TaxTMI 
TaxTMI 
2015 (5) TMI 359
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....stified in holding that cancellation of assessment by the Commissioner and ordering fresh enquiry is beyond the jurisdiction of the Commissioner U/s.263? (d) Whether the Appellate Tribunal is justified in entering into merits of the case and recording findings on the factual matrix in the absence of placement of any material either before assessing authority or revisional authority much less findings were recorded by them? Though the above questions of law were framed, all the questions centered round the power and jurisdiction of the revisional authority under Section 263 of the Income Tax Act (for short, the Act), and hence in the facts and circumstances of the case, we reframe the substantial question of law as follows for our consideration: Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal, Visakhapatnam, is justified in holding that the Commissioner of Income Tax did not exercise his jurisdiction under Section 263 of the Income Tax Act properly? The assessee is a Proprietor of Sri Sai Srinivasa Modern Rice Mill, Srikakulam, and he completed the construction of rice mill by March 1999. He filed return of income for the asse....
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....g stock of 2nd gunnies; iv) There was apparent discrepancy between the raw material cost of each unit and the sale price of finished rice amounting to Rs. 19/- per unit of finished rice sold; v) The correctness of the credit liabilities of 102 parties with their full addresses and the year wise breakup of the past years was not verified by the Assessing Officer; vi) The deduction of interest liability towards other concerns was not properly examined, and vii) The rebate under Section 88 of the Act should not have been allowed for NSC deposit of Rs. 11,000/-. A show cause notice was issued to the assessee requiring him to submit clarification or explanation to the above issues and also to show cause why the assessment made under Section 143(3) of the Act dated 15.03.2000 should not be set aside. The assessee appeared through his representative and submitted a written explanation to the show cause notice. After considering the explanation, the Commissioner considered it desirable to restore the entire assessment order for making fresh assessment de novo and in the concluding paragraph of his order he observed as follows: In the totality of the facts and circumstance....
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....Officer, the Commissioner of Income Tax is not supposed to raise the issue again and step into the shoes of the Assessing Officer like an appellate authority. After holding so, the Tribunal concluded as follows: After all his powers as per the provisions of Section 263 are supervisory in nature and not like that of an appellate authority. It will not be out of place to mention here that the legislature while compiling the statute has assigned only to the first appellate authority the powers of an AO. By virtue of that power only the first appellate authority is supposed to step into the shoes of an AO and even can enhance the assessment. Even the Tribunal has not been assigned with that power of enhancement. Therefore, in all fitness of things and in all fairness the legislatures intention has to be properly understood and the supervisory power of the CIT should not be misused simply because the order passed by the AO was a cryptic one as has been in the impugned case. Hence in our considered view when the issue raised by the CIT in the show cause notice in pursuance to invoking of Section 263 in no way are fatal to the interest of the Revenue when the assessee has already discl....
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....ancial 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, National Tax Tribunal, the High Court or the Supreme Court On a reading of the above provision it is clear that the only precondition for revising the order of Assessing Officer is that the order of the Assessing Officer should be erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner pointed out the errors in the order of the Assessing Officer and a perusal of the errors would clearly disclose the prejudicial interest of the revenue. The vesting of such power in the hands of the Commissioner under Section 263 of the Act is to see that the Assessing Officer does not commit any error affecting the interests of the revenue. We will consider the cases relied on by the learned Commissioner of Income Tax while passing the order impugned before the Tribunal. The first case is Rampyari Devi Saraogi (....
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.... the revisional power of the Commissioner was examined. It was held that the Commissioner has to be satisfied of twin conditions, namely, i) the order of the Assessing Officer sought to be revised is erroneous; and ii) it is prejudicial to the interests of the revenue. If one of them is absent, it was also held that recourse cannot be had to Section 263(1) of the Act. It was also held that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. It was also held that the order passed without applying the principles of natural justice or without application of mind fall under the said category. The phrase prejudicial to the interests of the revenue was explained as follows: 8. The phrase prejudicial to the interests of the Revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not conferred to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain & Anr. [(1957) 31 ITR 872 (Cal)], the High Court of....
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....vi Saraogi v. Commissioner of Income tax [(1968) 67 ITR 84 (SC)] and in Smt. Tara Devi Aggarwal v. Commissioner of Income-tax, West Bengal. [(1973) 88 ITR 323 : (1973) 3 SCC 482 : 1973 SCC (Tax) 318] In the instant case, a perusal of the order of the Assessing Officer would show that the return of income filed by the assessee was accepted and the tax was finalized. From the order of the Assessing Officer, one cannot deduce whether the errors pointed out by the Commissioner of Income Tax were considered by the Assessing Officer or not. The Commissioner of Income Tax, not only pointed out the errors, but also had shown the effect of the same on the revenue. It is not known how the Tribunal has come to the conclusion that the errors have no effect on the revenue. The Tribunal ought not to have taken into consideration the explanation submitted by the assessee before the Commissioner for coming to the conclusion that the errors pointed out by the Commissioner have no effect on the revenue. Ultimately, it is for the Assessing Officer, at the time of de novo enquiry, to consider whether the explanation offered by the assessee to the points raised by the Commissioner is proper or not. ....