TaxTMI 
TaxTMI 
2017 (5) TMI 1613
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....with total assessed income at Rs. 2,27,180. Subsequently, the records of the assessment year under consideration were called for and examined by Principal CIT, Bikaner. On examination of such record the Principal CIT, Bikaner found that the order under section 143(3), dated 28th Feb., 2014 was erroneous and prejudicial to the interest of Revenue. Accordingly, a show-cause notice under section 263 of the Act was issued on 19th Feb., 2016 wherein the issues relating to the expenses claimed on account of builty expenses, demurrage, payment of interest and outstanding debtors and creditors were raised. 2.2 In response to the aforesaid show-cause notice, a detailed reply has been filed on behalf of the assessee in terms of his letter dated 19th Feb., 2016. For the sake of convenience and ready reference, the relevant portion of the said reply is being reproduced hereinunder : "It is also relevant to mention here that section 44AD(6) was not in existence when the assessee filed his return of income on 21st Oct., 2011. However, retrospective amendment was made by the legislature in the Finance Bill, 2012 for the asst. yr. 2011-12. Thus, the section 44AD(6) was retrospectively made effe....
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....8 ITR 446 (Punj. & Har.) The CIT had to come to a firm decision that the original order was erroneous and prejudicial to Revenue-CIT's order under section 263 is invalid. 5. Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) , Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue-Two views are possible and the ITO "Officer has taken one view with which the CIT does not agree" 6. CIT v. Arvind Jewellers [2003] 259 ITR 502 (Guj.) CIT cannot say that the order of AO erroneous-where material was on record and was considered by AO-Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. 7. Modern Minerals v. Asstt. CIT [1997] 59 TTJ 733 (JP) If AO raised query-Assessee filed reply- AO accepted-CIT's order held unwarranted. 8. CIT v. Ratlam Coal Ash Co. [1987] 1988] 171 ITR 141 (MP) Tribunal found that the assessee had furnished information which was considered by the ITO. Hence revisional order is invalid. 9. CIT v. Gabrial India Ltd. [1993] 203 ITR 108 (Bom.) CIT directing ITO to rehear matter-CIT cannot revise order ....
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....ame 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. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. 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 ITO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO every loss of revenue as a consequence of an order of the AO, cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue, or 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 interests of the Revenue unless t....
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....of the IT Act, 1961 overlooking the newly inserted sub-section (6). Thus, the AO fell in error and committed serious lapse while not examining the two components of income, namely, commission and interest income in accordance with the spirit of the amended provisions of law. It has to be appreciated that the Parliament does not bring about any changes in taxation laws, unless it has valid reasons for doing so. The intention behind bringing about amendment by way of Finance Bill of 2012, and inserting sub-section (6) was clearly to take away the interest and commission income from the sweep of the provisions of section 44AD of the IT Act, 1961. In this situation, it was incumbent upon the AO to independently examine the commission income and the interest income and to decide if the aforesaid two components of income were to be brought to tax as business income or as income from other sources'. 6. In view of the aforesaid, I have no hesitation in holding that the assessment in question is erroneous in as much as the same is prejudicial to the interest of Revenue. 7. Accordingly, the assessment order dated 28th Feb., 2014 is being set aside with the directions that the AO will e....