TaxTMI 
TaxTMI 
1996 (6) TMI 40
X X X X Extracts X X X X
X X X X Extracts X X X X
....nesses carried on, although tagged along with it is a separate question by itself. Obviously an answer to the exercise of jurisdiction under section 263 of the Act by the Commissioner would only make it necessary, if it is in the negative, to proceed with consideration of the other question. After hearing learned senior standing counsel for taxes at length, we would concentrate on the question of exercise of jurisdiction under section 263 of the Act. In the view which we are taking for more than one reason, jurisdiction under section 263 of the Act on the facts and circumstances of the case would not be justifiable. As a consequence thereof, although learned senior standing counsel strenuously made some attractive submissions at the first blush we feel it unnecessary to reserve consideration in a better case justifying exercise under section 263 of the Act in regard thereto. If the exercise under section 263 of the Act would not be justifiable, consideration of the provisions of section 37 with regard to the disallowance could be postponed to an appropriate occasion. We adopt this course on the facts and circumstances of the case, although we would mention by way of a summary th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y perusing the order of the Commissioner of Income-tax, Trivandrum, it must be stated that satisfaction of the statutory requirements of section 263 as to how the situation would be prejudicial to the Revenue so as to justify exercise of the powers under section 263 of the Act is conspicuous by its absence. This is the requirement of the statutory provision. In view of what is taken into consideration by the Tribunal in the impugned order, in our judgment it is necessary for us to find out as to whether this exceptional power to reopen the completed assessments gets satisfaction from the material on record in view of the statutory provision that the Commissioner of Income-tax has been bestowed with the power of reopening the completed assessment, being prejudicial to the Revenue being the most important consideration in regard thereto. The assessee took up the matter before the Income-tax Appellate Tribunal, Cochin Bench, and it is this order dated June 14, 1985, which is impugned by the Department persuading the Tribunal for reference of the question referred to hereinbefore. The Tribunal considered the question in a two-fold manner. First it considered the question of di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s warranted. In the process of discussion, in the context the question before the Tribunal was as to whether each and every business activity carried on by the assessee is to be considered in the aggregate or would have to be separately computed all put together in the process of calculation of the concerned deductions. It appears that relying on the commentary at page 1111 in Iyengar's Law of Income-Tax, Seventh edition, and the position as available from the decision of the Madras High Court in South Indian Industrials Ltd. v. CIT [1935] 3 ITR 11 and the East Punjab High Court in Ram Chandra Munna Lal v. CIT [1949] 17 ITR 394 and drawing the logical inference from the decision of the Supreme Court in CIT v. Muthuraman Chettiar (P. M.) [1962] 44 ITR 710 cited in the order, the Tribunal reached the conclusion that the provisions of section 37(3A) would have to be considered for application to each of the business activities carried on by an assessee independently and separately and not on aggregate basis. The Tribunal also has drawn support from the Department Circular No. 240, dated May 17, 1978, to its conclusion that each business activity would be required to be considered. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pposes the statutory satisfaction that although there is some error with regard to the completed assessment, the order passed by the Income-tax Officer has to be erroneous in so far as it is prejudicial to the interests of the Revenue. In other words, the plain language of the section is more than abundantly clear that it is not every error or mistake that should induce the Commissioner of Income-tax to resort to exercise of the powers under section 263 of the Act. In our judgment, the factual matrix shows that it is a marginal situation and when by a careful and cautious judgment the Tribunal has considered exercise of the powers under section 263 of the Act by the Commissioner as not proper, although the phrase is " not valid ". The situation does not call for any interference in regard thereto. In fact, and as stated at the outset, our endorsement on the conclusion of the Tribunal that the exercise of the powers under section 263 of the Act by the Commissioner was not proper, should be the be--all and the end--all of the situation. Again, as stated at the outset, although learned senior standing counsel for taxes took us in detail through the provisions of sections 37(1), ....