TaxTMI 
TaxTMI 
TaxTMI 
2015 (8) TMI 968
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....l and proprietor of M/s Shekhar Chand Jain and Company and derives income from contract work of civil construction and filed its return of income on 31.10.2005 for the assessment year 2005-06 declaring an income of Rs. 1,71,580/-. The assessment was completed vide order dated 13.12.2007 (Annexure A-1) under Section 143(3) of the Act at an income of Rs. 2,70,080/- by making an addition of Rs. 98,500/- on account of inadmissible and unvouched expenses debited to the profit and loss account for personal use. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax-I, Ludhiana (for brevity, the CIT"). The CIT vide order dated 31.7.2008 (Annexure A-II) passed under Section 263 of the Act held the order of the Assessing Officer to be erroneous and prejudicial to the interest of the revenue. Accordingly, the assessment made by the Assessing Officer was cancelled and he was directed to frame the same de novo after calling the necessary documentary evidence, verification thereof and due opportunity of being heard to the assessee. Being dissatisfied, the assessee approached the Tribunal against the order passed by the CIT by way of an appeal who vide order dated 4.....
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....rgued that there was no error in the order of the Assessing Officer and it could not be termed to be erroneous or prejudicial to the interest of the revenue and, therefore, the jurisdiction invoked under Section 263 of the Act by the CIT was improper. 6. After hearing learned counsel for the parties, we find merit in the submissions made by the learned counsel for the appellant. 7. To adjudicate the question involved herein, the statutory provision of Section 263 of the Act requires to be examined. The relevant portion thereof reads thus:- "263. Revision of orders prejudicial to revenue - (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation....." 8. Section 26....
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....nue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue. Rampyari Devi Saraogi Vs. Commissioner of Income-tax [67 ITR 84] and in Smt. Tara Devi Aggarwal Vs. Commissioner of Income-tax, West Bengal [88 ITR 323]." 9. Delhi High Court in CIT v. Vikas Polymers, (2012) 341 ITR 537 examining the scope of Section 263 of the Act and analysing the circumstances under which revisional power can be exercised by the CIT, observed as under:- "12. At the same time, the words "prejudicial to the interest of the revenue", as observed in Dawjee Dadabhoy and Co. vs. S.P. Jain, (1957) 311 IT....
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....pts of Rs. 5,36,26,408/- and had declared taxable income of `1,71,580/-, thus giving net profit of 0.263% only. The show cause notice issued to the assessee described that the Assessing Officer had not examined the details of abnormally low profit of 0.263% at the time of making the assessment. The relevant portion of show cause notice dated 8.5.2008 reads thus:- "On perusal of record, it is noticed that assessment order passed under section 143(3) on 13.12.2007 by the Income Tax Officer-III(1), Ludhiana is erroneous and prejudicial to the interest of revenue as detailed as under:- i) Perusal to capital account shows addition of Rs. 6,00,000/-. In this regard no source of such deposits has been called for by the AO. ii) Perusal to savings bank account of the assessee shows various cash deposits totalling to Rs. 30,92,000/-. No source of such funds has been called for by the AO. Iii) On gross receipts of Rs. 5.36 crores assessee has declared profit of Rs. 43.73 lacs and further claimed depreciation of Rs. 42.78 lacs as per chart of computation of income. Effectively, assessee has returned net profit of 0.263%. Even in earlier years the results are far better. The AO has compl....
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....e of mistake or error, unless aforesaid two elements exist in the order of AO. In the case in hand, after hearing Authorized Representative, the CIT has recorded a clear finding that the order of AO was erroneous as well as prejudicial to the interest of Revenue. From the order of the AO, it is clear that for want of time, AO had done only a semblance of enquiry and that too, in very slip-shod manner, as is clear from the post script in the order of AO. AO accepted the version of the assessee without proper enquiry as a result substantial amount of taxable income was not brought to tax. In such case assessment order would be erroneous and prejudicial to the interest of the Revenue because law enjoins upon the AO to make assessment order bringing all taxable income to tax. The enquiry held in a perfunctory manner could not be said to be a proper enquiry before passing the assessment order. This cannot be ground to shut out the jurisdiction of the CIT that an adequate enquiry was conducted by the AO. We may clarify that order of the CIT is in two parts. Part one consists of reasons for issuing the show cause notice, and later part deals with findings recorded by the CIT after affordi....