TaxTMI 
TaxTMI 
2015 (6) TMI 315
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....p; Dated: 24.2.2014 To Sri Syed Saleha, No.1666, Pipeline Road, T. Dasarahalli, Bangalore - 560 057. Sir, Sub : Revision u/s 263 of the I.T. Act in your case for the A.Y. 2009-10 - issue of notice - calling for objections, If any - Reg. ********** The Scrutiny assessment order U/s 143(3) in your case, was passed on 28.12.2011 for the assessment year 2009-10. 2. On perusal of the assessment records, it is seen that you have advanced an amount of Rs. 6.45 crores to Mr Shakeer Ahmed, partner in the firm M/s S&S Inc. As per the agreement that the amount contributed / advanced as loan by any party shall bear interest @12%. However, the interest income to the tune of Rs. 77,40,000/- has not been offered to tax. 3. Hence, the order passed by the Assessing Officer on 28.12.2011 for the assessment year 2009-10, is proposed to be treated a erroneous & prejudicial to the interest of revenue. I, therefore, propose to pass an appropriate order u/s 263 of the I.T. Act, 1961, for the assessment year 2009-10. 4. In this connection, you are requested to file your clarifications / objections, if any, to the proposed action....
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....g Officer is directed to examine the same and decide accordingly. 5. In view of the facts of the case, the assessee's request for dropping the proceedings u/s 263 cannot be considered. The Hon'ble Supreme Court in the case of Malabar Industrial Co., Ltd., Vs Commissioner of Income-tax 243 ITR 83 (SC) held that "An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind." It is clear from the assessment order for A.Y 2009-10 that the Assessing Officer in his assessment order failed to apply his mind to the case in all perspective and therefore, the order made by him without application of mind is erroneous. When due to an erroneous order of the Assessing Officer, the revenue is losing tax payable by the assessee, the order made is certainly prejudicial to the interest of the revenue. The order of assessment is not in accordance with law and has bee made by the Assessing Officer without application of mind, in consequence whereof the lawful revenue due to the State has not been realized....
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.... in the revision order itself. It is important to note the shifting stand of the CIT so far as reasons for subjecting the assessment order to revision proceedings. At p. 1, in fifth sentence of the impugned revision order, learned CIT notes that that "on perusal of assessment record, it was noticed that assessment order was erroneous in as much as it was prejudicial to the interest of the Revenue as the details of purchase and sale of share transactions in futures were not verified as to whether the profit or loss from the futures trading amounts to speculation gain or loss". The extracts from show-cause notice, which have been reproduced in the impugned revision order at pp. 1 and 2, do not, however, even remotely support that stand. The stand taken in the show-cause notice is that, on merits, set off is not permissible in as much as show-cause notice states that "as per the provisions of s. 73 of the IT Act, any loss computed in respect of speculation business carried on by the assessee shall not be set off except against profits and gains of another speculation business", and, "therefore you (the assessee) are not allowed to adjust the speculation loss". The show-cause notice, t....
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.... 'The necessary implication in the expression 'after giving opportunity of being heard' relates to the point on which the CIT considers the order to be erroneous and prejudicial to the interests of the Revenue. In other words, it is necessary for the Commissioner to point out the exact error in the order which he proposes to revise so that the assessee would have an adequate opportunity of meeting the error before the final order is made.' (Emphasis, italicsed in print, supplied) In the case before the High Court, the show-cause notice referred to two issues to which the assessee had given satisfactory replies. No action was taken under s. 263 in respect of these two issues. However, in the said order the CIT mentioned the hire charges as the ground for revising the assessment. This point had not been mentioned as a ground in the show-cause notice. The High Court held that 'in as much as the CIT had not chosen to show these two points as the errors in making the final order and the final order under s. 263 refers only to the inference of hire charges being exigible to tax which was not mentioned at all in the show-cause, obviously the assessee had no oppo....
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.... other ground which, in its opinion, was available to the CIT as well. If the Tribunal is allowed to find out the ground available to the CIT to pass an order under s. 263(1) of the Act, then it will amount to a sharing of the exclusive jurisdiction vested in the CIT, which is not warranted under the Act. It is all the more so, because the Revenue has not been given any right of appeal under the Act against an order of the CIT under s. 263(1) of the Act. . . . Under s. 263 of the Act it is only the CIT who has been authorized to proceed in the matter and, therefore, it is his satisfaction according to which he may pass necessary orders thereunder in accordance with law. If the grounds which were available to him at the time of the passing of the order do not find a mention in his order appealed against, then it will be deemed that he rejected those grounds for the purpose of any action under s. 263(1) of the Act. In this situation, the Tribunal, while hearing an appeal filed by the assessee, cannot substitute the grounds which the CIT himself did not think proper to form the basis of his order.' We respectfully understand this judgment as holding, by necessary implication, t....