2020 (12) TMI 670

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....e appeal was admitted by a Bench of this Court vide order dated 11.10.2017 on the following substantial question of law: '1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in quashing the order of the Commissioner passed under Section 263 of the Act even when the CIT has rightly held that the order passed by the assessing authority allowing claim under Section 35(2AB) of the Act to an extent of Rs. 19,05,88,159/- is erroneous and prejudicial to interest of Revenue as it is rightly held by CIT that in the Profit and Loss account of the EOUs, the expenditure on scientific research claimed and allowed as deduction under Section 35(2)AB was not apportioned and debited to P & L Accounts of the two ....

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....ter referred to as 'the Tribunal', for short). The Tribunal by order dated 28.10.2015, allowed the appeal preferred by the assessee. In the aforesaid factual background, revenue is in appeal before this Court.   4. Learned counsel for the revenue submitted that the Tribunal erred in quashing the order of the CIT under Section 263 of the Act even when the CIT has rightly held that the order passed by the Assessing Officer allowing the claim under Section 35(2AB) of the Act to the extent of Rs. 19,05,88,159/- is erroneous and is prejudicial to the interest of the revenue. As is rightly held by the CIT that in the Profit and Loss Account of the EOUs, the expenditure on scientific research claimed and allowed as deduction under Section ....

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....ment, or cancelling the assessment and directing a fresh assessment. 8. Thus, from close scrutiny of Section 263 of the Act, it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under Section 263 of the Act. Firstly, the order of the Assessing Officer is erroneous and secondly, that it is prejudicial to the interest of the revenue on account of error in the order of assessment. 9. The aforesaid provision was considered by the Supreme Court in 'MALABAR INDUSTRIAL COMPANY VS. CIT', 243 ITR 83 and it was 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 and every loss of revenue as a co....