TaxTMI 
TaxTMI 
2006 (12) TMI 257
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....olding that the appellant's claim for a deduction of Rs. 50,00,000 under section 36(2)(i) read with section 36(1)(vii) of the Income-tax Act, 1961 ('the Act') was not correct. 5.The CIT erred in holding that since the appellant has shown income from interest under the head 'Income from other source' he was not entitled to a deduction of Rs. 50,00,000 on amount of moneys lost by him in the course of his activity of lending money by way of bill discounting. 6.The CIT failed to appreciate that: (i)the appellant was, in fact, engaged in the business of money lending, inter alia by way of bill discounting and that the mere fact that the appellant had shown his interest income under the head 'Income from other sources' did not alter the correct position in law and fact, that such income was, in fact 'income from business' and that the appellant was in fact, carrying on the business of money lending and, as such, was entitled to the deduction of Rs. 50,00,000 claimed by him under the provision of section 36(1) of the Act read with section 36(2)(i) of the Act; (ii)strictly without prejudice to (i) above, even if the appellant's interest income was regarded as assessable under s....
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....ing amounting to Rs. 59,14,771. The assessee had claimed bad debts of Rs. 50,00,000 against the said income. The return of income was accepted by the Assessing Officer vide order under section 143(3) of the Income-tax Act. 6. The CIT noted that the income from other sources was computed as per the provisions of sections 56 to 58 of the Income-tax Act and the claim of bad debts is not covered under the provisions of section 57(iii) of the Act. It was further noted by the CIT that during the course of assessment proceedings, the claim of bad debts was made by the assessee under section 36(2)(i) of the Income-tax Act and such claim is not allowable as the assessee had shown income of bill discounting under the head 'Income from other sources'. Show-cause notice under section 263 of the Income-tax Act dated 14-2-2002 was issued to the assessee. 7. Before the CIT, ld. AR for the assessee submitted that the business of financing and bill discounting carried on by the assessee was a sophisticated form of money lending in which against security of bills monies were lent with interest discounted either at the front or at the end. The interest component so earned by the assessee has be....
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....ssessee had declared the interest from bill discounting and its claim of bad debt under the head 'Income from other sources' under the sub-head 'Interest'. The ld. AR further drew our attention to the explanation filed before the Assessing Officer during the course of assessment wherein it had been categorically mentioned that the assessee 'carries out the business of finance and bill discounting'. Further the assessee in the said letter had given details of its claim of bad debts of Rs. 50,00,000 which was claimed as per the provisions of section 36(2)(i) of the Act. The assessee has enclosed the said explanation at pages 5 and 6 of the paper book along with the communication with the parties in respect of its claim of bad debts at pages 7 to 34 of the paper book. Reference was further made to letter dated 16-12-1999 filed before the Assessing Officer wherein the claim of carrying on the business of financing and bill discounting and deduction on account of bad debts as per the provisions of section 36(2)(i) of the Act was reiterated, as there was a successor to the Assessing Officer and the claim was re-explained to successor in office. Reference was also made to a series of judi....
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....cer had completed the assess- ment after considering the legal implications of the claims made by the assessee. 11. The ld. DR for the revenue submitted that the Assessing Officer has accepted the income that is the income from other sources as the return of income filed by the assessee had been accepted. The ld. DR further pointed out that the assessment completed by the Assessing Officer is both erroneous and prejudicial to the interest of the justice as the assessment order passed by the Assessing Officer is cryptic and without application of mind. The ld. AR in rejoinder stated that the Assessing Officer has not accepted the return of income but the returned income has been accepted. It was further stated by the ld. AR that the CIT cannot replace his view to that of the Assessing Officer as held by the Hon'ble Bombay High Court in CIT v. Gabrial India Ltd. [1993] 203 ITR 108. Reliance was also placed on the decision of the Hon'ble Bombay High Court in Dattatraya Gopal Bhotte v. CIT [1984] 150 ITR 460 for the proposition that in case the assessee makes a mistake in its return of income, then it is the duty of the Assessing Officer to correct the mistake made by the asse....
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....in its communication before the Assessing Officer had claimed to carry on the business of financing and bill discounting against which the claim of bad debt was made under section 36(2)(i) of the Act. The Assessing Officer has in the body of his order accepted that the assessee carries on business of financing and bill discounting and thereafter accepted the returned income. It is an established principle of a law that it is the duty of the Assessing Officer to correctly assess the income declared by the assessee which in its umbrella include the assessability of income under the correct head of income. Mere declaration of income under one head of income by the assessee does not restrict the power of the Assessing Officer to correctly assess the same under correct head of income other than the one declared by the assessee. In the facts of the present case, the issue of nature of business carried on by the assessee and the claim of deduction of Rs. 50,00,000 as bad debts against income of Rs. 59,14,771 has been considered by way of submissions of the assessee and also supporting documents furnished during the course of assessment. Merely because the order of the Assessing Officer is....
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.... accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself would not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, that the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interests of the revenue, then the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement must be fulfilled. There must be some prima facie material on record to show that tax which 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. When exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to s....