TaxTMI 
TaxTMI 
2018 (2) TMI 47
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....39;ble Supreme Court. The Assessing Officer during assessment proceedings in the course of assessment proceedings though discussed and disallowed the claim of Excise Duty refund and interest Subsidy but by mistake he did not add back these items in the computation of income. It was submitted that Assessing Officer had completed the assessment after scrutinizing the details required as is apparent from the Assessing Officer's order itself. The Ld. AR further submitted that a show cause notice u/s 263 of the Act was issued on 14.12.2015, proposing to add/disallow Excise Duty refund and interest Subsidy and alleged proportionate interest of Rs. 8,67,602/- out of interest claimed by the assessee for paying earnest money of Rs. 72,30,017/. The Ld. AR submitted that show cause notice issued by Ld. CIT was cryptic, non-speaking, without any basis, wherein no reasons were specified, specifically for disallowing of interest on borrowed funds. The Ld. AR submitted that the basic twin conditions for invoking section 263 of the Act is the order passed by Assessing Officer should be erroneous and prejudicial to the interests of the revenue and CIT should specify in the show cause notice (at lea....
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....sion and revenue cannot sit in the chair of businessman to decide how to take decisions. It was submitted that the Punjab & Haryana High Court in the case of CIT Vs. Max India Ltd. 388 ITR 0081, has held that where interest free funds are available, presumption will be that interest free funds were sufficient to meet investments and similar ratio has been held in a number of cases. In view of these facts and circumstances, it was submitted that on merits also the order passed by Assessing Officer was erroneous and the prejudicial but interest and in view of the above, it was submitted that the order passed by Ld. CIT should quashed. 4. The Ld. DR, on the other hand submitted that though it is an admitted fact that Excise Duty refund and interest Subsidy are capital receipts as per the judgment of Hon'ble Supreme Court in the case of Balaji Alloys but at the time of making assessment, the judgment of Supreme Court had not come into existence and department had filed appeal against the order of Jammu & Kashmir High Court before Supreme Court and therefore the Assessing Officer was bound to make additions. He submitted that the Assessing Officer in the body of assessment order ....
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.... per the order of Hon'ble Jammu & Kashmir High Court these two amounts representing Excise Duty refund and interest Subsidy were capital receipts and which were not liable to be taxed and therefore the order of the Assessing Officer to this extent was not erroneous and was not prejudicial to the interest of revenue. Regarding the disallowance of interest the assessee submitted before Ld. CIT in reply to show cause notice that assessee had sufficient interest bearing funds, therefore no disallowance was not warranted and also submitted that it was a business asset. Without recording as to how the order passed by Assessing Officer in not making addition on account of proportionate interest was erroneous he passed u/s 263 of the Act. In a case where Ld. CIT holds that the order passed by Assessing Officer is erroneous and prejudicial to the interest of revenue, he is bound to state the reasons after examining the reply of assessee as to how the order is erroneous. The Hon'ble Delhi High Court in the case of the Income Tax Office Vs. D.G. Housing 343 ITR 329 has held that while exercising jurisdiction/s 263 of the Act, and in the absence of finding that the order is erroneou....
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....nable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without the Commissioner of Income-tax conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. The Commissioner Income-tax cannot direct reconsideration on this ground but only when I order is erroneous. An order of remit cannot be passed by the Commissioner of Income-tax to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the Commissioner of Income-tax hold and records reasons why i t is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore, the Commissioner of Income-tax must after recording reasons hold that the order is erroneous. The jurisdictional precondition is that the Commissioner of Income-tax must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the Commissioner of Income-tax can rely includes ....
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....f Income-tax in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and, therefore, the assessment order is "erroneous". The said finding will be correct, if the Commissioner of Income-tax had examined and verified the said transaction himself and given a finding on the merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interests of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interests of the Revenue. In latter cases, the Commissioner of Income tax has to examine the order of the Assessing Officer on the merits or the decision taken by the Assessing Officer on the merits and then hold and form an opinion on the merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. In the second set of cases, the Commissioner of Income-tax cannot direct the Assessing Officer conduct further enquiry to verify and ....