M/s. Mahalakshmi Liquor Promoters Pvt. Ltd., Hyderabad V. ACIT, Circle-16(2), Hyderabad

ITA 930/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66371 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K GNANAPRAKASH
• Assessee Lawyers: A V RAGHURAM
• Keywords: Principle of natural justice; Difference of opinion; Right to appeal; Change of opinion
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 930/HYD/2012 ASSESSMENT YEAR 2007-08 M/S. MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD., HYDERABAD PAN: AABCM3739N VS. THE CIT-IV HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI A.V. RAGHURAM RESPONDENT BY: SRI K. GNANA PRAKASH DATE OF HEARING: 24.09.2012 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 DATED 26.3.2012. 2. AT THE OUTSET, WE HAVE NOTICED THAT THERE WAS A DEL AY OF 7 DAYS IN FILING THIS APPEAL FOR WHICH THE ASSESSEE F ILED A PETITION EXPLAINING REASONS FOR DELAY AND WE ARE SATISFIED W ITH THE EXPLANATION GIVEN BY THE ASSESSEE FOR SUCH DELAY OF 7 DAYS. THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED FOR AD JUDICATION ON MERIT. 3. THE ASSESSEES GRIEVANCE IN THIS APPEAL IS WITH REG ARD TO INVOKING THE PROVISIONS OF SECTION 263 OF THE INCOM E-TAX ACT, 1961 BY THE CIT THOUGH THERE WAS CONSIDERATION OF E NTIRE ISSUE BY THE ASSESSING OFFICER DURING THE SCRUTINY PROCEE DINGS AND HAS TAKEN ONE OF THE VIEW POSSIBLE IN LAW. I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 2 4. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE INVE STED AN AMOUNT OF RS. 1,72,97,822 IN SHARES DURING THE YEAR . THIS SUM WAS BROUGHT INTO BUSINESS THROUGH LOANS AND MONEY R ECEIVED BACK ON SALE OF LAND EARLIER. ACCORDING TO THE CIT INSTEAD OF USING BORROWED FUNDS FOR THE PURPOSE OF BUSINESS, T HE ASSESSEE DIVERTED THE SAME FOR THE PURPOSE OF INVESTMENT IN SHARES AND IT HAS CLAIMED AN INTEREST OF RS. 14,92,478 TOWARDS IN TEREST ON LOAN. FURTHER THE ASSESSEE RECEIVED RS. 1.55 CRORE S AS ADVANCE FROM SRI S.V. SRIRAMULU TOWARDS THE FACILITATOR FOR THE PURCHASE OF LAND. THE ASSESSING OFFICER ON THIS ISSUE NOT E XAMINED WHETHER THERE WAS ANY TRANSFER IN ACCORDANCE WITH T HE PROVISIONS OF SECTION 2(47) OF THE ACT. BEING SO, THE CIT DIRECTED THE ASSESSING OFFICER TO EXAMINE THESE TWO ISSUES A FRESH BY INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 5. AT THE OUTSET, THE AR CHALLENGED THE VALIDITY OF AC TION OF THE CIT IN EXERCISING THE JURISDICTION U/S. 263 OF THE ACT. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAD INVESTED A SUM OF RS. 1,72,97,882/- IN THE EQUITY SHARES OF M/S. MALT SPIRITS INDIA PVT. LTD., AND M/S. ALTRA SPIRITS INDIA LTD. THE EN TIRE INVESTMENT WAS MADE OUT OF SHARE CAPITAL AND RESERVES OF THE C OMPANY. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD CONSIDERED THE APPLICABILITY OF PROVISIONS OF SECTI ON 14A AND IT IS ONLY A CHANGE OF OPINION BY THE CIT IN THE REVIS ION PROCEEDINGS. FURTHER, THE ASSESSEE HAD RECEIVED AN ADVANCE FOR SALE OF THE LAND TO THE EXTENT OF RS. 1.55 CRORES. THE INVESTMENTS IN M/S. ALTRA SPIRITS INDIA PVT. LTD., AND M/S. MAL TS SPIRITS INDIA PVT. LTD., WAS FOR THE PURPOSE OF BUSINESS AND NO I NTEREST BEARING FUNDS WERE UTILIZED FOR THE PURPOSE OF MAKI NG INVESTMENT IN EQUITY SHARES AND THERE WAS NO NEED F OR THE COMPANY AS IT HAD RESERVES IN THE FORM OF CAPITAL A ND RESERVES FOR A SUM OF RS. 2.51 CRORES. THE INVESTMENT IN M/S . MALTS SPIRITS I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 3 INDIA PVT. LTD., AND M/S. ALTRA SPIRITS INDIA PVT. LTD., WAS MADE FOR THE PURPOSE OF EXPANSION OF THE EXISTING BUSINE SS. THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN THE CAS E OF S.A. BUILDERS VS CIT (288 ITR 1) APPLIES TO THE FACTS OF THE CASE. HE FURTHER SUBMITTED THAT A SMALL PORTION OF INTEREST BEARING FUNDS COULD HAVE BEEN USED FOR THE PURPOSE OF INVESTMENT IN EQUITY SHARES IN THE AFORESAID COMPANIES. STILL, THE INVE STMENT CANNOT BE DISALLOWED AS THE INVESTMENT WAS MADE FOR THE PU RPOSE OF BUSINESS. 6. THE LEARNED DR SUBMITTED THAT T HE ASSESSEE HAD DEBITED A SUM OF RS. 14,92,478 AS FINANCE CHARGES TO THE P&L ACCOUNT. DURING THE PREVIOUS YEAR, THE ASSESSEE HAD INVESTED A SUM OF RS. 1,72,97,822 IN THE SHARE APPLICATION MONEY AND EQUI TY SHARES OF M/S. MALT SPIRITS INDIA PVT. LTD., AND M/S. ALTRA S PIRITS INDIA PVT. LTD. THE ISSUE IN DISPUTE IS WHETHER BORROWED FUNDS WERE USED FOR THE PURPOSE OF INVESTMENT IN EQUITY CAPITAL OF ASSOCIATED CONCERNS OR NOT. THE ASSESSEE HAS SHARE CAPITAL AND RESERVES INCLUDING SHARE APPLICATION MONEY FOR A SUM OF RS. 2.45 CRORES. DURING THE PREVIOUS YEAR, IT HAD ALSO TAKEN UNSECUR ED LOANS TO THE TUNE OF RS. 45 LAKHS. THE LEARNED AUTHORISED RE PRESENTATIVE HAS INCORRECTLY STATED THAT A SMALL PORTION OF INVE STMENT WHICH ACCORDING TO HIM COULD BE IN THE RANGE OF RS. 20 LA KHS WAS MADE OUT OF THE BORROWED FUNDS. THE ASSESSING OFFICER DI D NOT EXAMINE THE APPLICABILITY OF SECTION 14A OF THE IT ACT. THE AO HAS ALSO NOT EXAMINED WHETHER THE INTEREST OF RS. 1 4.92 LAKHS WAS INCURRED FOR THE PURPOSE OF BUSINESS. AS THE AS SESSING OFFICER DID NOT VERIFY THE SOURCES OF INVESTMENT IN EQUITY. SHARES, AND FROM THE SUBMISSIONS OF THE LEARNED AUT HORISED REPRESENTATIVE IT CAN BE SEEN THAT A PORTION OF INV ESTMENT IN EQUITY SHARES WAS MADE OUT OF THE BORROWED FUNDS. T HE LEARNED AUTHORISED REPRESENTATIVE CONTENDED THAT INVESTMENT IN EQUITY I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 4 CAPITAL WAS MADE FOR THE PURPOSE OF BUSINESS. CONSI DERING THE ARGUMENTS OF THE LEARNED AUTHORISED REPRESENTATIVE, THE CIT SET ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ON 31.12.2009 WITH A DIRECTION TO EXAMINE WHETHER BORR OWED FUNDS WERE DIVERTED FOR THE PURPOSE OF INVESTMENT IN EQUI TY SHARES OF THE ASSOCIATED CONCERNS AND EXAMINE WHETHER ANY COM MERCIAL EXPEDIENCY IS INVOLVED M THE INVESTMENT IN EQUITY S HARES. THE ASSESSING OFFICER WAS ALSO DIRECTED TO EXAMINE THE APPLICABILITY OF SECTION 14A OF THE IT ACT. THUS, THE CIT IS JUST IFIED IN SETTING ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3). 7. REGARDING THE SECOND ISSUE THE AR SUBMITTED THAT TH E ASSESSEE INTENDED TO PURCHASE 7 ACRES OF LAND AND G AVE A SUM OF RS. 1.4 CRORES DURING THE PREVIOUS YEAR AS ADVANCE. OUT OF THIS ADVANCE OF RS. 1.4 CRORES, A SUM OF RS. 70 LAKHS WA S INTENDED TO BE TOWARDS THE COST OF LAND AND ANOTHER SUM OF RS. 70 LAKHS WAS MEANT FOR THE DEVELOPMENT OF LAND. THE ADVANCE WAS GIVEN TO SRI S.V. SRIRAMULU WHO WAS THE FACILITATOR FOR THE PURC HASE OF LAND AND THE FACILITATOR COULD NOT PURCHASE THE LAND TO THE EXTENT THE ASSESSEE DESIRED. HE COULD PURCHASE THE LAND ON BEH ALF OF THE ASSESSEE COMPANY TO THE EXTENT OF 5.34 ACRES FOR A SUM OF RS. 59 LAKHS. SRI S.V. SRIRAMULU WAS ENTRUSTED WITH THE TA SK OF RESELLING THE LAND WHICH WAS ACQUIRED THROUGH HIM DURING THE PREVIOUS YEAR AND IN RESPONSE THERETO, HE GAVE AN ADVANCE OF RS. 1.55 CRORES. THIS FACT WAS CONFIRMED BY HIM DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. NO DEVELOPMENT EXPENDITURE WAS INCURRED BY HIM AND THE ENTIRE ADVANCE GIVEN BY HIM OUGHT TO HAVE BEEN SHOWN IN THE BALANCE SHEET, BUT A PORTION OF IT WAS ACCOUNTED FOR IN THE LAND ACCOUNT. IT HAS NO IMPACT ON THE PROFIT. SRI S.V. SRIRAMULU DID NOT TRANSFER THE LAND ON BEH ALF OF THE ASSESSEE DURING THE PREVIOUS YEAR AND THE LAND WAS SOLD ON I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 5 19.08.10 AND THE CAPITAL GAIN ARISES IN THE ASST. Y EAR 2011-12. THE COMPANY WILL ACCOUNT FOR THE CAPITAL GAINS IN T HE YEAR OF TRANSFER. HE FURTHER SUBMITTED THAT THE LAND VALUE WAS PROPERLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THERE WAS NO CAPITAL GAINS WHICH ACCRUED TO THE ASSESSEE DURING THE PREV IOUS YEAR. 8. THE DR SUBMITTED THAT THE PLEA OF THE LEARNED AR TH AT THE LAND ACQUIRED IN THE PREVIOUS YEAR WAS RESOLD ON 19 .08.2010 FOR A SUM OF RS. 59.85 LAKHS. HOWEVER, THE ASSESSEE REC EIVED A SUM OF RS. 1.55 CRORES AS ADVANCE FROM SHRI S.V. SRIRAM ULU, THE FACILITATOR. THE ASSESSING OFFICER DID NOT EXAMINE WHETHER THERE WAS ANY TRANSFER IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2(47) OF THE IT ACT. IT IS STRANGE TO KNOW THAT THE ADVANCE WAS GIVEN IN THE PREVIOUS YEAR 2005-06 AND THE CONVEYAN CE DEED WAS EXECUTED IN THE PREVIOUS YEAR 2010-11. THE ASSESSIN G OFFICER DID NOT VERIFY WHETHER THERE WAS ANY TRANSFER IN TE RMS OF SECTION 2(47) OF THE IT ACT. 9. 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 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 I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 6 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 TR UE OR THAT WHAT IS TRUE IS FALSE. AT PAGE 649/650 IN P. RAMANATHA AIYERS LAW LEXICO N 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 TH E PROCESS OR PROCEEDING TO JUDGEMENT OR IN THE EXECUT ION UPON THE SAME, IN A COURT OF RECORD; WHICH IN THE C IVIL 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 RESPE CT THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION. 10. AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE SCOPE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAI NED THUS: AN ERROR IS ANY DEVIATION FROM THE STANDARD OR COU RSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INT ENTIONAL. A MISTAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSI ON OF MISCONCEPTION OF THE NATURE OF A CASE. AN ERROR MA Y BE FROM THE ABSENCE OF KNOWLEDGE, A MISTAKE IS FROM INSUFFI CIENT OR FALSE 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 RECTIFIE D, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO CAN COUNTERACT. STRICTLY SPEAKING, HALLUCINATION IS AN ILLUSION OF THE PERCEPTION, A PHANTASM OF THE IMAGINATION. THE ONE COMES OF DISORDERED VISION, THE 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 UNACCOUNTABL E ERROR IN I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 7 JUDGEMENT OR FACT, ESPECIALLY IN ONE REMARKABLE OTH ERWISE FOR ACCURATE INFORMATION AND RIGHT DECISION. IT IS EXC EPTIONAL ERROR OR MISTAKE IN THOSE OTHERWISE NOT LIKELY TO B E DECEIVED. 11. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN WHETHE R IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR . IN OUR VIEW, AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 WOU LD 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 T HE INTEREST OF THE REVENUE. 12. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMOVE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE 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 EFFECTIVELY. IN OT HER WORDS, HE I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 8 MUST CARRY OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOUSLY ON T HE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCED B Y THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS U NDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESERVES TO BE NOTED THAT THE PRESENT ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE INCOME-TAX ACT. IN OTHER WORDS, THE ASSESSING OFFIC ER WAS STATUTORILY REQUIRED TO MAKE THE ASSESSMENT UNDER S ECTION 143(3) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER A S 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. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSI NG OFFICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING O R REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSME NTS. HE SHOULD BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. THE ASSESSING OFFICER HAS GOT TO PROTECT , ON ONE HAND, THE INTEREST OF THE ASSESSEE IN THE SENSE THA T HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF WHAT IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND, HE HAS A DUTY TO PROTECT THE INTERESTS OF THE REVENUE AND TO SEE THAT NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE T AX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS O N HIS EYES AND MECHANICALLY ACCEPT WHAT THE 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 T HE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE IN QUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJECTING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESSING OFFICER BE COMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHER E THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUINENE SS OF THE I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 9 CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE T HERE 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 I S 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 (88 ITR 323) (SC), AND MALABAR INDUSTRIAL CO. LTD'S CASE ( 243 ITR 83) (SC). 13. IN MALABAR INDUSTRIAL CO. LTD. CASE 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 ATTR ACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL TH E ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NA TURAL JUSTICE OR WITHOUT 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 EXC HEQUER. 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 THE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISDICTION OF TH E COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DECISION-MAKING CAUSING PREJUDICE TO EITHER PARTY I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 10 CANNOT THEREFORE BE ALLOWED TO STAND AND STARE AT T HE LEGAL SYSTEM. IT IS DIFFICULT TO COUNTENANCE SUCH ARBITRARINESS IN THE ACTIONS OF THE ASSESSING OFFIC ER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PRO TECT THE INTEREST OF BOTH THE PARTIES, NAMELY, THE ASSES SEE AS WELL AS THE STATE. IF HE FAILS TO DISCHARGE HIS DUT IES FAIRLY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDE RS CAN ALWAYS BE CORRECTED EITHER AT THE INSTANCE OF T HE ASSESSEE, IF THE ASSESSEE IS PREJUDICED OR AT THE I NSTANCE OF THE COMMISSIONER, IF THE REVENUE IS PREJUDICED. WH ILE MAKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO P LAY. HE IS THE INVESTIGATOR, PROSECUTOR AS WELL AS ADJUD ICATOR. AS AN ADJUDICATOR HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TAXPAYER AND HE HAS TO BE FAIR TO B OTH. HIS DUTY TO ACT FAIRLY REQUIRES THAT WHEN HE ENQUIR ES INTO A SUBSTANTIAL MATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDING ON THE RELEVANT ISSUE GIVING, HOWSOEVER B RIEFLY, HIS REASONS THEREFOR. IN S.N. MUKHERJEE V. UNION OF INDIA AIR 1990 SC 1984, IT HAS BEEN OBSERVED BY THE HON'B LE SUPREME COURT AS FOLLOWS: REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUD ICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE O F ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHOR ITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WH ICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT A N ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR IT S DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSIDE RATIONS SHOW THAT THE RECORDING OF REASONS BY AN ADMINISTRA TIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXC LUDES 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 SHOULD BE AS ELABORATE AS IN THE DECISION OF A COURT OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PARTICULA R FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE TH AT THE AUTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDING OF REASONS IS G REATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRM S SUCH I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 11 AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APP ELLATE OR REVISIONAL AUTHORITY AGREES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. 14. 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 CAPACITY . AN ASSESSMENT ORDER IS AMENABLE TO APPEAL BY THE ASSES SEE AND TO 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. I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 12 15. 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 IN CORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW . IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYI NG THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLIC ATION 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. 16. 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 OFFICER DOES NOT SHOW ANY APPLICATION OF MIND ON HIS PART. HE SIMPLY ACCEPTED THE INCOME DECLARED BY THE ASSESSEE. THIS IS A CAS E WHERE THE ASSESSING OFFICER MECHANICALLY ACCEPTED WHAT THE AS SESSEE WANTED HIM TO ACCEPT WITHOUT ANY APPLICATION OF MIN D OR ENQUIRY. THE EVIDENCE AVAILABLE ON RECORD IS NOT E NOUGH TO HOLD THAT THE RETURN OF THE ASSESSEE WAS OBJECTIVELY EXA MINED 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 ARBITRARY MANNER. HIS ORDER IS A COMPLETELY NON-SPE AKING ORDER. I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 13 IN OUR VIEW, IT WAS A FIT CASE FOR THE LEARNED COMM ISSIONER TO EXERCISE HIS REVISIONAL JURISDICTION UNDER SECTION 263 WHICH HE RIGHTLY EXERCISED BY CANCELLING THE ASSESSMENT ORDE R AND DIRECTING THE ASSESSING OFFICER TO PASS A FRESH ORD ER CONSIDERING THE ISSUES RAISED BY THE CIT. IN OUR VI EW, THE ASSESSEE SHOULD HAVE NO GRIEVANCE IN THE ACTION OF LEARNED COMMISSIONER IN EXERCISING THE JURISDICTION U/S. 26 3 OF THE IT ACT. 17. 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 AND HENCE, THE COMMISSIONER WAS NOT JUSTIFIED IN ASSUMING THE REVISIONAL JURISDICTION U NDER SECTION 263. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE AFORESAID SUBMISSIONS. AS ALREADY STATED EARLIER, A N ORDER BECOMES ERRONEOUS BECAUSE INQUIRIES, WHICH OUGHT TO HAVE BEEN MADE ON THE FACTS OF THE CASE, WERE NOT MADE AND NO T BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE F ACTS STATED OR THE CLAIMS MADE IN THE RETURN ARE ASSUMED TO BE COR RECT. THUS, IT IS MERE FAILURE ON THE PART OF THE ASSESSING OFFICE R TO MAKE THE NECESSARY INQUIRIES OR TO EXAMINE THE CLAIM MADE BY THE ASSESSEE IN ACCORDANCE WITH LAW, WHICH RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. NOTHING MORE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE. ONE WOULD NOT KNOW AS TO WHAT WOULD HAVE HAPPENED IF TH E ASSESSING OFFICER HAD MADE THE REQUISITE INQUIRIES OR EXAMINED THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. H E COULD HAVE ACCEPTED THE ASSESSEE'S CLAIM. EQUALLY, HE COULD HA VE ALSO REJECTED THE ASSESSEE'S CLAIM DEPENDING UPON THE RE SULTS OF HIS ENQUIRY OR EXAMINATION INTO THE CLAIM OF THE ASSESS EE. THUS, THE FORMATION OF ANY VIEW BY THE ASSESSING OFFICER WOUL D NECESSARILY DEPEND UPON THE RESULTS OF HIS INQUIRY AND I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 14 CONSCIOUS, AND NOT PASSIVE, EXAMINATION INTO THE CL AIM OF THE ASSESSEE. IF THE ASSESSING OFFICER PASSES AN ORDER MECHANICALLY WITHOUT MAKING THE REQUISITE INQUIRIES OR EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW, SUCH AN ORDER WILL CLEARLY BE ERRONEOUS IN LAW AS IT WOULD NOT BE BASED ON OBJ ECTIVE CONSIDERATION OF THE RELEVANT MATERIALS. IT IS THER EFORE, THE MERE FAILURE ON THE PART OF THE ASSESSING OFFICER IN NOT MAKING THE INQUIRIES OR NOT EXAMINING THE CLAIM OF THE ASSESSE E IN ACCORDANCE WITH LAW THAT PER SE RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. NOTHING ELSE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE T O SHOW THAT THE ORDER SOUGHT TO BE REVISED IS ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. 18. WE ARE UNABLE TO ACCEPT THE SUBMISSION OF THE LEARNED 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 REVISI ONAL 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 I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 15 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 BY THE ASSESSING OFFICER CONTAINS SOME APPARENT ERR OR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. 19. 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 COMMISSIONER 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 V IEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OF FICER IS UNSUSTAINABLE IN LAW. 20. 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 H AVE 'ADOPTED' OR CHOSEN ONE OF THE COURSES PERMISSIBLE IN LAW. TH E ASSESSING 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 I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 16 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 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 I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 17 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 OBSERVATIONS OF THE HON'BLE SUPREME COURT DO NOT, I N OUR VIEW, HELP THE ASSESSEE; AND RATHER THEY ARE AGAINST THE ASSESSEE. 21. IN THE CASE OF PADMASUNDARA RAO V. STATE OF TAMIL 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, S AID LORD MORRIN IN HARRINGTON V. BRITISH RAILWAYS BOARD [197 2] 2 WLR 537 (HL). CIRCUMSTANTIAL FLEXIBILITY, ONE ADDIT IONAL OR DIFFERENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWE EN CONCLUSIONS IN TWO CASES....' THEREFORE, THE OBSERV ATIONS OF THE HON'BLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD 'S CASE (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE LE ARNED COUNSEL CANNOT BE READ IN ISOLATION. THE JUDGMENT D ESERVES TO BE READ IN ITS ENTIRETY TO CULL OUT THE LAW LAID DO WN BY THE HON'BLE SUPREME COURT. IF SO READ, IT IS QUITE EVID ENT THAT THE ORDERS PASSED ON AN INCORRECT ASSUMPTION OF FACTS O R INCORRECT APPLICATION OF LAW OR WITHOUT APPLYING THE PRINCIPL ES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS AND PREJUD ICIAL 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 'ADOP TED', IN SUCH AN ORDER, A COURSE PERMISSIBLE IN LAW OR 'TAKE N' A VIEW WHERE TWO OR MORE VIEWS ARE POSSIBLE. 22. 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 I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 18 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 APPLIC ATION OF MIND BY THE ASSESSING OFFICER AND THUS BE AMENABLE TO RE VISION UNDER SECTION 263. IN THIS CASE BEFORE US, THE ASSESSMEN T ORDER PASSED BY THE ASSESSING OFFICER LACKS JUDICIAL STRENGTH TO STAND. IT IS NOT A CASE WHERE THE ORDER IS SHORT BUT IS NOT SUPPORTE D BY JUDICIAL STRENGTH. IT IS IN THIS VIEW OF THE MATTER THAT WE FEEL THAT THE LEARNED COMMISSIONER HAS CORRECTLY EXERCISED HIS RE VISIONAL JURISDICTION UNDER SECTION 263. 23. 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 BEEN E NACTED 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 I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 19 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 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. 24. ON MERIT ALSO, WE HAVE GONE THROUGH THE ARGUMENT OF THE ASSESSEE'S COUNSEL. AS WE HAVE HELD IN EARLIER PAR A, THERE WAS NO ENQUIRY BY THE ASSESSING OFFICER ON THE ISSUES RAIS ED BY THE CIT IN HIS ORDER U/S. 263 OF THE ACT. THE LACK OF ENQU IRY OR INADEQUATE ENQUIRY BY THE ASSESSING OFFICER COULD B E VERY MUCH REASON FOR ASSUMING JURISDICTION U/S. 263 OF THE AC T. IN THE PRESENT CASE, AS THERE IS NO ENQUIRY BY THE ASSESSI NG OFFICER WHILE PASSING ASSESSMENT ORDER U/S. 143(3) OF THE A CT, THE CIT ISSUED A SHOW-CAUSE-NOTICE AND PASSED ORDER U/S. 26 3 OF THE ACT TO MAKE AN ENQUIRY ON THE ISSUES RAISED BY HIM IN H IS ORDER. THE ASSESSING OFFICER HAS IGNORED THE ENTIRE ISSUE WHILE MAKING I.T.A. NO. 930/HYD/2012 M/S MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD.. ================== 20 THE ASSESSMENT. FOR NON-CONSIDERATION OF RELEVANT MATERIALS WHILE MAKING THE ASSESSMENT, THE ASSESSMENT ORDER H AS RIGHTLY BEEN SET ASIDE TO CONSIDER THE TWO ISSUES RAISED BY THE CIT IN HIS ORDER. THEREFORE, THE FINDING OF THE CIT CANNOT BE SAID A PERVERSE FINDING AND THE FINDING GIVEN BY THE CIT C ANNOT CAUSE ANY PREJUDICE TO THE ASSESSING OFFICER AND THE SAME IS CONFIRMED. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCTOBER, 2012. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH OCTOBER, 2012 TPRAO COPY FORWARDED TO: 1. M/S. MAHALAKSHMI LIQUOR PROMOTERS PVT. LTD., C/ O. M/S. K. VASANTKUMAR, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD-1. 2. THE CIT-IV, HYDERABAD. 3. THE ACIT, CIRCLE-16(2), HYDERABAD 4. THE ADDL. CIT, RANGE-16, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD