TaxTMI 
TaxTMI 
2006 (10) TMI 120
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....directors as ' income from business' ? and (ii) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the exercise of power under section 263 of the Income-tax Act by the Commissioner of Income-tax was erroneous ?" 2. To learn as to how these questions arose, we may refer, in brief, to the facts of the case : 3. The relevant assessment year is 2000-01. The assessee admitted the lease rent received from M/s. Blue Star Ltd., as "income from house property" after allowing the statutory deductions. The assessee also admitted "net loss" of Rs. 5,75,580 as " income from business" derived from the business of hiring of air conditioners. The Assessing Officer accepted the income as shown in the retu....
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....no nexus with rental income from hiring of air conditioners and accordingly, treated the income from hiring of air conditioners as " income from other sources" . 7. On appeal by the assessee, the Tribunal, appreciating the explanation offered by the assessee, that the assessee/company was pursuing the business as per the main object clause of its memorandum of association and that the assessee has been doing the same line of business and submitting its returns consistently on the same basis for nearly two decades, came to the conclusion that the only difference which arose is that earlier the air conditioners were hired to other parties and during the impugned assessment year, the assessee had hired the air conditioners to a marriage hall ....
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....me-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A ; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorised by the Board in this behalf under section 120 ; (b) ' record' shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner ; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-....
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....y the Commissioner suo motu under it, 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 if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when....
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....he 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 offer ing, 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)." (emphasis supplied) 11. After referring to the facts and the law enunciated in the decision referred to supra, it is clear that what was not prejudicial to the Revenue for two decades cannot be construed as prejudicial to the Revenue for the impugned assessment year, me....