TaxTMI 
TaxTMI 
2016 (4) TMI 122
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....as the order of original assessment passed by the A.O u/s. 143(3) of the act is neither erroneous nor pre-judicial to the interest of the revenue. 3. Before us, the ld. counsel for the assessee vehemently submitted that Commissioner has invoked the powers conferred upon him by section 263 of the Act holding that the assessment order is erroneous and prejudicial to the interest of the revenue on the following grounds:- 1. The assessee had claimed capital expenses (IPO expense) of Rs. 1,17,14,943/- being 1/5th of Rs. 5,85,74,716/- as preliminary expenses u/s. 35D after commencement of business. As per the applicable provisions of section 35D(1)(ii) for A.Y. 2009-10 the assessee was not eligible to claim the same as the assessee is not a....
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....he power u/s. 263 of the Act. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. 243 ITR 83 has laid down the following ratio:- "A bare reading of section. 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under ii, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. 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-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or i....
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....nufacture and production of articles and even in the absence of either of them there could be an industrial undertaking." 9. In our understanding of the law, this is the reason for which the Hon'ble Kerala High Court (supra) has held the business of lodge to be an industrial undertaking. The finding of the Commissioner that the A.O has not enquired into this is incorrect. We find that the A.O has thoroughly examined this issue at length which is evident from the observations/findings given at para 3 of the assessment order. 10. Since the claim of the assessee is backed by judicial pronouncement in favour of the assessee. It cannot be said that there was a wrong assumption of law. 11. The second observation of the Commissioner i....
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....ent order erroneous and pre-judicial to the interest of the revenue. 15. The AO has taken a view which may be different from the view of the Ld. Commissioner and assuming that the view taken by the AO is a loss to the Revenue but the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. (supra) has held that "every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue," for e.g. 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 Ld. Commissioner does not agree, it cannot be treated as an order which is erroneous or prej....