2018 (7) TMI 1720

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....n the ground that the amount of income offered earlier for taxation was deductible u/s 80IC of the Incometax Act, 1961 (hereinafter also called 'the Act'). The A.O. determined total income at Rs. 23,75,422/- by disallowing deduction u/s 80IC amounting to Rs. 17,17,610/- and also making disallowance u/s 14A to the tune of Rs. 6,57,812/-. The ld. CIT held the assessment order to be erroneous and prejudicial to the interest of the Revenue on the ground that the Assessing Officer accepted, without any application of mind, the assessee's claim of exempt income of Rs. 15,12,47,000/-, being, agricultural income which was actually generated from growing mushroom. After thoroughly discussing the point, the ld. CIT set aside the assessment order and ....

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....ivergence of opinion on the point, makes it explicitly clear that the issue at the time of passing of the order by the ld. CIT, was debatable. The Hon'ble Supreme Court in CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) has held that where two views are possible and the ITO has taken one view, with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law. It goes without saying that debatable issues are outside the ken of section 263. An assessment order must be necessarily, inter alia, erroneous so as to be eligible for revision u/s 263. If a point is debatable and the two views are prevalent on a particular point and the Ass....

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.... been utilized for growing mushorooms, which were given during proceedings u/s 263 only, vide letter dated 28.02.2018'. This shows that the AO did not examine the quantification of the extent of income claimed as exempt. No material has been placed before us to demonstrate that such findings recorded by the revisionary authority are not correct. 6. Clause (a) of Explanation 2 to section 263 states that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the Revenue if, in the opinion of the Principal CIT or Commissioner: "the order is passed without making inquiries or verification which should have been made." Clause (b) further provides that an order is deemed to be c....

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....e dated 29.01.2018, the ld. CIT discussed about the AO not making any inquiry as to the correctness of the agricultural income in view of the fact that the same was generated from growing mushroom. However, it is graphically clear that the quantification of income from growing of mushroom is not a new issue, but simply another aspect of the same issue. Further, we do not find any reason to restrict the jurisdiction of the CIT only to the extent of issues taken up in the notice. The raison d'etre of our such conclusion is the language used in section 263(1) of the Act, which uses the expression 'after giving the assessee an opportunity of being heard' which is different from 'after the service of notice.' If an opportunity has been given dur....