TaxTMI 
TaxTMI 
2015 (4) TMI 902
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....ts and expenses, ignoring the fact that AO made detailed inquiries during the course of the assessment proceedings and only after due satisfaction to the enquiries, allowed various expenses while computing the income from business or profession. 3. Without prejudice to the above, in an unlikely situation of upholding the disallowance of expenses on the alleged ground that the expenditure is not incurred for the purpose of business, as there is no business activity but only investment activity during the year under consideration, the appellant humbly submits that expenditure should be allowed to the extent they are very basic and necessary expenditure to maintain corporate form/structure of the appellant." 2. The brief facts of the case are that the assessee filed return declaring total loss at Rs. 1,80,88,960/-. The assessment u/s 143(3) was passed on 30.9.2011 at a loss of Rs. 1,78,57,950/-. On a proposal being received from the assessing officer the CIT called for the record and issued show cause notice to the assessee in accordance with the provisions of section 263 which read as under :- "2. In this case, in the AY 2009-10, you have earned Rs. 23,10,010/- as interest on fixe....
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....n operation and after elaborate discussion in the assessment order, the assessing officer allowed the said expenditure which appears to be one of the possible view in law. Thus the assessment was completed after considering all facts and information. This is not a case of lack of inquiry. There is no requirement to pass a detail assessment order. The CIT cannot re-examine and substitute his judgement in place of assessing officer. 5. The CIT after considering the submission of the assessee set aside the assessment order passed u/s 143(3) r.w. order u/s 154 and directed the assessing officer to pass order after giving the assessee reasonable opportunity of being heard by holding as under :- "10. After considering overall facts of the case, I am of the opinion that the AO has not properly examined the issue that when there is no business activity whether the expenses are legally allowable as deduction in the assessment ? The interest income has been assessed by the AO as income from other sources. That being so, there is no business income and as a matter of principle, the expenses are then not allowable. Therefore, prima-facie, the order u/s 143(3) is found to be erroneous and pre....
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.... shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the pro....
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....ing Officer after making the enquiries and examining the records, taken one of the possible views, it cannot be said that the order passed by the Assessing Officer is erroneous. 9. It is also apparently clear that the power of the CIT are three fold. One, prior to the initiation of the proceedings u/s 263. Second, at the time of initiation of the proceedings. Third, the final outcome after the initiation of the proceeding. Power of the CIT prior to the initiation includes 'call for and examine the records' of any proceedings under this Act. The word 'record' is very important, because on the basis of the record of the proceedings the CIT will form an opinion that the order passed is erroneous as well as prejudicial to the interest of the Revenue and once he forms an opinion, he has to give an opportunity to the assessee of being heard and after making or causing the enquiry he can pass an order. Moreover the inquiry is conducted once the CIT forms an opinion on the basis of record that the order passed is erroneous and prejudicial to the interest of Revenue. The word 'record' has been defined under Explanation (b) of Section 263 to mean that the 'record' shall include and shall be....
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....s. It is not a case where the expenses allowed by the assessing officer were attributable to the income arises from the investment. Jurisdiction u/s 263 has been exercised on the basis that all expenses charged to the profit and loss account is attributable to the investment in shares. Once the assessing officer has examined the nature of all the expenses and given the finding that the expenses relates to the business. It cannot be said that the order passed by the assessing officer is erroneous. It is not a case of lack of inquiry and also not a case where the assessing officer has taken a view which is unsustainable in law. Even we noted in the order passed u/s 263, the CIT has not given specific finding that the order passed is erroneous but stated that the order passed is prima facie found to be erroneous. Even we may mention that where there are two views possible as to the interpretation of any transaction and the Assessing Officer has taken one of the view favourable to the assessee, the order cannot be said to be erroneous unless the view taken by the Assessing Officer is unsustainable in law. Same view has been taken by Hon'ble Supreme Court in case of Malabar Industri....