TaxTMI 
TaxTMI 
2010 (12) TMI 295
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....f tax to the extent of Rs. 7,33,55,613. The assessee had filed written submissions dated August 20, 2008 explaining that the gain arising on transfer of assets to wholly owned subsidiary being exempt u/s 47(iv) is not taxable u/s 115JB of the Act based on various judicial precedents. 2.1 The assessee also submitted that the precedents u/s 263 is invalid and void ab intio. The CIT considered the submissions and passed an order u/s 263 of the Act directing the Assessing Officer to compute the book profit of the assessee after considering the gain arising on transfer of assets to RIL which is exempt u/s 47(iv) as part of book profit. The assessee has preferred an appeal before the Tribunal against the order of CIT u/s 263. The Hon'ble Tribunal was of the opinion that in view of the different decisions of the Tribunals/Courts the matter should be referred to Special Bench. Accordingly, the Special Bench vide order dated 2.7.2010 in ITA No.673/H/2009 had held that the section 47(iv) of the Act has no application in the computation of book profits u/s 115JB. It was also held that computation of income under normal provisions of the Income-tax and the book profit are two parallel compu....
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....dents cited during the course of submission were in favour of the assessee. 2.8 According to him, in the absence of any negative judicial precedents in relation of aforementioned issued against the assessee proceedings initiated u/s 263 of the Act are invalid and void. 3. The learned departmental representative submitted that a perusal of the assessment order shows that the Assessing Officer had not even computed the income u/s 115JB, leave along undertake any discussion on the treatment to be accorded to profit on sale of assets to its subsidiary. It is also a fact that the Assessing Officer had not raised any issue regarding the liability of the assessee u/s 115JB at all in the course of the assessment proceedings, whether by way of notices/letters to the assessee or otherwise. She submitted that failure of the Assessing Officer to examine the issue amounts to an error prejudicial to revenue for which the CIT is empowered to invoke section 263. She placed reliance on the following judgements: (i) GEE Vee Enterprises v. Addl. CIT 99 ITR 375 (Del.). (ii) CIT v. Emery Stone Manufacturing Co. 213 ITR 843 (Raj.). (iii) Duggal & Co. v. CIT 220 ITR 456 (Del.). (iv) CIT....
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....w will suffice for the requirement of order being erroneous. (iii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law. (vi) If while making the assessment, the Assessing Officer examines the accounts, make enquiries, applies his mind to the facts and circumstances of the case and determines the income, the Commissioner, while exercising his power u/s 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Off....
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.... two views are plausible the CIT cannot exercise his power u/s 263 to defer with the Assessing Officer even if there has been a loss of revenue. On the other hand, when the Assessing Officer takes a view it is patently unsustainable, the CIT can exercise his powers where the loss of revenue results as a consequence of the view taken by the Assessing Officer. It is also clear that while passing the order u/s 263, the CIT has to be examined not only the assessment order but also the entire facts on the record. Further, when a regular assessment is made it has to be presumed that it has been passed upon proper application of mind. The ITO is not only the adjudicator but also an investigator. He cannot be remained passive in face of an order when it calls for further enquiry. He has to ascertain the truth of the facts stated by the assessee. It is incumbent on the part of the Assessing Officer to make further investigation of the facts stated by the assessee when circumstances would make such an enquiry is prudent. The word 'erroneous' in section 263 includes failure to make such an enquiry by the Assessing Officer. The assessment order becomes erroneous because such an enquiry is not ....