M/s GMR Spintex (P) Limited, Adilabad V. Dy.CIT, Circle-1, Nizamabad

ITA 779/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69980 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Keywords: Depreciation; Principle of natural justice; Assessment record; Right to appeal; Unabsorbed depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 779/HYD/2013 ASST. YEAR: 2008-09 M/S. GMR SPINTEX (P) LTD., ADILABAD. PAN: AACCG 6516 A VS. DEPUTY CIT, CIR-1, NIZAMABAD. APPELLANT RESPONDENT APPELLANT BY: SRI K.C. DEVDAS RESPONDENT BY: SRI P. SOMA SEKHAR REDDY DATE OF HEARING: 03-12-2013 DATE OF PRONOUNCEMENT: 13.12.2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT PASSED U/S 263 DATED 22-3-2013. THE ASSESSEES GRIEVANCE IN THIS APPEAL IS WITH REGARD TO THE GIVING DIRECTION BY THE CIT TO THE ASSESSING OFFICE R TO PASS FRESH ASSESSMENT ORDER AFTER CARRYING OUT REQU ISITE ENQUIRY WITH REGARD TO THE CLAIM OF DEPRECIATION ON MACHINERY. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY IS A SPINNING MILL AND IT HAS FILED ITS RET URN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 29-9-2009 ADMITTING LOSS OF (-)2,25,77,708/-. THE ASSESSING OFFICER ACCEPTED THE RETURN OF INCOME FILED BY THE ASSESSEE BY ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 2 PASSING AN ORDER U/S 143(3) ON 16-12-2010. THE CIT NOTICED FROM THE ASSESSMENT RECORDS AND INFORMATIO N FILED BY THE ASSESSEE COMPANY THAT THE ASSESSEE COMPANY STARTED COMMERCIAL PRODUCTION ON 15-3-2008 AND CLAIMED HUGE UNABSORBED DEPRECIATION AT RS.2,25,77,708. ACCORDING TO THE CIT, THE ASSESSIN G OFFICER HAD NOT APPLIED HIS MIND TO THE CLAIM OF DEPRECIATION AND WITHOUT PROPER EXAMINATION OR ENQU IRY, ACCEPTED THE LOSS RETURNED BY THE ASSESSEE. THE C IT OBSERVED THAT TO MANUFACTURE YARN SOME OF THE BASIC MACHINERIES REQUIRED FOR ANY ASSESSEE/MANUFACTURER INCLUDE AUTO CONERS, CARDING MACHINE, COMBERS, RING FRAMES AND ACCESSORIES, SPEED FRAME, ETC. SUCH MACHINERIES SHOULD HAVE BEEN PURCHASED ON OR BEFORE 15-3-2008 TO JUSTIFY ANY CLAIM OF DEPRECIATION BENE FIT. FURTHER, THE ASSESSEE COMPANY SHOULD HAVE ERECTED A LL THE MACHINERY BEFORE PUTTING THE MACHINERY TO UTILISATION. AS SEEN FROM THE RECORD AND THE MACHI NERY LEDGER ACCOUNT, PURCHASES HAVE BEEN MADE IN THIS ACCOUNT EVEN AFTER 15-3-2008 AND AS PER BILL DATED 10-3- 2008, AUTO CONE WAS IMPORTED FROM GERMANY AT A COST OF RS.6.61 CRORES BUT CUSTOMS DUTY WAS PAID ON 20-3-20 08. SIMILARLY, CARDING MACHINE WAS PURCHASED FROM LAKSH MI MACHINE WORKS (P) LTD., ON 30-3-2008 AND ERECTION CHARGES WERE DEBITED ON 31-3-2008 AND RING FRAMES W ERE PURCHASED ON SEVERAL DATES AND ALSO ON 20-3-2008 AN D 25-3-2008 AND ERECTION CHARGES WERE DEBITED ON 31-3 - 2008. FURTHER, MANUFACTURING EXPENSES OF RS.28,77,734/- WAS DEBITED IN TO THE PROFIT AND LOS S A/C THAT INCLUDES THE FOLLOWING ITEMS SUCH AS RAW MATER IAL RS.23,56,190/-, PACKING MATERIAL RS.22,095/-STORES AND SPARES RS.77,875/-, ELECTRICITY CHARGES RS.3,00,097 /-, ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 3 WAGES RS.1,18,477/-. THERE WAS NO OPENING STOCK IN THIS CASE. HOWEVER, THE CLOSING STOCK WAS SHOWN AS RS.27,32,221/- AGAINST THE RAW MATERIAL CONSUMPTION OF RS.23,56,190/- APART FROM THE SALE OF RS.8,10,000/- AT A HIGH GROSS PROFIT RATE OF 150%. IT IS EVIDENT FR OM THE ABOVE THAT THE ASSESSING OFFICER HAD ALLOWED THE DEPRECIATION CLAIM WITHOUT PROPER EXAMINATION OF F ACTS AND CIRCUMSTANCES UNDER WHICH SEVERAL MACHINERY PAR TS WERE PURCHASED OR ERECTED TO JUSTIFY THE CONTENTION THAT THE BUSINESS ACTIVITY COULD HAVE COMMENCED ON 15-3- 2008. HENCE, THE CIT (A) WAS OF THE OPINION THAT THE ASSESSING OFFICER SHOULD HAVE NOT ALLOWED THE DEPRECIATION CLAIM AS THE ASSESSEE COULD NOT HAVE COMMENCED ANY BUSINESS ACTIVITY BY 15-3-2008. IN T HE LIGHT OF THE ABOVE, THE CIT (A) OBSERVED THAT THE O RDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND HE DIREC TED THE ASSESSING OFFICER TO PASS FRESH ORDER AFTER CARRYIN G NECESSARY ENQUIRY AGAINST THE FINDING OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT ASSESSMENT ORDER WAS PASSED U/S 143(3) OF THE ACT A ND THE ASSESSEE PRODUCED ALL BOOKS OF ACCOUNTS AND HAS EXPLAINED COMPUTATION OF INCOME. THE ASSESSING OFFI CER AFTER ACCEPTING THE CONTENTION OF THE ASSESSEE RECO RDED HIS FINDING IN THE ASSESSMENT ORDER. HE HAD VERIFIE D ACCOUNTS AND BILLS AND VOUCHERS AND FOUND TO BE COR RECT. BEING SO, THE CIT COULD NOT FIND FAULT WITH THE ORD ER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AFTER DU E APPLICATION OF MIND AND OBSERVED THAT NO ADDITION ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 4 WARRANTED. HOWEVER, THE CITS SHOW CAUSE NOTICE DA TED 26-2-2013 SOUGHT TO REVISE THE ASSESSMENT ORDER ON THE GROUND THAT THE LEARNED ASSESSING OFFICER HAS NOT C ARRIED OUT PROPER ENQUIRY WITH REGARD TO THE CLAIM OF DEPRECIATION. THE LEARNED AR OPPOSED THE ORDER OF THE CIT AND SUBMITTED THAT THE ASSESSEE HAS FILED VAT RETURN FOR THE MONTH OF MARCH, 2008 SHOWING THE TURNOVER EFFECTED DURING THE SAID MONTH AT RS.8,10, 000/. HE ALSO DREW OUR ATTENTION TO THE SALES TAX ASSESSM ENT ORDER ISSUED BY THE COMMERCIAL TAX OFFICER, ADILABA D FOR THE YEAR 2007-08 SHOWING GROSS TURNOVER OF RS.8,34,300/-. HE ALSO SUBMITTED THAT THE ASSESSEE HAS COLLECTED C FORM RECEIVED FROM THE CUSTOMER, WHO HAS PURCHASED FINISHED PRODUCTS ON THE PRESCRIBED FORM AND HE ALSO DREW OUR ATTENTION TO THE ELECTRICITY BILL FOR THE MONTH OF MARCH, 2008 DATED 26-3-2008. THE AR ALSO SUBMITTED THAT THE FIRST READING AS ON 26-2-2008 W AS AT 0 UNITS AND THE READING AS ON 26-3-2008 (I.E., AF TER COMMERCIAL PRODUCTION) AT 2220 UNITS. 4. ACCORDING TO THE LEARNED AR, THE ASSESSEE HAS COMMENCED COMMERCIAL PRODUCTION DURING MARCH 2008 BY USING PLANT AND MACHINERIES AND OTHER ASSETS AND THESE WERE PUT TO USE DURING THE PREVIOUS YEAR RELE VANT TO ASST. YEAR. HE DREW OUR ATTENTION TO VARIOUS MANUFACTURING PROCESSES CARRIED ON BY THE ASSESSEE SUCH AS RUNNING THE MILL AND MANUFACTURING OF YARN WITH THE AID OF EQUIPMENTS INSTALLED BEFORE 15-3-20 08 AND 31-3-2008 AND VARIOUS MACHINERIES WERE USED BY THE ASSESSEE. HE SUBMITTED THAT THERE CANNOT BE AN Y DOUBT REGARDING USAGE OF AUTO CONES. HE SUBMITTED THAT AUTO CONES WERE IMPORTED FROM GERMANY AND CUSTOM DUTY WAS PAID ON 20-3-2008. THERE CANNOT BE ANY ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 5 DOUBT THAT THE MACHINERY WAS INSTALLED BEFORE 2-3-2 008. HE SUBMITTED THAT TWO AUTO CONERS PURCHASED VIDE BI LL DATED 20-12-2007 WERE RECEIVED ON 18-2-2008 BY DELIVERY IN CUSTOMS PORT AND CUSTOM DUTY WAS PAID O N 18-2-2008. IT WAS SUBMITTED THAT THOSE AUTO CONERS WERE RECEIVED ON 20-3-2008 AT INLAND CONTAINER DEPO T, HYDERABAD AND WERE INSTALLED BEFORE 31-3-2008. HE SUBMITTED THAT THE USER TEST IS NEITHER POSSIBLE N OR NECESSARY TO ALLOW DEPRECIATION AND THEREFORE, USER TEST IS ONLY FOR ENTRY INTO BLOCK OF ASSETS AFTER BEING BROUGHT. THIS WOULD CLEAR THE DOUBT ABOUT DATE OF INSTALLATI ON. IT IS FURTHER SUBMITTED THAT IT WOULD BE CLEAR THAT THE ASSESSEE HAS ACTUALLY STARTED COMMERCIAL PRODUCTION AS ON 15-3-2008 WITH THE AVAILABLE MACHINERY PURCHASED AND INSTALLED PRIOR TO THIS DATE, ALTHOUGH SOME MACHINERIES WERE BROUGHT AFTER 15-3-2008, INSTALLED AND ENTERED INTO THE BLOCK OF ASSETS BEFORE 31-3-2008 A ND THAT THE COMMERCIAL PRODUCTION HAS STARTED WOULD BE CLEAR FROM THE FACT THAT MACHINERIES WERE INSTALLED , RAW MATERIALS WERE PURCHASED, SALES WERE EFFECTED AND O THER COMPONENTS WHICH ENTERS INTO PRODUCTION STOOD SATIS FIED AS REFLECTED IN THE BOOKS. IN VIEW OF THE ABOVE, THE CIT IS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO REVISE THE ASSESSMENT ORDER. IN SUPPORT OF THE ABOVE CONTENTION, THE LEARNED AR RELIED UPON THE FOLLOWI NG JUDGMENTS:- 1. CIT VS. DEEPAK MITTAL 324 ITR 411(P & H) 2. CIT VS. DEVELOPMENT CREDIT BANK LTD. 323 ITR 206 (BOM) 3. CIT VS. GREEN WORLD CORPORATION 314 ITR 81 (SC) 4. CIT VS. GANPAT RAM BISHNOI 296 ITR 292 (RAJ) 5. CIT VS. MAX INDIA LTD. 295 ITR 282 (SC) 6. BONGAIGAON REFINERY & PETROCHEMICALS LTD. VS. UNION BANK OF INDIA 287 ITR 120 (GAU.) ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 6 7. CIT VS. GABRIEL INDIA LTD. 203 ITR 108 (BOM.) 8. CIT VS. ARVIND JEWELLERS 259 ITR 502 (GUJ.) 9. CIT VS. GANPAT RAM BISHNOI (H.C.) 296 ITR 292 (RAJ.) 10. CIT VS. GIRDHAR LAL 258 ITR 331 (RAJ.) 11. MALABAR INDUSTRIES CO. LTD. VS. CIT 243 ITR 83 (SC) 12. INVENTA CHEMICALS VS. ACIT (2010) 5 TAXMANN.COM 105 (HYD) (TRIBU.) 13. M/. KISHORESONS SURFACTANTS, HYDERABAD VS. ACIT, HYDERABAD ITA.834/HYD/2008 DATED 23.10.2009 14. CIT VS. ASHISH RAJPAL 320 ITR 674 (DEL.) 15. RANKA JEWELLERS VS. ACIT 328 ITR 148 (BOM.) 16. CIT VS. CONTIMETERS ELECTRICALS (P) LTD. 317 ITR 249 (DEL.) 17. RAJESH GOYAL & SONS VS. CIT 29 SOT 253 (AGRA) (TRIB.) 5. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT THE FACTS BROUGHT ON RECORD BEFORE THE CIT CLEARL Y ESTABLISH THAT THE ASSESSEE HAS NOT COMMENCED THE PRODUCTION AS STATED BY THE ASSESSEE AND MACHINERIE S ARE NOT INSTALLED. BEING SO, THE ORDER OF THE CIT IS TO BE CONFIRMED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US AND ALSO GONE TH ROUGH ALL THE CASE LAW CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP THE 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 REVISIONAL JUR ISDICTION U/S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESS ING OFFICER ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 7 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. 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. 7. AT PAGE 650 OF THE AFORESAID LAW LEXICON, TH E SCOPE 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 8 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. 8. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN W HETHER IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR. I N OUR VIEW, AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 OF HE ACT WOULD BE ERRONEOUS AND FALL IN THE AFORESAID CATEGORY OF 'ER RORS' IF IT IS, INTER ALIA, BASED ON AN INCORRECT ASSUMPTION OF FAC TS 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 OF THE CASE AND THEREBY CAUSE PREJUDICE TO THE INTE REST OF THE REVENUE. 9. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO RE MOVE THE 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 9 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. 10. IN OTHER WORDS, THE ASSESSING OFFICER WAS STAT UTORILY REQUIRED TO MAKE THE ASSESSMENT UNDER SECTION 143(3 ) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATE D BY SUB-SECTION (1) OF SECTION 143. BULK OF THE RETURNS FILED BY THE ASSESSEES ACROSS THE COUNTRY IS ACCEPTED BY THE DEP ARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTINY. ONLY A F EW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER IS TH EREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOUL D BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQU ER. 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 EXCESS OF WHAT IS LEGITIMATELY DUE FROM HIM, ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 10 AND ON THE OTHER HAND, HE HAS A DUTY TO PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THAT NO ONE DODGED THE REVEN UE AND ESCAPED WITHOUT PAYING THE LEGITIMATE TAX. THE ASSE SSING OFFICER IS NOT EXPECTED TO PUT BLINKERS ON HIS EYES AND MEC HANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS H IS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GEN UINENESS OF THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTANCE S 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 ASSESSING OFFICER BECOMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN MADE OR GENUINENESS OF THE CLAIM HAS N OT BEEN EXAMINED WHERE THE INQUIRIES OUGHT TO HAVE BEEN MAD E AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINE D AND NOT BECAUSE THERE IS ANYTHING WRONG WITH HIS ORDER IF A LL THE FACTS STATED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORR ECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS NOT ONLY WHEN IT CONTAINS SOME APPAREN T ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BU T ALSO WHEN IT IS A STEREO-TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIE S OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH ARE CALLED FOR I N THE CIRCUMSTANCES OF THE CASE. IN TAKING THE AFORESAID VIEW, WE ARE SUPPORTED BY THE DECISIONS OF THE HON'BLE SUPREME C OURT IN RAMPYARI DEVI SARAOGI V. CIT (67 ITR 84) (SC), SM T. TARA DEVI AGGARWAL V. CIT (88 ITR 323) (SC), AND MALABAR INDU STRIAL CO. LTD'S CASE ( 243 ITR 83) (SC). 11. IN MALABAR INDUSTRIAL CO. LTD., CASE (SUPRA ) THE HON'BLE COURT 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 11 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 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 , ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 12 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. 12. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE SUPREME COURT IN SIEMENS ENGG. & MFG. CO. LTD. V. UNION OF INDIA AIR 1976 SC 1785. IT IS SETTLED LAW THAT WHILE MAKING 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 REVISION BY THE COMMISSIONER UNDER SECTIONS 263 AND 264 OF THE ACT. THEREFORE, A REASONED ORDER ON A SUBSTANTI AL ISSUE IS LEGALLY NECESSARY. THE JUDGMENTS ON WHICH RELIANCE WAS PLACED 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 13 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. 13. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAID THAT 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 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. 14. WE SHALL NOW TURN TO THE FACTS OF THE CASE AS TO WHETHER THE CASE BEFORE US IS COVERED BY THE AFORES AID PRINCIPLES. A PERUSAL OF THE ASSESSMENT ORDER PASS ED BY ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 14 THE ASSESSING OFFICER DOES NOT SHOW ANY APPLICATION OF MIND ON HIS PART. HE SIMPLY ACCEPTED THE LOSS DECL ARED BY THE ASSESSEE. THIS IS THE CASE WHERE THE ASSESSI NG OFFICER MECHANICALLY ACCEPTED WHAT THE ASSESSEE WAN TED HIM TO ACCEPT WITHOUT ANY APPLICATION OF MIND OR PR OPER ENQUIRY. ACCORDING TO US, THE ASSESSMENT ORDER PAS SED FOR THE IMPUGNED ASSESSMENT YEAR IS CLEARLY ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF REVENUE AS IT WAS PASSED WITHOUT PROPER EXAMINATION OR ENQUIRY AND VERIFICATION OR OBJECTIVE CONSIDERATION OF THE CLA IM MADE BY THE ASSESSEE. IN OUR OPINION, THE ASSESSING OFF ICER OMITTED TO EXAMINE THE ISSUE IN QUESTION, AND THE ASSESSMENT ORDER IS CRYPTIC AND IT IS NOT A SPEAKIN G ORDER. THE ASSESSING OFFICER HAD NOT VERIFIED INSTA LLATION OF THE MACHINERY IN THE PREMISES OF THE ASSESSEE AN D CORRESPONDING CONSEQUENTIAL OPERATION OF THE MACHIN ERY. THE ASSESSING OFFICER SHOULD HAVE CALLED FOR THE DE TAILS REGARDING THE DELIVERY OF MACHINERY AT THE FACTORY PREMISES OF THE ASSESSEE AND THE RAW MATERIALS USE D FOR THE PURPOSE OF COMMERCIAL PRODUCTION. THE ASSESSIN G OFFICER HAS NOT BOTHERED TO VERIFY ANY PARTICULARS REGARDING PURCHASES AND INSTALLATION OF THE MACHINE RIES AND SPECIFIC RAW MATERIALS WERE USED FOR THE PURPOS E OF COMMERCIAL PRODUCTION. HE HAS NOT BOTHERED TO SEE WHETHER THE DATE ON WHICH MACHINERIES WERE DELIVERE D TO THE ASSESSEE AND INSTALLED AT THE PREMISES OF THE ASSESSEE. CONSIDERING ALL THESE FACTS, THE CIT GAV E DIRECTION TO THE ASSESSING OFFICER TO CARRY ON NECE SSARY ENQUIRY BEFORE ALLOWING THE CLAIM OF THE ASSESSEE AND HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT. ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 15 15. IT WAS, HOWEVER, CONTENDED BY THE LEARNED COUNSEL T HAT THE ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW IN ACCEPTING 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, THEREAFTER COULD H AVE ACCEPTED THE ASSESSEE'S CLAIM. EQUALLY, HE COULD HAVE ALSO R EJECTED 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 16 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. 16. WE ARE UNABLE TO ACCEPT THE SUBMISSION OF THE L EARNED 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 OF THE ACT. THE VIEW TAKEN BY THE ASSES SING OFFICER SHOULD NOT BE A MERE VIEW IN VACUUM BUT A JUDICIAL VIEW. IT IS WELL ESTABLISHED THAT THE ASSESSING OFFICER BEING A QUASI-JUDICIAL AUTHORITY CANNOT TAKE A VIEW, EITHER AGAINST OR IN FAVOUR OF THE ASSESSEE/REVENUE, WITHOUT MAKING PROPER INQUIRIES A ND WITHOUT PROPER EXAMINATION OF THE CLAIM MADE BY THE ASSESSE E IN THE LIGHT OF THE APPLICABLE LAW. AS ALREADY STATED EA RLIER, WE ARE NOT ABLE TO APPRECIATE ON WHAT MATERIAL WAS PLACED BEFO RE THE ASSESSING OFFICER AT THE ASSESSMENT STAGE TO TAKE S UCH A VIEW. THE ASSESSEE HAS ALSO NOT BEEN ABLE TO LEAD ENOUGH EVIDENCE TO SHOW TO US THAT ANY INQUIRY WAS MADE BY THE ASSESSI NG OFFICER IN THIS REGARD. THEREFORE, MERE ALLEGATION THAT THE ASSESSING OFFICER HAS TAKEN A VIEW IN THE MATTER WILL NOT PUT THE MATTER BEYOND THE PURVIEW OF SECTION 263 UNLESS THE VIEW S O TAKEN BY THE ASSESSING OFFICER IS A JUDICIAL VIEW CONSCIOUSL Y BASED UPON PROPER INQUIRIES AND APPRECIATION OF ALL THE RELEVA NT FACTUAL AND LEGAL ASPECTS OF THE CASE. THE JUDICIAL VIEW TAKEN BY THE ASSESSING OFFICER MAY PERHAPS PLACE THE MATTER OUTS IDE THE PURVIEW OF SECTION 263 UNLESS IT IS SHOWN THAT THE VIEW SO TAKEN ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 17 BY THE ASSESSING OFFICER CONTAINS SOME APPARENT ERR OR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. 17. THE LEARNED COUNSEL HAS STRONGLY RELIED UPON TH E 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. 18. WE HAVE CAREFULLY GONE THROUGH THE AFORESAID OBSERVATIONS. 'ADOPTING' ONE OF THE COURSES PERMISSIBLE IN LAW NE CESSARILY REQUIRES THE ASSESSING OFFICER TO CONSCIOUSLY ANALY SE 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 A SSESSING OFFICER CANNOT BE PRESUMED OR ATTRIBUTED TO HAVE 'A DOPTED' OR CHOSEN A COURSE PERMISSIBLE IN LAW WHEN HIS ORDER D OES NOT SPEAK IN THAT BEHALF. SIMILARLY, 'TAKING' ONE VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE ALSO NECESSARILY IMPORTS TH E 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 18 THE ASSESSING OFFICER THAT HE CAN COME TO A CONCLUS ION AS TO 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 19 ONE VIEW IN PREFERENCE TO THE OTHER DOES NOT ARISE. THE AFORESAID OBSERVATIONS OF THE HON'BLE SUPREME COURT DO NOT, I N OUR VIEW, HELP THE ASSESSEE; AND RATHER THEY ARE AGAINST THE ASSESSEE. 19. IN THE CASE OF PADMASUNDARA RAO V. STATE OF TAM IL NADU (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 ARE P OSSIBLE. 20. 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 ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 20 MIND BY THE ASSESSING OFFICER AND THUS BE AMENABLE TO REVISION UNDER SECTION 263. IN THE CASE BEFORE US, THE ASSE SSMENT 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. 21. IN OUR OPINION, THE ASSESSING OFFICER HAS BEEN ENTRUSTED 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, BEEN ENACTED TO EMPOWER THE COMMISSIONER TO CORRECT AN ERRONEOUS ORDER- 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 COUNTERPRODUCTIVE AS IT WOULD HAVE THE EFFECT OF PR OMOTING ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 21 ARBITRARINESS IN THE DECISIONS OF THE ASSESSING OFF ICERS AND THUS DESTROY THE VERY FABRIC OF SOUND TAX DISCIPLINE. IF ERRONEOUS ORDERS, WHICH ARE PREJUDICIAL TO THE INTEREST OF TH E REVENUE, ARE ALLOWED TO STAND, THE CONSEQUENCES WOULD BE DISASTR OUS IN THAT THE HONEST TAX PAYERS WOULD BE REQUIRED TO PAY MORE THAN OTHERS TO COMPENSATE FOR THE LOSS CAUSED BY SUCH ER RONEOUS ORDERS. FOR THIS REASON ALSO, WE ARE OF THE VIEW TH AT THE ORDERS PASSED ON AN INCORRECT ASSUMPTION OF FACTS OR INCOR RECT APPLICATION OF LAW OR WITHOUT APPLYING THE PRINCIPL ES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND OR WITHOUT M AKING REQUISITE INQUIRIES WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE WITHIN THE MEANING OF SECTION 263. BEING SO, IN OUR OPINION, THE CIT HAS NOT COMMITTED ANY ERROR IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AND THE ARGUME NTS OF THE LEARNED COUNSEL FOR THE ASSESSEE ARE SUPERFICIA L, ARTIFICIAL WHICH ARE DEVOID OF ANY MERIT. ACCORDING LY THE GROUNDS RAISED BY THE ASSESSEE ARE REJECTED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. PRONOUNCED IN OPEN COURT ON 13-12-2013. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 13 TH DECEMBER, 2013 JMR* COPY FORWARDED TO: 1. M/S. GMR SPINTEX (P) LTD. D.NO.308/B, GMT TOWERS , CINEMA ROAD, ADILABAD. 2. THE DCIT, CIR-1, NIZAMABAD. 3. THE CIT CONCERNED, HYDERABAD. 4. THE DR ITAT, HYDERABAD ITA NO. 779 OF 2013 M/S GMR SPINTEX (P) LTD., ADILABAD. ====================== 22