTION. THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHIN G 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 ST ALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULA R STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN ETHER SPHERES OF HUMAN ACTIVITY. (SEE PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977) 106 ITR 1 (SC) AT PAGE 10) ....' 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 INCOME-TAX OFFICER ACTIN G IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS 'ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUT ION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE HIMSELF. THE COMMISSIONER, ON PERUSAL OF I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 7 THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMAT E MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ON E DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NO T VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE FORMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHI CH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. THE INCOME-TAX OFFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITUR E INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CA SE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, SUCH DECISION OF THE INCOME- TAX OFFICER CANNOT BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION I N THAT REGARD.' 9. THE LEARNED AR SUBMITTED THAT IN THE INSTANT CASE, THE LEARNED ASSESSING OFFICER CALLED FOR EXPLANATION ON THE VERY SAME ISSUE VIDE QUESTIONNAIRES DATED 22.06.2009, 12 .10.2009 AND 16.10.2009 FROM THE ASSESSEE AND THE ASSESSEE H AD FURNISHED HIS EXPLANATION VIDE LETTERS DATED 26.10. '2009 AND ON VARIOUS OTHER DATES. THIS CLEARLY SHOWS THAT THE AS SESSING OFFICER HAS UNDERTAKEN THE EXERCISE OF EXAMINING AS TO WHETHER COMMISSION EXPENDITURE WAS INCURRED BY THE ASSESSEE OR NOT. ON BEING SATISFIED WITH THE EXPLANATION FURNISHED B Y THE ASSESSEE, HE ACCEPTED THE SAME. THE LEARNED COMMISS IONER OF I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 8 INCOME TAX IN THE SHOW CAUSE NOTICE DATED 23.02.201 1 ACCEPTED THIS POSITION IN THE FOLLOWING WORDS: 'IN SUPPORT OF THIS EXPENDITURE YOU HAVE MERELY FURNISHED CONFIRMATION LETTERS FROM THE PARTIES WITHOUT GIVING ANY JUSTIFICATION SUPPORTIVE EVIDENC E REGARDING THE SERVICES RENDERED WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. ASSESSING OFFICE R HAS NOT GATHERED ANY EVIDENCE TO SUGGEST THAT SERVICES WERE RENDERED BY THESE AGENTS COMMENSURATE TO THE COMMISSION PAID. ASSESSING OFFICER HAS NOT CARRIED OUT ANY FURTHER ENQUIRIES I N THIS REGARD.' 10. THE AR SUBMITTED THAT THUS, EVEN THE LEARNED COMMISSIONER OF INCOME TAX CONCEDED THE POSITION TH AT ASSESSING OFFICER MADE ENQUIRIES. THE ONLY GRIEVANC E OF THE LEARNED COMMISSIONER OF INCOME TAX WAS THAT THE ASS ESSING OFFICER SHOULD HAVE MADE FURTHER ENQUIRIES RATHER T HAN ACCEPTING THE EXPLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF 'LACK OF ENQUIRY.' THE LEARNED COMMISSIO NER OF INCOME TAX HAD PLACED RELIANCE ON VARIOUS JUDICIAL DECISIONS WHICH ARE NOT GERMANE IN THE PRESENT CASE INASMUCH AS THOSE DECISIONS ARE APPLICABLE TO THE CASE WHERE THERE WA S NO ENQUIRY AT ALL BY THE ASSESSING OFFICER. 11. THE AR FURTHER SUBMITTED THAT THE IMPUGNED ORDER IS ALSO LIABLE TO BE SET ASIDE FOR THE SIMPLE REASON THAT T HE LEARNED COMMISSIONER OF INCOME TAX HAD NOT FURNISHED THE MA TERIAL IN THE SHOW CAUSE NOTICE BASED ON WHICH HE JUMPED OVER TO THE CONCLUSION IMPETUOUSLY, WITHOUT PROPER APPLICATION OF MIND, THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF REVENUE. IT WAS ONLY IN THE IMPUGNED O RDER, A MENTION WAS MADE AS TO THE MATERIAL, VIZ. SUBSEQUEN T ASSESSMENT PROCEEDINGS, BASED ON WHICH HE HAD COME TO SUCH CONCLUSION. IT IS WELL SETTLED PRINCIPLE OF LAW THA T THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME TAX PROCE EDINGS; MORE I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 9 SO, IN RESPECT OF QUESTION OF FACT. EACH ASSESSMENT YEAR IS A SEPARATE UNIT OF ASSESSMENT. THE ISSUES IN THE PRES ENT YEAR MAY BE THE SAME AS THEY MIGHT HAVE BEEN IN THE SUBSEQUE NT YEAR; BUT, STILL IT IS EXPECTED OF THE ASSESSING OFFICER TO VERIFY THE FACTS ON THOSE ISSUES AND THEN HE MAY FOLLOW HIS ORDER FO R THE SUBSEQUENT YEAR. THE HON'BLE ORISSA HIGH COURT IN T HE CASE OF CLT V. ORISSA STATE FINANCIAL CORPORATION (1993) 20 3 ITR 747 HELD THAT NO REVISION WAS POSSIBLE BASED ON THE EAR LIER ORDER OF THE TRIBUNAL. 12. NO NEW MATERIAL HAS BEEN BROUGHT ON RECORD TO SUGGE ST THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF REVENUE. THEREFORE, THE JURISDICTION U NDER SECTION 263 OF INCOME TAX ACT, 1961 CANNOT BE ASSUMED. RELI ANCE IN THIS REGARD IS PLACED ON THE DECISION OF HON'BLE IN COME-TAX APPELLATE TRIBUNAL - CHENNAI BENCH IN THE CASE OF I CLCI BANK LTD. V. JOINT COMMISSIONER OF INCOME-TAX - [2009} 3 09 ITR (A T) 235 (CHENNAI). 13. THE AR SUBMITTED THAT THAT THE LEARNED ASSESSING OF FICER AFTER DULY CONSIDERING THE EXPLANATION AND INFORMAT ION FILED IN RESPONSE TO THE QUESTIONNAIRE ON THE ISSUE, ON BEIN G SATISFIED WITH SUCH EXPLANATION CHOSE NOT TO MAKE ANY FURTHER ENQUIRY. ENDLESS ENQUIRY IS NOT POSSIBLE AND IT IS FOR THE L EARNED ASSESSING OFFICER TO DECIDE WHEN TO END THE ENQUIRY . THE LEARNED CIT CANNOT TRANSGRESS THE JURISDICTION UNDE R SECTION 263 OF I.T. ACT, 1961 BY MENTIONING THAT NO PROPER ENQUIRY WAS MADE. RELIANCE IN THIS REGARD IS PLACED ON THE DECI SION OF HON'BLE AGRA BENCH OF ITAT IN THE CASE OF RISHI KUM AR GUPTA V. CIT, 90 TTJ 645. 14. THE LEARNED AR SUBMITTED THAT, WITHOUT PREJUDICE TO THE ABOVE, ON THE MERITS OF THE ISSUE, THE ASSESSEE RES PECTFULLY I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 10 SUBMITS THAT PAYMENT OF COMMISSION WAS MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THERE WERE NO EXTRANEOUS CONSIDERATIONS INVOLVED NOR WAS IT THE C ASE OF REVENUE THAT UNREASONABLE, AMOUNTS WERE PAID TO THE RELATED PARTIES. THEREFORE, THERE WERE NO GROUNDS OF WHATSO EVER NATURE TO DISALLOW THE COMMISSION PAYMENTS. RELIANCE IN TH IS REGARD IS PLACED ON THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF SWADESHI COTTON MILLS CO. LTD. V. CIT - 63 ITR 57 ( SC). 15. THE AR SUBMITTED THAT THE REASONS GIVEN FOR DISALLO WANCE OF COMMISSION PAYMENTS FOR THE SUBSEQUENT ASSESSMEN T YEAR, I.E., 2008-09, CANNOT BE ADOPTED FOR DISALLOWANCE O F THE SAME IN THE PRESENT YEAR WITHOUT VERIFYING THE FACTS ON THO SE ISSUES INDEPENDENTLY THE ASSESSMENT OF EACH YEAR IS INDEPE NDENT AND THE PRINCIPLES OF RES JUDICATA ARE NOT APPLICABLE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE INCOME-TAX APPELLATE TRIBUNAL - CHENNAI BENCH IN THE CASE OF ICICI BANK LTD. V. JOINT COMMISSIONER OF INCOME-TAX - [2009] 309 ITR (AT) 23 5 (CHENNAI). IN FACT, THERE WAS NO MATERIAL ON RECORD SUGGESTING THAT IN RESPECT OF COMMISSION PAYMENTS ANY ADDITION IS NEITHER ENTAILED NOR WAS THERE ANY NEW MATERIAL BROUGHT ON RECORD JUSTIFYING DISALLOWANCE OF COMMISSION PAYMENTS. THU S, THE LEARNED COMMISSIONER OF INCOME-TAX IS NOT JUSTIFIED USURP JURISDICTION UNDER THE PROVISIONS OF SECTION 263 OF INCOME TAX ACT, 1961. IN THE LIGHT OF THE AFORESAID REASONS, FACTS, CIRCUMSTANCES AND LEGAL POSITION, IT IS PRAYED THAT THIS HON'BLE TRIBUNAL MAY BE PLEASED TO PASS SUCH APPROPRIATE OR DER OR ORDERS AS MAY BE DEEMED FIT AND PROPER IN THE INTER ESTS OF JUSTICE, QUASHING THE IMPUGNED ORDER PASSED UNDER S ECTION 263 OF INCOME TAX ACT, 1961. 16. THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER ALLOWED PAYMENT OF COMMISSION AS BUSINESS EXPENDITU RE I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 11 WITHOUT CARRYING OUT NECESSARY ENQUIRY REGARDING GE NUINENESS OF PAYMENT AND SERVICE RENDERED. THE ASSESSEE ONLY FILED CONFIRMATION LETTERS FROM THESE PARTIES AND ON THAT BASIS THE ASSESSING OFFICER ALLOWED PAYMENT OF COMMISSION. H E SUBMITTED AS FOLLOWS: A) THE ASSESSING OFFICER MERELY ACCEPTED THE CONFIRMAT ORY LETTERS (FROM THE ALLEGED COMMISSION AGENTS) FILED BY THE ASSESSEE FIRM WITHOUT CONDUCTING ANY INDEPENDEN T ENQUIRY/INVESTIGATION. B) THE ASSESSING OFFICER HAD NOT CALLED FOR THE COPIES OF AGREEMENTS ENTERED INTO BY THE ASSESSEE FIRM WITH T HE ALLEGED COMMISSION AGENTS. C) THE ASSESSING OFFICER HAD NOT CALLED FOR CORRESPONDENCE MADE BY THE ASSESSEE FIRM WITH THE COMMISSION AGENTS. D) THE ASSESSING OFFICER HAD NOT CALLED FOR THE PARTYW ISE LIST OF CUSTOMERS INTRODUCED BY THE ALLEGED COMMISS ION AGENTS. E) THE ASSESSING OFFICER HAD NOT CALLED FOR SPECIFIC TONNAGE DETAILS OF SALES EFFECTED THROUGH EACH OF T HE COMMISSION AGENT. F) THE ASSESSING OFFICER HAD NOT CALLED FOR DOCUMENTAR Y EVIDENCE IN SUPPORT OF SERVICES RENDERED BY THE ALL EGED COMMISSION AGENTS. G) THE ASSESSING OFFICER HAD NOT CALLED FOR THE BASIS OF CALCULATION OF COMMISSION IN RESPECT OF EACH OF THE ALLEGED COMMISSION AGENT. H) THE ASSESSING OFFICER HAD NOT SATISFIED HIMSELF WIT H THE EXPERTISE OF THE ABOVE AGENTS IN PROVIDING SIMILAR SERVICES TO PARTIES OTHER THAN THE ASSESSEE FIRM. 17. THE DR FURTHER SUBMITTED THAT FOR A.Y. 2008-09 ON ENQUIRY IT WAS FOUND THAT THIS EXPENDITURE IS NOT G ENUINE AND I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 12 ON THIS BASIS THE CIT TOOK UP THE CASE FOR REVISION FOR THIS ASSESSMENT YEAR. ACCORDING TO THE DR THE RECORD ME ANS ALL THE INFORMATION AND EVIDENCE AVAILABLE BEFORE THE CIT A FTER CONCLUSION OF ASSESSMENT BY THE ASSESSING OFFICER. FOR THIS PURPOSE, HE RELIED ON THE JUDGEMENT OF SUPREME COUR T IN THE CASE OF CIT VS. MANJUNATHESWAR PACKING PRODUCTS (23 1 ITR 53) WHEREIN IT WAS HELD THAT 'RECORD' FOR THE PURPOSE O F 'REVISION', MEANS THE INFORMATION/EVIDENCE AVAILABLE WITH THE COMMISSIONER OF INCOME-TAX AS ON THE DATE OF ISSUE OF SHOW- CAUSE-NOTICE U/S. 263 OF THE ACT. NOTHING PROHIBIT S THE COMMISSIONER FROM COLLECTING AND RELYING UPON NEW/A DDITIONAL MATERIAL/EVIDENCE TO SHOW AND STATE THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE SUB MITTED THAT LIKE ALL ENQUIRY CONDUCTED BY THE ASSESSING OFFICER TO COME TO CORRECT CONCLUSION COULD BE THE VERY REASON TO INVO KE THE PROVISIONS OF SECTION 263 OF THE ACT. HE SUBMITTED THAT IN THIS CASE THERE IS TOTAL NON APPLICATION OF MIND BY THE ASSESSING OFFICER AND THEREBY INCORRECT ASSESSMENT OF FACTS. HE RELIED ON THE FOLLOWING JUDGEMENTS: A) CIT V. DAGA ENTRADE P. LTD. 327 ITR 467 (GAU.); B) CONSOLITED PHOTO & FINVEST LD. VS. ACIT, 281 ITR 39 4 (DEL), C) ASHOK LEYLAND VS. CIT, 260 ITR 599 (MAD.); D) CIT VS. JAWAHAR BHATTACHARJEE, 341 ITR 434 (GAU); E) CIT V. MCMILLAN & CO., 33 ITR 182 (SC) F) RAMPYARI DEVI SAROOGI V. CIT, 67 ITR 84 (SC) G) MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 (SC ) H) CIT V. PUSHPA DEVI, 173 ITR 445 (PATNA) I) ADDL. CIT VS. MUKUR CORPN. 111 ITR 312 (GUJ) J) LAJJAWATI SINGHAL V. CIT, 226 ITR 527 (ALL) K) JAI BHARAT TANNERS VS. CIT, 264 ITR 673 L) THALI BAI JAIN VS. ITO & ANR. 101 ITR 1 (KAR.) 18. HE ALSO RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF SPECTRA SHARES IN ITA NO. 748/HYD/2011 ORDER DATED 5.8.2011. 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US AND ALSO GONE TH ROUGH ALL THE JUDGEMENTS CITED BY THE PARTIES BEFORE US. FIRST W E TAKE UP THE I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 13 LEGAL ISSUE WITH REFERENCE TO THE JURISDICTION OF I NVOKING THE PROVISIONS OF SECTION 263 OF THE ACT BY THE LEARNED CIT. THE SCHEME OF THE IT ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTE D TO THE REVENUE. IF DUE TO ERRONEOUS ORDER OF THE ASSESSIN G 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 (SC), THE COMMISSIONER CAN EXERCISE REVISION JURIS DICTIONAL U/S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESS ING OFFICER SOUGHT TO BE REVISED IS (I)ERRONEOUS; AND ALSO (II ) PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE WORD ERRONEOUS HAS NOT BEEN DEFINED IN THE INCOME TAX ACT. IT HAS BEEN HOWEVE R DEFINED AT PAGE 562 IN BLACKS LAW DICTIONARY (SEVENTH EDITION ) THUS; ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM TH E LAW. THE WORD ERROR HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY THUS: ERROR NO. 1 : A PSYCHOLOGICAL STATE THAT DOES NOT CONFORM TO OBJECTIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TRUE OR THAT WHAT IS TRUE IS FALSE. AT PAGE 649/650 IN P. RAMANATHA AIYERS LAW 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 MATTERS OF JUDGEMENT ERROR IS A FAULT IN JUDGEMENT, OR IN THE PROCESS OR PROCEEDING TO JUDGEMENT OR IN THE EXECUTION UPON THE SAME, IN A COURT OF RECORD; WHICH IN THE CIVIL LAW IS CALLED A NULLITYIE (TERMES DE LA LEY). SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INADVERTENCE S.99 CPC AND S.215 CR.PC. I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 14 ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPECT THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION. 20. AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE SCOP E OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAINED THUS: AN ERROR IS ANY DEVIATION FROM THE STANDARD OR COURSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INTENTIONAL. A MISTAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSION OF MISCONCEPTION OF THE NATURE OF A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOWLEDGE, A MISTAKE IS FROM INSUFFICIENT OR FAL SE OBSERVATION. BLUNDER IS A PRACTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMITTED THROUGH GLARING IGNORANCE, HEEDLESSNESS, OR AWKWARDNESS. AN ERROR MAY BE OVERLOOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIED, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO CAN COUNTERACT. STRICTLY SPEAKING, HALLUCINATI ON IS AN ILLUSION OF THE PERCEPTION, A PHANTASM OF THE IMAGINATION. THE ONE COMES OF DISORDERED VISION, T HE OTHER OF DISCARDED IMAGINATION. IT IS EXTENDED IN MEDICAL SCIENCE TO MATTERS OF SENSATION, WHETHER THERE IS NO CORRESPONDING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN UNACCOUNTABLE ERROR IN JUDGEMENT OR FACT, ESPECIALLY IN ONE REMARKABLE OTHERWISE FOR ACCURATE INFORMATION AND RIGHT DECISI ON. IT IS EXCEPTIONAL ERROR OR MISTAKE IN THOSE OTHERWI SE NOT LIKELY TO BE DECEIVED. 21. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD B E SEEN WHETHER IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR. IN OUR VIEW, AN ORDER SOUGHT TO BE REVISED UNDER SECTI ON 263 WOULD BE ERRONEOUS AND FALL IN THE AFORESAID CATEGO RY OF 'ERRORS' IF IT IS, INTER ALIA, BASED ON AN INCORRECT ASSUMPT ION OF FACTS OR AN INCORRECT APPLICATION OF LAW OR NON-APPLICATION OF MIND TO SOMETHING WHICH WAS OBVIOUS AND REQUIRED APPLICATIO N OF MIND OR BASED ON NO OR INSUFFICIENT MATERIALS SO AS TO A FFECT THE MERITS I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 15 OF THE CASE AND THEREBY CAUSE PREJUDICE TO THE INTE REST OF THE REVENUE. 22. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMOVE T HE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIO NER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFFICER TAKES A WRONG DECISION WITHOUT CONSIDERING THE MATE RIALS AVAILABLE ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS, WHERE SUCH INQUIRY WAS PR IMA FACIE WARRANTED. THE COMMISSIONER WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER SH OULD 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 ASSESSI NG OFFICER UNDER THE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJ UDICATOR BUT ALSO OF AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE I N THE FACE OF A RETURN, WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. HE MUST DISCHARGE BOTH THE ROLES EFFECTIVE LY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FA CTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOU SLY ON THE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE P RODUCED BY THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT H AS UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESER VES TO BE NOTED THAT THE PRESENT ASSESSMENT WAS MADE UNDER SE CTION 143(3) OF THE INCOME-TAX ACT. IN OTHER WORDS, THE A SSESSING OFFICER WAS STATUTORILY REQUIRED TO MAKE THE ASSESS MENT UNDER SECTION 143(3) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) OF SECTION 143. BUL K OF THE RETURNS FILED BY THE ASSESSEES ACROSS THE COUNTRY I S ACCEPTED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCR UTINY. I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 16 ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE AS SESSING OFFICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCR UTINY ASSESSMENTS. HE SHOULD BE FAIR NOT ONLY TO THE ASSE SSEE BUT ALSO TO THE PUBLIC EXCHEQUER. THE ASSESSING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTEREST OF THE ASSESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EX CESS 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 THAT NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING T HE LEGITIMATE TAX. THE ASSESSING OFFICER IS NOT EXPECT ED TO PUT BLINKERS ON HIS EYES AND MECHANICALLY ACCEPT WHAT T HE ASSESSEE CLAIMS BEFORE HIM. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS OF THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJECTING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASS ESSING OFFICER BECOMES ERRONEOUS BECAUSE AN ENQUIRY HAS NO T BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMI NED WHERE THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUI NENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAU SE THERE IS ANYTHING WRONG WITH HIS ORDER IF ALL THE FACTS STAT ED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORRECT. THE COMMISS IONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ER RONEOUS NOT ONLY WHEN IT CONTAINS SOME APPARENT ERROR OF REASON ING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO-TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS ST ATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMINE THE G ENUINENESS OF THE CLAIM WHICH ARE CALLED FOR IN THE CIRCUMSTAN CES OF THE CASE. IN TAKING THE AFORESAID VIEW, WE ARE SUPPORTE D BY THE DECISIONS OF THE HON'BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI V. CIT (67 ITR 84) (SC), SMT. TARA DEVI A GGARWAL V. CIT I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 17 (88 ITR 323) (SC), AND MALABAR INDUSTRIAL CO. LTD'S CASE ( 243 ITR 83) (SC). 23. IN MALABAR INDUSTRIAL CO. LTD. CASE THE HON'BLE CO URT HAS HELD AS UNDER: THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONL Y WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. 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 THE ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. IN OUR HUMBLE VIEW, ARBITRARINESS IN DECISION-MAKIN G WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAUSES PREJUDICE TO AN ASSESSEE OR TO THE STATE EXCHEQUER. THE LEGISLATURE HAS TAKEN AMPLE CARE TO PROVIDE FOR THE MECHANISM TO HAVE SUCH PREJUDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED THROUGH REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 264 OR THROUGH APPEALS AND OTHER MEANS OF JUDICIAL REVIEW, THE PREJUDICE CAUSED TO T HE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISDICTION OF THE COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DECISION-MAKING CAUSING PREJUDICE TO EITHER PARTY CANNOT THEREFORE BE ALLOWED TO STAND AND STARE AT THE LEGAL SYSTEM. IT IS DIFFICULT TO COUNTENANCE SUCH ARBITRARINESS IN THE ACTIONS OF THE ASSESSING OFFICER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PROTECT THE INTERES T OF BOTH THE PARTIES, NAMELY, THE ASSESSEE AS WELL AS T HE STATE. IF HE FAILS TO DISCHARGE HIS DUTIES FAIRLY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDERS C AN ALWAYS BE CORRECTED EITHER AT THE INSTANCE OF THE ASSESSEE, IF THE ASSESSEE IS PREJUDICED OR AT THE INSTANCE OF THE COMMISSIONER, IF THE REVENUE IS PREJUDICED. WHILE MAKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO PLAY. HE IS THE INVESTIGATOR, PROSECUTOR AS WELL AS ADJUDICATOR. AS AN ADJUDICATO R HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TAXPAYER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQUIRES THAT WHEN HE ENQUIRES INTO A I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 18 SUBSTANTIAL MATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDING ON THE RELEVANT ISSUE GIVING, HOWSOEVER BRIEFLY, HIS REASONS THEREFOR. IN S.N. MUKHERJEE V. UNION OF INDIA AIR 1990 SC 1984, IT HAS BEEN OBSERVED BY THE HON'BLE SUPREME COURT AS FOLLOWS: REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHORITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHORITY. BUT THE OTHER CONSIDERATIONS , REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THI S COURT IN HOLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR ITS DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THAT THE RECORDING OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OR ARBITRARINESS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECISION-MAKING. THE SAI D PURPOSE WOULD APPLY EQUALLY TO ALL DECISIONS AND IT S APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH A RE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT MAY, HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOU LD BE AS ELABORATE AS IN THE DECISION OF A COURT OF LA W. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICI T SO AS TO INDICATE THAT THE AUTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERSY. THE NEE D FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SU CH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELL ATE OR REVISIONAL AUTHORITY AGREES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. 24. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE SUPRE ME COURT IN SIEMENS ENGG. & MFG. CO. LTD. V. UNION OF INDIA AIR 1976 SC 1785. IT IS SETTLED LAW THAT WHILE MAKING A SSESSMENT ON ASSESSEE, THE ITO ACTS IN A QUASI-JUDICIAL CAPAC ITY. AN ASSESSMENT ORDER IS AMENABLE TO APPEAL BY THE ASSES SEE AND TO I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 19 REVISION BY THE COMMISSIONER UNDER SECTIONS 263 AND 264. THEREFORE, A REASONED ORDER ON A SUBSTANTIAL ISSUE IS LEGALLY NECESSARY. THE JUDGMENTS ON WHICH RELIANCE WAS PLAC ED BY THE LEARNED COUNSEL FOR THE ASSESSEE ALSO POINTS TO THE SAME DIRECTION. THEY HAVE HELD THAT ORDERS, WHICH ARE SU BVERSIVE 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 ARBI TRARY MANNER, AS HAS BEEN DONE IN THE CASE BEFORE US, THE ADMINISTRATION OF REVENUE IS BOUND TO SUFFER. IF WI THOUT DISCUSSING THE NATURE OF THE TRANSACTION AND MATERI ALS ON RECORD, THE ASSESSING OFFICER HAD MADE CERTAIN ADDI TION TO THE INCOME OF THE ASSESSEE, THE SAME WOULD HAVE BEEN CO NSIDERED ERRONEOUS BY ANY APPELLATE AUTHORITY AS BEING VIOLA TIVE OF THE PRINCIPLES OF NATURAL JUSTICE WHICH REQUIRE THAT TH E AUTHORITY MUST INDICATE THE REASONS FOR AN ADVERSE ORDER. WE FIND NO REASON WHY THE SAME VIEW SHOULD NOT BE TAKEN WHEN A N ORDER IS AGAINST THE INTERESTS OF THE REVENUE. AS A MATTER O F FACT SUCH ORDERS ARE PREJUDICIAL TO THE INTERESTS OF BOTH THE PARTIES, BECAUSE EVEN THE ASSESSEE IS DEPRIVED OF THE BENEFI T OF A POSITIVE FINDING IN HIS FAVOUR, THOUGH HE MAY HAVE SUFFICIEN TLY ESTABLISHED HIS CASE. 25. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAID THA T AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNDER S ECTION 263 IN THE FOLLOWING CASES: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERROR OF 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 APPLICATION OF LAW. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 20 OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. (III) THE ORDER PASSED BY THE ASSESSING OFFICER IS A STEREOTYPE ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN OR WHERE HE FAILS TO MAKE THE REQUISITE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH IS CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. 26. WE SHALL NOW TURN TO THE FACTS OF THE CASE TO SEE W HETHER THE CASE BEFORE US IS COVERED BY THE AFORESAID PRIN CIPLES. PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFF ICER DOES NOT SHOW ANY APPLICATION OF MIND ON HIS PART. HE SI MPLY ACCEPTED THE INCOME DECLARED BY THE ASSESSEE. THIS IS A CASE WHERE THE ASSESSING OFFICER MECHANICALLY ACCEPTED W HAT THE ASSESSEE WANTED HIM TO ACCEPT WITHOUT ANY APPLICATI ON OF MIND OR ENQUIRY. THE EVIDENCE AVAILABLE ON RECORD IS NO T ENOUGH TO HOLD THAT THE RETURN OF THE ASSESSEE WAS OBJECTIVEL Y EXAMINED OR CONSIDERED BY THE ASSESSING OFFICER. IT IS BECAUSE OF SUCH NON- CONSIDERATION OF THE ISSUES ON THE PART OF THE ASSE SSING OFFICER THAT THE RETURN FILED BY THE ASSESSEE STOOD AUTOMAT ICALLY ACCEPTED WITHOUT ANY PROPER SCRUTINY. THE ASSESSMEN T ORDER PLACED BEFORE US IS CLEARLY ERRONEOUS AS IT WAS PAS SED WITHOUT PROPER EXAMINATION OR ENQUIRY OR VERIFICATION OR OB JECTIVE CONSIDERATION OF THE CLAIM MADE BY THE ASSESSEE. TH E ASSESSING OFFICER HAS COMPLETELY OMITTED TO EXAMINE THE ISSUE S IN QUESTION FROM CONSIDERATION AND MADE THE ASSESSMENT IN AN AR BITRARY MANNER. HIS ORDER IS A COMPLETELY NON-SPEAKING ORDE R. IN OUR VIEW, IT WAS A FIT CASE FOR THE LEARNED COMMISSIONE R TO EXERCISE HIS REVISIONAL JURISDICTION UNDER SECTION 263 WHICH HE RIGHTLY EXERCISED BY CANCELLING THE ASSESSMENT ORDER AND DI RECTING THE ASSESSING OFFICER TO PASS A FRESH ORDER CONSIDERIN G THE ISSUES RAISED BY THE CIT. IN OUR VIEW, THE ASSESSEE SHOULD HAVE NO GRIEVANCE IN THE ACTION OF LEARNED COMMISSIONER IN EXERCISING THE JURISDICTION U/S. 263 OF THE IT ACT. I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 21 27. IT WAS HOWEVER CONTENDED BY THE LEARNED COUNSEL THA T THE ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW IN ACCE PTING THE RETURN OF THE ASSESSEE WITH REFERENCE TO EXPENDITU RE AND HENCE, THE COMMISSIONER WAS NOT JUSTIFIED IN ASSUMI NG THE REVISIONAL JURISDICTION UNDER SECTION 263. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE AFORESAID SUBMISSIO NS. AS ALREADY STATED EARLIER, AN ORDER BECOMES ERRONEOUS BECAUSE INQUIRIES, WHICH OUGHT TO HAVE BEEN MADE ON THE FAC TS OF THE CASE, WERE NOT MADE AND NOT BECAUSE THERE IS ANYTHI NG WRONG WITH THE ORDER IF ALL THE FACTS STATED OR THE CLAIM S MADE IN THE RETURN ARE ASSUMED TO BE CORRECT. THUS, IT IS MERE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE THE NECESSARY INQUIRIES OR TO EXAMINE THE CLAIM MADE BY THE ASSESSEE IN ACCORD ANCE WITH LAW, WHICH RENDERS THE RESULTANT ORDER ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE. NOTHING MORE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE. ONE WOUL D NOT KNOW AS TO WHAT WOULD HAVE HAPPENED IF THE ASSESSING OFF ICER HAD MADE THE REQUISITE INQUIRIES OR EXAMINED THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. HE COULD HAVE ACCE PTED THE ASSESSEE'S CLAIM. EQUALLY, HE COULD HAVE ALSO REJEC TED THE ASSESSEE'S CLAIM DEPENDING UPON THE RESULTS OF HIS ENQUIRY OR EXAMINATION INTO THE CLAIM OF THE ASSESSEE. THUS, T HE FORMATION OF ANY VIEW BY THE ASSESSING OFFICER WOULD NECESSAR ILY DEPEND UPON THE RESULTS OF HIS INQUIRY AND CONSCIOUS, AND NOT PASSIVE, EXAMINATION INTO THE CLAIM OF THE ASSESSEE. IF THE ASSESSING OFFICER PASSES AN ORDER MECHANICALLY WITHOUT MAKING THE REQUISITE INQUIRIES OR EXAMINING THE CLAIM OF THE A SSESSEE IN ACCORDANCE WITH LAW, SUCH AN ORDER WILL CLEARLY BE ERRONEOUS IN LAW AS IT WOULD NOT BE BASED ON OBJECTIVE CONSIDERA TION OF THE RELEVANT MATERIALS. IT IS THEREFORE, THE MERE FAILU RE ON THE PART OF THE ASSESSING OFFICER IN NOT MAKING THE INQUIRIES O R NOT EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE W ITH LAW THAT I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 22 PER SE RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE. NOTHING ELSE IS REQUIR ED TO BE ESTABLISHED IN SUCH A CASE TO SHOW THAT THE ORDER S OUGHT TO BE REVISED IS ERRONEOUS AND PREJUDICIAL TO THE INTERES TS OF THE REVENUE. 28. WE ARE UNABLE TO ACCEPT THE SUBMISSION OF THE LEARN ED COUNSEL FOR TWO OTHER REASONS ALSO. FIRST REASON IS THAT THE VIEW SO TAKEN BY THE ASSESSING OFFICER WITHOUT MAKING TH E REQUISITE INQUIRIES OR EXAMINING THE CLAIM OF THE ASSESSEE WI LL PER SE BE AN ERRONEOUS VIEW AND HENCE WILL BE AMENABLE TO REV ISIONAL JURISDICTION UNDER SECTION 263. SECOND REASON IS TH AT IT IS NOT TAKING OF ANY VIEW THAT WILL TAKE THE MATTER UNDER THE SCOPE OF SECTION 263. THE VIEW TAKEN BY THE ASSESSING OFFICE R SHOULD NOT BE A MERE VIEW IN VACUUM BUT A JUDICIAL VIEW. IT IS WELL ESTABLISHED THAT THE ASSESSING OFFICER BEING A QUAS I-JUDICIAL AUTHORITY CANNOT TAKE A VIEW, EITHER AGAINST OR IN FAVOUR OF THE ASSESSEE / REVENUE, WITHOUT MAKING PROPER INQUIRIES AND WITHOUT PROPER EXAMINATION OF THE CLAIM MADE BY THE ASSESSEE IN THE LIGHT OF THE APPLICABLE LAW. AS ALREADY ST ATED EARLIER, WE ARE NOT ABLE TO APPRECIATE ON WHAT MATERIAL WAS PLA CED BEFORE THE ASSESSING OFFICER AT THE ASSESSMENT STAGE TO TA KE SUCH A VIEW. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO LEAD E NOUGH EVIDENCE TO SHOW TO US THAT ANY INQUIRY WAS MADE BY THE ASSESSING OFFICER IN THIS REGARD. THEREFORE MERE AL LEGATION THAT THE ASSESSING OFFICER HAS TAKEN A VIEW IN THE MATTE R WILL NOT PUT THE MATTER BEYOND THE PURVIEW OF SECTION 263 UNLESS THE VIEW SO TAKEN BY THE ASSESSING OFFICER IS A JUDICIAL VIEW C ONSCIOUSLY BASED UPON PROPER INQUIRIES AND APPRECIATION OF ALL THE RELEVANT FACTUAL AND LEGAL ASPECTS OF THE CASE. THE JUDICIAL VIEW TAKEN BY THE ASSESSING OFFICER MAY PERHAPS PLACE THE MATTER OUTSIDE THE PURVIEW OF SECTION 263 UNLESS IT IS SHOWN THAT THE VIEW SO TAKEN I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 23 BY THE ASSESSING OFFICER CONTAINS SOME APPARENT ERR OR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. 29. THE LEARNED COUNSEL HAS STRONGLY RELIED UPON THE FOLLOWING OBSERVATIONS MADE IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) AND SUBMITTED THAT THE LEARNED COM MISSIONER WAS NOT JUSTIFIED IN SUBSTITUTING HIS VIEW FOR THAT OF THE ASSESSING OFFICER: ... EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN O RDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCO ME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 30. WE HAVE CAREFULLY GONE THROUGH THE AFORESAID OBSERVATIONS. 'ADOPTING' ONE OF THE COURSES PERMISS IBLE IN LAW NECESSARILY REQUIRES THE ASSESSING OFFICER TO CONSC IOUSLY ANALYSE AND EVALUATE THE FACTS IN THE LIGHT OF RELEVANT LAW AND BRING THEM ON RECORD. IT IS ONLY THEN THAT HE CAN BE SAID TO HAVE 'ADOPTED' OR CHOSEN ONE OF THE COURSES PERMISSIBLE IN LAW. THE ASSESSING OFFICER CANNOT BE PRESUMED OR ATTRIBUTED TO HAVE 'ADOPTED' OR CHOSEN A COURSE PERMISSIBLE IN LAW WHE N HIS ORDER DOES NOT SPEAK IN THAT BEHALF. SIMILARLY, 'TAKING' ONE VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE ALSO NECESSARILY IMP ORTS THE REQUIREMENT OF ANALYSING THE FACTS IN THE LIGHT OF APPLICABLE LAW. THEREFORE, PROPER EXAMINATION OF FACTS IN THE LIGHT OF RELEVANT LAW IS A NECESSARY CONCOMITANT IN ORDER TO SAY THAT THE ASSESSING OFFICER HAS ADOPTED A PERMISSIBLE COURSE OF LAW OR TAKEN A VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE. IT IS ONLY AFTER SUCH PROPER EXAMINATION AND EVALUATION HAS BE EN DONE BY THE ASSESSING OFFICER THAT HE CAN COME TO A CONCLUS ION AS TO I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 24 WHAT ARE THE PERMISSIBLE COURSES AVAILABLE IN LAW O R WHAT ARE THE POSSIBLE VIEWS ON THE ISSUE BEFORE HIM. IN CASE HE COMES TO THE CONCLUSION THAT MORE THAN ONE VIEW IS POSSIBLE THEN HE HAS NECESSARILY TO CHOOSE A VIEW, WHICH IS MOST APPROPR IATE ON THE FACTS OF THE CASE. IN ORDER TO APPLY THE AFORESAID OBSERVATIONS TO A GIVEN CASE, IT MUST THEREFORE FIRST BE SHOWN THAT THE ASSESSING OFFICER HAS 'ADOPTED' A PERMISSIBLE COURSE OF LAW O R, WHERE TWO VIEWS ARE POSSIBLE, THE ASSESSING OFFICER HAS 'TAKE N' ONE SUCH POSSIBLE VIEW IN THE ORDER SOUGHT TO BE REVISED UND ER SECTION 263. THIS REQUIRES THE ASSESSING OFFICER TO TAKE A CONSCIOUS DECISION; ELSE HE WOULD NEITHER BE ABLE TO 'ADOPT' A COURSE PERMISSIBLE IN LAW NOR 'TAKE' A VIEW WHERE TWO OR M ORE VIEWS ARE POSSIBLE. IN OTHER WORDS, IT IS THE ASSESSING OFFIC ER WHO HAS TO ADOPT A PERMISSIBLE COURSE OF LAW OR TAKE A VIEW WH ERE TWO OR MORE VIEWS ARE POSSIBLE. IT IS DIFFICULT TO COMPREH END AS TO HOW THE ASSESSING OFFICER CAN BE ATTRIBUTED TO HAVE 'AD OPTED' A PERMISSIBLE COURSE OF LAW OR 'TAKEN' A VIEW WHERE T WO OR MORE VIEWS ARE POSSIBLE WHEN THE ORDER PASSED BY HIM DOE S NOT SPEAK IN THAT BEHALF. WE CANNOT ASSUME, IN ORDER TO PROVI DE LEGITIMACY TO THE ASSESSMENT ORDER, THAT THE ASSESSING OFFICER HAS ADOPTED A PERMISSIBLE COURSE OF LAW OR TAKEN A POSSIBLE VIE W WHERE HIS ORDER DOES NOT SAY SO. THE SUBMISSIONS MADE BY THE LEARNED COUNSEL, IF ACCEPTED, WOULD REQUIRE US TO FORM, SUB STITUTE AND READ OUR VIEW IN THE ORDER OF THE ASSESSING OFFICER WHEN THE ASSESSING OFFICER HIMSELF HAS NOT TAKEN A VIEW. IT COULD HAVE BEEN A DIFFERENT POSITION IF THE ASSESSING OFFICER HAD 'ADOPTED' OR 'TAKEN' A VIEW AFTER ANALYSING THE FACTS AND DEC IDING THE MATTER IN THE LIGHT OF THE APPLICABLE LAW. HOWEVER, IN THE CASE BEFORE US, THE ASSESSING OFFICER HAS NOT AT ALL EXA MINED AS TO WHETHER ONLY ONE VIEW WAS POSSIBLE OR TWO OR MORE V IEWS WERE POSSIBLE AND HENCE, THE QUESTION OF HIS ADOPTING OR CHOOSING ONE VIEW IN PREFERENCE TO THE OTHER DOES NOT ARISE. THE AFORESAID I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 25 OBSERVATIONS OF THE HON'BLE SUPREME COURT DO NOT, I N OUR VIEW, HELP THE ASSESSEE; AND RATHER THEY ARE AGAINST THE ASSESSEE. 31. IN THE CASE OF PADMASUNDARA RAO V. STATE OF TAMIL N ADU (255 ITR 147), THE HON'BLE SUPREME COURT HAS HELD T HAT '... THERE IS ALWAYS PERIL IN TREATING THE WORDS OF A SPEECH OR JUDGMENT AS THOUGH THEY ARE WORDS IN A LEGISLATIVE ENACTMENT, AND IT IS TO BE REMEMBERED THAT JUDICIAL UTTERANCES ARE MADE IN THE SETTING OF THE FACTS OF A PARTICULAR CASE, SAID LORD MORRIN IN HARRINGTON V. BRITISH RAILWAYS BOARD [1972] 2 WLR 5 37 (HL). CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFE RENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN T WO CASES....' THEREFORE, THE OBSERVATIONS OF THE HON'B LE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD'S CASE (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE LEARNED COUNSEL CAN NOT BE READ IN ISOLATION. THE JUDGMENT DESERVES TO BE READ IN ITS ENTIRETY TO CULL OUT THE LAW LAID DOWN BY THE HON'B LE SUPREME COURT. IF SO READ, IT IS QUITE EVIDENT THAT THE ORD ERS PASSED ON AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLI CATION OF LAW OR WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTI CE OR WITHOUT APPLICATION OF MIND WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF THE ORDER SOUGHT TO BE REVISED UNDER SECTION 263 SUFFERS FROM ANY OF THE AFORESAID VICES, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS 'ADOPTED', IN SUCH AN ORDER, A COURSE P ERMISSIBLE IN LAW OR 'TAKEN' A VIEW WHERE TWO OR MORE VIEWS AR E POSSIBLE. 32. IT WAS NEXT CONTENDED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSING OFFICER HAD CONSI DERED ALL THE RELEVANT ASPECTS OF THE CASE CAREFULLY WHILE PASSIN G THE ORDER. ACCORDING TO HIM, THE MERE FACT THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS SHORT WOULD NEI THER MEAN FAILURE ON HIS PART IN NOT EXAMINING THE MATTER CAR EFULLY NOR WOULD RENDER HIS ORDER ERRONEOUS SO LONG AS THE VIE W TAKEN BY HIM WAS A POSSIBLE VIEW. IN OUR VIEW, THE AFORESAID SUBMISSION OF THE ASSESSEE MUST FAIL FOR THE REASONS ALREADY E XPLAINED IN THE FOREGOING PARAS OF THIS ORDER AS THE ORDER, WHICH IS SOUGHT TO BE REVISED UNDER SECTION 263 REFLECTS NO PROPER APP LICATION OF MIND BY THE ASSESSING OFFICER AND THUS BE AMENABLE TO REVISION I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 26 UNDER SECTION 263. IN THIS CASE BEFORE US, THE ASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER LACKS JUDICIAL STRE NGTH TO STAND. IT IS NOT A CASE WHERE THE ORDER IS SHORT BUT IS NO T SUPPORTED BY JUDICIAL STRENGTH. IT IS IN THIS VIEW OF THE MATTER THAT WE FEEL THAT THE LEARNED COMMISSIONER HAS CORRECTLY EXERCISED HI S REVISIONAL JURISDICTION UNDER SECTION 263. 33. IN OUR OPINION, THE ASSESSING OFFICER HAS BEEN ENTR USTED THE ROLE OF AN INVESTIGATOR, PROSECUTOR AS WELL AS ADJUDICATOR UNDER THE SCHEME OF THE INCOME-TAX ACT. IF HE COMMI TS AN ERROR WHILE DISCHARGING THE AFORESAID ROLES AND CONSEQUEN TLY PASSES AN ERRONEOUS ORDER CAUSING PREJUDICE EITHER TO THE ASSESSEE OR TO THE STATE EXCHEQUER OR TO BOTH, THE ORDER SO PAS SED BY HIM IS LIABLE TO BE CORRECTED. AS MENTIONED EARLIER, THE A SSESSEE CAN HAVE THE PREJUDICE CAUSED TO HIM CORRECTED BY FILIN G AN APPEAL; AS ALSO BY FILING A REVISION APPLICATION UNDER SECT ION 264. BUT THE STATE EXCHEQUER HAS NO RIGHT OF APPEAL AGAINST THE ORDERS OF THE ASSESSING OFFICER. SECTION 263 HAS THEREFORE BE EN ENACTED TO EMPOWER THE COMMISSIONER TO CORRECT AN ERRONEOUS OR DER- PASSED BY THE ASSESSING OFFICER WHICH HE CONSIDERS TO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE COM MISSIONER HAS ALSO BEEN EMPOWERED TO INVOKE HIS REVISIONAL JURISD ICTION UNDER SECTION 264 AT THE INSTANCE OF THE ASSESSEE ALSO. T HE LINE OF DIFFERENCE BETWEEN SECTIONS 263 AND 264 IS THAT WHI LE THE FORMER CAN BE INVOKED TO REMOVE THE PREJUDICE CAUSE D TO THE STATE THE LATER CAN BE INVOKED TO REMOVE THE PREJUD ICE CAUSED TO THE ASSESSEE. THE PROVISIONS OF SECTION 263 WOULD L OSE SIGNIFICANCE IF THEY WERE TO BE INTERPRETED IN A MA NNER THAT PREVENTED THE COMMISSIONER FROM REVISING THE ERRONE OUS ORDER PASSED BY THE ASSESSING OFFICER, WHICH WAS PREJUDIC IAL TO THE INTEREST OF THE REVENUE. IN FACT, SUCH A COURSE WOU LD BE COUNTER PRODUCTIVE AS IT WOULD HAVE THE EFFECT OF PROMOTING ARBITRARINESS IN THE DECISIONS OF THE ASSESSING OFFICERS AND THUS DESTROY THE I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 27 VERY FABRIC OF SOUND TAX DISCIPLINE. IF ERRONEOUS O RDERS, WHICH ARE PREJUDICIAL TO THE INTEREST OF THE REVENUE, ARE ALLOWED TO STAND, THE CONSEQUENCES WOULD BE DISASTROUS IN THAT THE HONEST TAX PAYERS WOULD BE REQUIRED TO PAY MORE THAN OTHER S TO COMPENSATE FOR THE LOSS CAUSED BY SUCH ERRONEOUS OR DERS. FOR THIS REASON ALSO, WE ARE OF THE VIEW THAT THE ORDER S PASSED ON AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICAT ION OF LAW OR WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND OR WITHOUT MAKING REQUISITE INQ UIRIES WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN T HE MEANING OF SECTION 263. 34. FURTHER COMING TO THE FACTS OF THE PRESENT CASE, TH ERE IS NO ENQUIRY IN RESPECT OF COMMISSION PAYMENT MADE TO THE FOLLOWING PARTIES TO THE TUNE OF RS. 4,18,80,995 AS BELOW: NAME OF THE PARTY COMMISSION PAID (RS.) R.K. MARKETING SERVICE 99,59,139 VIJAY MINING PVT. LTD. 99,59,139 LAKSHMI MINES & MINERALS 2,03,895 B. BHAGYALAKSHMI 1,99,10,281 K. ANNAPURNA 18,56,501 TOTAL 4,18,80,995 35. THE CIT WAS OF THE OPINION THAT THERE IS NO PROPER ENQUIRY BY THE ASSESSING OFFICER. THE ASSESSING OFFICER AC CEPTED THE CLAIM OF PAYMENT OF COMMISSION BY PLACING RELIANCE ONLY ON CONFIRMATION LETTERS FILED BY THE ASSESSEE FIRM WIT HOUT CONDUCTING FURTHER ENQUIRY WITH REGARD TO GENUINENE SS OF THE COMMISSION PAYMENTS. THE ASSESSING OFFICER NOT GAT HERED ANY INFORMATION REGARDING THE GENUINENESS OF PAYMENTS A ND EVIDENCE TO SUGGEST THE NATURE OF SERVICES RENDERED BY THESE PARTIES. IT IS INCUMBENT ON THE PART OF THE ASSESS ING OFFICER TO COME TO INDEPENDENT CONCLUSION THAT THE PAYMENTS I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 28 COMMENSURATE WITH THE NATURE OF SERVICES RENDERED B Y THE PARTIES. THE ASSESSING OFFICER ABSOLUTELY CLOSED H IS EYES FOR EXTRANEOUS REASONS AND ACCEPTED THE COMMISSION PAYM ENTS JUST ON THE BASIS OF CONFIRMATION LETTERS. CONFIRMATION LETTERS THEMSELVES CANNOT PROVE THE GENUINENESS OF THE PAYM ENTS AND NATURE OF SERVICES RENDERED. BEING SO, IT HAS TO B E EXAMINED THOROUGHLY. AT THIS POINT, WE MAKE IT CLEAR THAT T HE CIT THOUGH SAID IN HIS ORDER THAT THERE IS NO PROPER ENQUIRY B Y THE ASSESSING OFFICER, HE, INSTEAD OF DIRECTING THE ASS ESSING OFFICER TO CARRY ON FURTHER ENQUIRY FROM THE POINT WHERE HE HAS STOPPED, DISALLOWED THE ENTIRE COMMISSION PAYMENTS. THIS IS NOT PROPER. THE CIT IS REQUIRED TO CAUSE ENQUIRY H IMSELF REGARDING THE GENUINENESS OF PAYMENTS OF COMMISSION OR GOT IT DONE FROM THE ASSESSING OFFICER. IN THE PRESENT CA SE, HE FAILED ON BOTH THE COUNTS. BEING SO, IN OUR OPINION, IT I S APPROPRIATE TO REMIT THE ENTIRE ISSUE BACK TO THE FILE OF THE A SSESSING OFFICER TO CARRY FURTHER ENQUIRY. ACCORDINGLY, WE MODIFY T HE ORDER OF THE CIT TO THAT EXTENT AND REMIT THE ENTIRE ISSUE TO TH E FILE OF THE ASSESSING OFFICER TO CARRY FURTHER ENQUIRY AS THE C ASE WARRANTS REGARDING GENUINENESS OF THE COMMISSION PAYMENTS TO THE ABOVE PARTIES. THE ASSESSING OFFICER IS DIRECTED TO EXA MINE THE ENTIRE ISSUE AND IF HE FINDS THE ASSESSEE HAS INCURRED ANY COMMISSION PAYMENTS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS COMMENSURATE WITH THE SERVICES RENDERED BY THE RESP ECTIVE PARTIES, THE SAME IS TO BE ALLOWED TO THAT EXTENT. 36. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCTOBER, 2012. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH OCTOBER , 2012 TPRAO I.T.A. NO. 741/HYD/2012 M/S. SUN MINERALS =================== 29 COPY FORWARDED TO: 1. M/S. SUN MINERALS, C /O. M/S. P.R. DATLA & CO., CHARTERED ACCOUNTANTS, 6-3-788/A/9, FIRST FLOOR, DURGA NAGAR, AMEERPET, HYDERABAD-500 016. 2. THE ADDL. COMMISSIONER OF INCOME - TAX, RANGE - 6, HYDERABAD. 3. THE CIT - III, HYDERABAD. 4. THE ACIT, CIRCLE - 6(1), HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD