TaxTMI 
TaxTMI 
2016 (6) TMI 45
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....n 263 of the Act are bad in law The learned CIT has erred in initiating the revisionary proceedings under Section 263 of the Act and passing an order thereto. a) Without appreciating the fact that the conditions laid down in Section 263 of the Act have not been satisfied, ie, the order passed by the learned assessing officer should be both erroneous and prejudicial to the interest of the Revenue; b) Without appreciating the fact that the material/information in relation to the notional foreign exchange gain transaction was already on record of the assessing officer while passing the assessment order under Section 143(3) of the Act for the subject year and revisionary proceedings have been initiated merely on account of change of opinion; and c) Without giving any finding or reasons that the assessment order is erroneous and prejudicial to the interest of the revenue for treating the notional foreign exchange gain as being revenue in nature and accordingly taxable in the hands of the Appellant. Ground no. 2 - Taxability of notional foreign exchange gain as being on revenue account Without prejudice to the above, the learned CIT has erred in directing the assessing office....
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....nsel for the assessee pointed out that the CIT-IV did not give his opinion on the order passed by the AO was erroneous in so far it is prejudicial to the interests of the Revenue. The ld. Counsel for the assessee relied on case laws in support of his contentions. The ld. DR relied on the order of the CIT. A reading of the order of CIT-IV suggests that he opined the fluctuation in foreign exchange resulting into gain is a revenue item and no adjustment is available on such gain in computing the total income under normal provisions of the Act. The AO, in his order, clearly stated that the case on hand was selected for scrutiny and notices under section 143(2) of the Act were issued and served on the assessee. The assessee filed all details as required under scrutiny on various dates and the case was discussed and heard and ended up with an order under section 143(3) of the Act. It is found that it is not the finding of the CIT-IV that the AO did not conduct the assessment proceedings in accordance with procedure established under the Act. The finding of the CIT-IV refers that the assessment requires reconsideration with a direction to AO to examine the case de novo. The CIT-IV failed....
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....he assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. Such decision of the ITO cannot be held to be "erroneous"simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That, in our opinion, is not permissible. Further, inquiry and/or fresh determination can be directed by the Commissioner only after coming to a conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interest of the Revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal disapproved his action and set aside his order. We do not find any ....
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....t be prejudicial to the interest of the Revenue. There is nothing to show in the order of the CIT that the ITO would have reached a different conclusion had he passed a detailed order. So, the conclusion of the CIT that the orders of the ITO are erroneous and prejudicial to the interest of the Revenue are based merely on suspicion and surmises in the absence of any enquiry having been made by him. 12. In the present case also, as discussed above the CIT having reached the conclusion that the assessee is not entitled to adjust foreign exchange gain while computing the total income and did not mention anything in his order that the order of AO suffered any error and it is prejudicial to the interest of revenue, except mentioning the case requires reconsideration. In our opinion, the facts contained in the aforesaid decision are similar and applicable to the case on hand and relying on the same we hold that the order of the CIT is bad under law and consequently it is set aside. 13. The Hon'ble HIGH COURT OF PUNJAB & HARYANA in the case of COMMISSIONER OF INCOME TAX vs. R.K. METAL WORKS reported in 112 ITR 0445 a question has been referred "Whether, on the facts and in the circumsta....
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.... any opinion on this question, since our jurisdiction is confined only to answering the question referred to us. The question referred to us is answered in the affirmative. There will be no order as to costs. 14. In the present case also, in response to the notice U/S 263 of the Act, the assessee raised his contentions by way of a written submissions, having acknowledging the same on file, with out answering contentious issues therein came to a conclusion that the order of AO is erroneous and prejudicial to the interests of the Revenue. The facts in the aforesaid case also are similar to the facts case on hand and the law laid down by the Hon'ble High Court is clearly applicable to the case on hand. 15. The Hon'ble HIGH COURT OF PUNJAB & HARYANA in the case of COMMISSIONER OF INCOME TAX vs. KANDA RICE MILLS reported in 178 ITR 0446 The facts of the case are that the CIT found that the business loss of Rs. 30,000 was determined, after adjusting deductions under s. 80J of the Act and was allowed to be carried forward. By order the assessment made by the ITO was set aside with a direction to make fresh assessment on re-examining the points contained in paras 7 to 10 of his order. T....