TaxTMI 
TaxTMI 
2011 (3) TMI 1035
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....tituting his opinion in place of the Assessing Officer's opinion who had passed the assessment order by considering the decision of the Calcutta and Bombay High Court on the issue of notional interest; 4. Without prejudice to the above, the leaned CIT(A) erred in directing the Assessing Officer to recompute the income for the year by making addition on account of notional interest, while under section 263 should have set aside the assessment 5. The learned CIT erred in directing the Assessing Officer to levy penalty under section 271(1)(c) in his order of revision under section 263" 3. The assessee has challenged the revision order passed under section 263 mainly on two grounds i.e., (i) that the CIT has substituted his opinion in place of the opinion of the Assessing Officer and therefore the CIT(A) has no jurisdiction under section 263(ii) the addition on account of notational interest on the interest free deposits under section 23(1)(a) of the Act is against the law as settled by the various decisions of this Tribunal as well as the Hon'ble High Courts. As regards the validity of the jurisdiction under section 263, the ld. AR of the....
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....t of notional interest on interest free deposits received by the assessee. Thus, the Assessing Officer has not applied his mind on the issue and therefore, there is no question of any view taken by the Assessing Officer on the issue. The learned DR has submitted that when the Assessing Officer has not examined the issue and has not applied the mind on the issue while framing the assessment then the assessment order is erroneous so far as the prejudicial to the interest of the revenue. He has relied upon the decision of this Tribunal in the case of Arvee International v. Addl. CIT [2006] 101 ITD 495 (Mum.). The learned DR has further contended that even in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1/123 Taxman 433 Hon'ble Full Bench of the Hon'ble Delhi High Court has observed that if there is a mistake or error committed by the Assessing Officer in the assessment order the remedy is not under section 147 but the same is only under section 263. He has also relied upon the decision in the case of ITO v. Baker Technical Services (P.) Ltd. [2009] 126 TTJ (Mum.) 455/[2010] 125 ITD 1 (TM). 5. In rebuttal, the learned AR has submitted that the Assessing Officer raised ....
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....any view while framing the assessment then the question of substitution of the view by the CIT does not arise. In the case of Arvee International (supra), this Tribunal has discussed the issue of exercising the jurisdiction under section 263 in detailed in paragraphs 9 to 16 as under : "9. Let us now examine the legality of the order passed by the learned Commissioner with reference to the statutory conditions laid down in section 263. The scheme of the Income-tax Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Assessing Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. As held in Malabar Industrial Co. Ltd.'s case (supra), the Commissioner can exercise revisional jurisdiction under section 263 if he is satisfied that the order of the Assessing Officer sought to be revised is (z) erroneous; and also (u) prejudicial to the interests of the revenue. 10. The word "erroneous" has not been defined in the Income-tax Act. It has however been defined at page 562 in Black's Law Dictionary (Seventh Ed....
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....it should be seen whether it suffers from any of the aforesaid forms of error. In our view, an order sought to be revised under section 263 would be erroneous and fall in the aforesaid category of "errors" if it is, inter alia, based on an incorrect assumption of facts or an incorrect application of law or non-application of mind to something which was obvious and required application of mind or based on no or insufficient materials so as to affect the merits of the case and thereby cause prejudice to the interest of the revenue. 14. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo motu proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima 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 should have made further inquiries before accepting the claim made by the....
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.... have been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo typed order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. In taking the aforesaid view, we are supported by the decisions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT, Smt. Tara Devi Aggarwal v. CIT and Malabar Industrial Co. Ltd.'s case (supra). In Malabar Industrial Co. Ltd.'s 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 or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the ....
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....hich have also weighed with this 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 said purpose would apply equally to all decisions and its application cannot be confined to decisions which are 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 particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage....
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....orders passed without applying the principles of natural justice or without application of mind. (iii) The order passed by the Assessing Officer is a stereo typed 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." 7. In view of the above discussion an following the decision of this Tribunal (supra), we hold that there is no illegality so far as exercising and jurisdiction the provisions of section 263 of the Act by the CIT. 8. Grounds of appeal No. 2 on merits. 9. We have heard both the parties. The main contention of the learned AR is that in view of the various decision, the notional interest cannot be added while framing the fair rental value under section 23(1)(a). We have considered the rival contention and relevant record. As per the provisions of section 23(1), the ALV has to be determined by taking into account the sum for which the property might reasonably be expected to let from year to year under section 23(1)(a) and then if the property is let out then the Assessing Officer has to first tak....