TaxTMI 
TaxTMI 
2017 (8) TMI 1432
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....the fresh assessment order dated 27.07.2009 passed u/s 263/143(3), even when the appeal u/s 260A against ITAT's order dated 25.02.2010 in ITA No.589/JP2009 is pending before the Hon'ble High Court? Whether the assessment order dated 27.07.2009 passed in compliance to order dated 16.2.2009 u/s 263 of the Act by the Commissioner can be treated as nullity and without locus standi inspite of the fact that the same was passed prior to passing of ITAT order dated 26.2.2010 and the fact of passing 27.7.2009 order was not at all considered by the ITAT?" D.B. Income Tax Appeal No.243/2011 admitted on 23.05.2013 "Whether the order of revision u/s 263 of Income Tax Act, 1961 can be declared as without jurisdiction, wrong and bad in law, when the basis of issuing the same are the evidences recovered during the course of survey u/s 133A and statements recorded u/s 131 of the Act, which categorically show that the order was erroneous and prejudicial to interest of revenue? Whether deduction of income u/s 80IB of the Act can be granted to the assessee when the new business as created by reconstruction splitting of business already in existence on the basis of evidences record....
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..... Assessee claimed 10% deduction of his profit u/s 80-IB for the A.Y.2003- 04 as well as for the A.Y. 2004-05. As is evident from the sequence of events, the same business, at the same place and with same machinery had been going on for several years, in the name of M/s Indian Art Palace." 4. The finding arrived at by the CIT(A) is as under:- "3.1 On perusal of the records, I find that the identical issues, as involved in this ground of appeal, were also involved in the appellant's appeal for the A.Y.2003-04. The said appeal has been decided by me vide my order of even date, in ITA No.147/JPR/09-10, wherein as per detailed discussion in para 3.3 of that order, I have partly allowed the appellant's ground taken against this disallowances of the claimed deduction u/s 80-IB of the I.T. Act. Therefore, following may said order, this ground of appeal is;, similarly allowed in this year also. Accordingly, a disallowance of 5% amounting to Rs. 3,49,045/-, out of the claimed deduction u/s 80-IB is confimed and the balance disallowance is directed to be deleted. Consequently, this ground of appeal is treated as partly allowed." 5. While considering the matter, the tribunal ha....
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....cuments and evidences filed by the assessee as well as books of account and further raised the following queries:- "(i)That it is not practically possible for the assessee to carry out such huge manufacturing activities for affecting sales worth Rs. 14,73,58,247/- with the help of a small plant of Rs. 2 lacs as shown by the assessee in his balance sheet. (ii) That as per details of purchases the assessee had made purchases of ready built furniture of Rs. 16164420/- on Form H relates to purchases from out of state Rs. 7,03,050/- and on Form B-17, purchases within state worth Rs. 1,54,61,370/-. Thereafter, the AO passed a speaking order by which deduction claimed under section 80IB was allowed on 90% sales made by assessee. After examining all these evidences and documents and taking into consideration the order of AO as well as order of ld. CIT passed under section 263, the following findings were given by the Tribunal which are recorded at pages 15 & 16 of its order :- " Before us the ld. A/R has reiterated those explanation furnished by the assessee before the AO as discussed above. The ld. A/R has successfully been able to demonstrate ....
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....f the assessee. 14. In the result appeal is allowed. 10. After going through the above finding of the Tribunal, it is clearly seen that the Tribunal has examined the issue on merit also. It has been clearly mentioned that ld. A/R has successfully been able to demonstrate before us that M/s Art Palace, proprietary concern of the assessee was not set up at the same business premises as that of M/s Indian Art Palace, the assessee was never a partner or employee in the firm and had not connection with the said firm M/s Indian Art Palace. The concern M/s Art Palace is sole proprietary concern of the assessee. The assessee on this new premises set up his unit w.e.f. 28.2.2002 which place is having separate approach. The unit of M/s Indian Art Palace was working at different location since 1984 as shown in the map place at page 11 supported by an affidavit placed at page 12 of the paper book, the Indian Art Palace carried on business of manufacturing and sale till financial year 2002-03 i.e. even after assessee set up its unit and commenced business, moreover manufacturing work of the unit of assessee was got done on job basis, statements recorded in course survey in fin....
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..... In that view of the matter, the order of the Tribunal has no legal validity in view of the order passed by the CIT(A). 8. He has also contended that:- "After receiving the proposal on 13.01.2009, a show cause notice u/s 263 of the IT Act was issued to the assessee for AY 2005-06 vide this office letter No.CIT.III/JPR/ITO(T&J)/2008- 09/2445 dated 14.01.2009. The assessee was asked to explain as to why the order passed for AY 2005-06 on 29.11.06 may not be revised and the deduction u/s 80IB of the IT Act allowed in excess to the extent of Rs. 1,35,17,406 may not be ordered to be withdrawn. The hearing in this matter was fixed on 30th January, 2009. This condition is not fulfilled because the business of assessee is only an extension of a very old existing business in the name of M/s Indian Art Palace. M/s Indian Art Palace was an old partnership firm in which family members of assessee were partners. In nutshell, the same business continued in the name of M/s The Art Palace, as proprietary concern of the assessee. The features characteristic of the continuance of the old business is that: i. The business was started in the same business pre....
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.... Act there is no provision to examine a person on oath. But it does not mean that a statement under Section 133A of the Act can be retracted at the whim and fancy of the assessee. In the light of the aforesaid, the assertions made by the learned counsel for the petitioner cannot be accepted. 11. On the question of charging Rs. 82/- per kg. on betel nuts we find from a perusal of the record that the price of betel nuts ranged from Rs. 25/- to Rs. 192/- per kg.. The Commission has taken an average of Rs. 82/- per kg., in which we do not find any error. Further, no evidence has been filed by the petitioner to indicate that he had purchased the betel nuts at the rate of Rs. 45/- per kg.. This being a pure finding of fact, no interference can be made by this Court in a writ jurisdiction." 12. He has relied upon the decision rendered by the Bombay High Court in the case of Dr. Dinesh Jain Vs. Income Tax Officer reported in (2014) 363 ITR 210(Bom) wherein it has held as under:- 5. To consider the first contention, it will be apt to quote section 263(1) which is relevant for our purpose : "263. Revision of orders prejudicial to revenue - (1) The Commi....
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.... 81 (Guj) treated loss of tax as prejudicial to the interests of the revenue. 6. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Company v. CIT MANU/TN/0138/1981 : [1987] 163 ITR 129 (Mad) interpreting "prejudicial to the interests of the revenue". The High Court held, "In this context, it must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration". In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income Tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. 13. Counsel for the appellant has referred to Section 263 (1)(b) ....
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.... by the Commissioner suo moto under it, is that the order of the Income Tax Officer is erroneous insofar 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 an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act....
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....re a sum not earned by a person is assessed as income in his hands on his so offering, 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 MANU/SC/0177/1967 : [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT MANU/SC/0339/1972 : [1973] 88 ITR 323 (SC) . 16. He has also relied on the decision of the Madras High Court in the case of Commissioner of Income Tax Vs. S. Khader Khan Son reported in (2008) 300 ITR 0157 which was confirmed by the Supreme Court (2013) 352 ITR 480 (SC). Para 4 and 5.3 reads as under:- "4. In the instant case, there was a survey operation conducted under Section 133A of the Act in the assessee's premises and a statement was recorded from one of the partner. Assuming there were discrepancies and irregularities in the books of accounts maintained by the assessee, an offer of additional income for the respective assessment years was made by the partner of the firm. But, such statement, in view of the scope and ambit of the materials collected during the course of survey action under Section 133A shall not have any evidentiary ....