2015 (9) TMI 505

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....ar 2006-07 was completed under section 143(3) of the Income Tax Act by Annexure A order, accepting loss of Rs. 2,68,03,915/- returned by the assessee and allowing the loss to be carried forward. Subsequently, in exercise of the powers under section 263, the Commissioner of Income Tax initiated proceedings and passed Annexure B order dated 7.2.2011, by which, the assessment order was set aside for detailed examination of the issues involved. Accordingly, fresh assessment was completed by Annexure C order, where the total income was assessed to be 'nil'. By the impugned order, appeal field against Annexure B order as ITA.342/11 was dismissed by the Tribunal. We are told that the appeal filed by the assessee against Annexure C order of....

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....360 ITR 36 (Ker)] and contended that this is a case where the Commissioner has correctly concluded that the order of assessment was erroneous and prejudicial to the interests of the Revenue. Therefore, according to him, the order of the Commissioner as confirmed by the Tribunal did not merit interference. 7. We have considered the submissions made by both sides. Section 263(1) reads thus: "The Principal Commissioner or 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 in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making....

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....rs passed without applying the principles of natural justice or without application of mind. 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 confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy and Co. v. P.Jain [1957] 31 ITR 872, the High Court of Karnataka in CIT v. T.Narayana Pai [1975] 98 ITR 422, the High Court of Bombay in CIT v. Gabriel India Ltd [1993] 203 ITR 108 and the High Court of Gujharat in CIT v. Smt.Minalben S. Parikh [1995] 215 ITR 81 treated loss of tax as prejudicial to the interests of the Revenue. Mr.Abraham relied on the judgment of the Division Benc....

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....oes 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 v. CIT [1968] 67 ITR 84 (SC) and in Smt.Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). In the instant case, the Commissioner noted that the Income-tax Officer passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding th....

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....& Loss account in which Rs. 86.76 lakhs were hire charges paid in foreign currency to M/s.Singtel, Singapore. No tax has been deducted as required under the relevant provisions and hence liable to be added u/s 40(a)(ia). It was further observed that the assessing officer had not applied his mind in accepting these items as details of expenditure did not call for and verified so as to satisfy their allowability under the statute. Clearly this is an error which would cause prejudice to the interest of revenue in as much as high quantum of loss require to be carried forward." 10. Relying on the above, the Commissioner held that the Assessing Officer has passed Annexure A order without any application of mind and without conducting any enqui....