TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1229
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....revenue - recourse cannot be had to Section 263 of the Act as held by Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] & noted by Hon'ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon'ble Court in its subsequent judgement titled as CIT V/s Max India Ltd. (295 ITR 282). Similar principal has been foll....
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....r is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material to justify the Commissioner's finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue. 1.4 The Hon'ble Delhi Court, in the cited decision, further observed that there is a fine though subtle distinction between "lack of inquiry" and "inadequate inquiry". It is only in cases of "lack of inquiry" that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In Gabriel India Ltd. (supra), it was expressly observed: - "The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyo....
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....xercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under section 147 and/or to revise the assessment order under section 263. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant sections. While doing so, it must also be borne in mind that the legislature had not vested in the revenue any specific power to question an order of assessment by means of an appeal. Regarding applicability of Section 263, what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the revenue is the basic pre-condition for exercise of jurisdiction under section 263. Both are twin conditions tha....
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....re conjointly present in the given factual matrix. 1.8 An Explanation-2 has been inserted by Finance Act 2015 in Section 263 with effect from 01/06/2015 to declare that order shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of appropriate authority-(1) the order was passed without making inquiries or verifications which should have been made; (ii) the order is passed allowing any relief without inquiring into the claim; (iii) the order is not in accordance with any direction or instructions etc. issued by the Board u/s 119; or (iv) the order was not in accordance with binding judicial precedent. However, the insertion of aforesaid explanation would not alter the position that twin conditions as envisaged by Sec.263 must conjointly be present before the power of revision could be exercised by revisional authority. 2.1 Keeping in mind aforesaid principle, we find that the assessee, before us, is under appeal challenging the validity of revisional jurisdiction exercised by Ld. Pr. Commissioner of Income Tax-32, Mumbai (Pr.CIT-32) for Assessment Year 2014-15 vide order dated 29/03/2019. The grounds raised by the assessee....
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....x - 32, also erred in setting aside the Order of Jt. Commissioner of Income tax (AO)-32(3) with respect to Short term Capital loss on sale of Sundaram units amounting to Rs. 2,41,37,225/- on the presumption that said units might have been traded and issue of Dividend stripping as per Sec. 94(7) of the IT Act and Bonus Stripping as per Sec. 94(8) would have attracted. The same deserves to be deleted as:- (i)The appellant have received the Dividend Income from Mutual funds, other than the units of Sundaram Mutual fund, held during the year and hence Sec.94(7) is not applicable. (ii) The Sundaram Mutual Fund units 2408303.832 worth of Rs. 5,00,00,000 was purchased on 05/09/2013 and on the record date i.e. 23/12/2013 the bonus units 2408303.832 were allotted on the basis of 1:1 ratio. The Appellant has sold the Original units 2408303.832 for Rs. 2,58.62,775/- on 07/01/2014 thereby incurring short term capital loss of Rs. 2,41,37,525/- (i.e.Rs. 5,00,00,000- Rs. 2,58,62,775).Section 94(7) and 94(8) of the IT Act is not applicable as the Appellant has purchased original units prior to period of three months from the record date and therefore short term capital loss on sale of Sundar....
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....ripping u/s 94(7) and bonus stripping u/s 94(8) on Sale of Sundaram Units not examined; iv) Form No. 3CEA not filed / examined to ascertain the net worth of the undertaking as slump sale and therefore, the correctness of Long-Term Capital gains could not be ascertained. 2.5 In response, the assessee, vide replies dated 25/09/2018, 21/02/2019, 26/03/2019 & 29/03/2019, submitted that assessee's business was transferred to another entity i.e. M/s Sleek International Private Limited as a going concern on slump sale basis for consideration of Rs. 61.71 Crores. As per the arrangement, the loans & deposits standing in assessee's book were also transferred to the said entity. This transaction was reflected by the Tax Auditor as repayment of loan u/s 269T otherwise than by an account payee cheque. However, considering the facts, penalty would not be leviable since there would be no contravention of Sec.269T. It was also submitted that Sundaram units were purchased before 3 months from record date and therefore, the provisions of Sec. 94(7) & 94(8) were not applicable to the factual matrix. The copy of Form 3CEA as required u/s 50B was also filed along with reply. 2.6 However, after perus....
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....l to the interest of the revenue; iii) Revision could not be resorted to in case of failure on the part of Ld. AO to initiate penalty proceedings against the assessee. Au Contraire, Ld. CIT-DR asserted that non-application of mind by Ld. AO to the relevant issues would make the order erroneous and prejudicial to the interest of the revenue. The Ld. CIT-DR also submitted that wrong assumption of facts or incorrect application of law would certainly make order liable for revision u/s 263. It was further submitted that firstly, the assessee was expected to submit the details to Ld. AO, who, with due application of mind, should have considered the issues raised by revisional authority. Since there was failure on the part of Ld. AO to apply his mind to the issues, the revisional jurisdiction was validly invoked by Ld. Pr.CIT-32. 5. We have duly considered the same. So far as the argument that revisional authority could not invoke jurisdictional merely at the instance of Ld. AO, is concerned, we are of the considered opinion that so long as the twin conditions as envisaged by Sec.263 are fulfilled by conducting minimal enquiry, the jurisdiction would certainly be valid notwithstanding ....
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....e no occasion for the assessee to make any submissions in this regard. This being the case, prima facie, this issue was raised by Ld. revisional authority without conducting any minimal inquiry that the said expenditure was not admissible under law. The conclusion was drawn on mere allegation that the said expenditure was inadmissible expenditure. It is settled legal position that the revision jurisdiction could not be exercised to make fishing or roving inquiry without establishing the fact that the order was erroneous as well as prejudicial to the interest of the revenue. Therefore, we are not convinced with exercise of revision jurisdictions on this issue. 8. Similar is the situation with respect to third issue i.e. applicability of Sec. 94(7) / 94(8) to the case of the assessee. It is quite evident that the assessee, vide submissions dated 29/03/2019, had submitted that the dividend was not earned on the units of Sundaram Mutual Fund and in support of the same, ledger extract of dividend income as well as statement of respective mutual funds which gave rise to dividend income was furnished which clearly established that no dividend was earned on Sundaram Mutual Fund. In the ....