TaxTMI 
TaxTMI 
2017 (12) TMI 1541
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....from the record are as follows. The assessee firm was carrying on the business of stevedoring, clearing and forwarding agents at Visakhapatnam Port. It has involved in the allied activities of handling of imported cargos, like fertilizers, sugar etc. on behalf of the importers/principals, namely, Indian Potash Ltd., and State Trading Corporation, by way of storage, packaging and dispatch of materials, according to instructions. In order to facilitate such activities and services, the firm has constructed storage godowns from time to time in an extent of Acs.8.57 cents of land, taken on long lease for 30 years from the Port Trust. 3. For the assessment year 1987-88, the assessment was completed under Section 143(3) of the Act whereunder the total income of the assessee was determined at Rs. 84,32,760/-. The Commissioner of Income Tax (for short, the CIT) on examining the relevant record opined that the assessment made by the Assessing Officer (for short, the AO) was erroneous and prejudicial to the interests of the Revenue. The CIT felt that the AO did not scrutinize the reasons for the said reduction of the assessees income which got down by 50% compared to the immediately prece....
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....8 for its opinion. 6. Accordingly, the statement of facts has been sent by the Tribunal to this Court upon which the case has been registered as Referred Case No.18 of 2001. 7. Mr. K. Raji Reddy, learned Senior Standing Counsel for the Income Tax Department, submitted that the Tribunal has committed a serious error in interfering with the order of the CIT, that the facts of the case satisfied the twin ingredients of Section 263 of the Act, namely, (i) the assessment order being erroneous and (ii) same being prejudicial to the interests of the Revenue, inasmuch as the AO failed to examine the issue whether the transactions entered into by the assessee firm with the two Trusts involved diversion of part of income hitherto earned by the former in favour of the latter and also whether the considerations received from the Trusts purportedly for achieving the efficiency in firms business were genuine, reasonable, adequate and without involving any artificial arrangement and dubious methods. The learned Standing Counsel further argued that by the tax planning devise incorporated in the impugned transactions, the partners could, however, be providing for income as well as funds or ac....
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....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 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 canceling the assessment and directing a fresh assessment. 11. The scope of Section 263 of the Act is the subject matter of a slew of judicial pronouncements. In Malabar Industrial Co. Ltd. (2 supra), the Supreme Court held that while exercising jurisdiction suo motu under Section 263 of the Act, the Commissioner has to be satisfied with two conditions, namely, (i) that the Order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. That if either of the two conditions is absent, the Commissioner cannot exercise his jurisdiction under the said provision. The Supreme Court further held that Section 263 of the Act cannot be invoked to correct each and every type....
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....s a different opinion in the matte, that it is only in cases of lack of inquiry that such a course of action would be open. 15. In C.I.T. v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom.) the Bombay High Court held that the conclusion of the Commissioner that an order is erroneous must be based on material on record of the proceedings called for by him and that if there is no such material on record, it can be said that the very initiation of proceedings by him would be illegal and without jurisdiction. It has further held that the Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded and that the Department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance and that if this is permitted, litigation would have no end except when legal ingenuity is exhausted. 16. In Kwality Steel Suppliers Complex (1 supra) the Supreme Court after referring to the judgment of the Gujarat High Court in C.I.T. v. Arvind Je....
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....ficer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted. f) Whether there was application of mind before allo....
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....ctions of substantial payments to the Trusts relating to operational activities, styled as profits from handling of specific cargos, like potash, sand, sugar etc., were examined and verified. He has further observed that with regard to godowns rents, the AO has not examined as to how the Family Trust has utilized the godowns and that whether there was any termination of pre-existing lease agreements of the said premises with the original tenants, who were the principals of the assessee firm. Referring to the leasing of two Terexes to the Grand Children Trust, the CIT observed that there was absolutely no application of mind in the course of the assessment proceedings as to whether the earning from hiring out two Terexes for the entire year to the Trust for Rs. 8.4 lakhs was real and adequate and that the AO has also not noticed that if the same Terexes purportedly given on hire to the Trust were wholly used and maintained by the assessee while paying hire charges exceeding Rs. 20.00 lakhs during the year to the said Trust. On the said premises, the CIT felt that the order of the AO was erroneous insofar as it is prejudicial to the interests of the Revenue is concerned as the AO had....