TaxTMI 
TaxTMI 
2021 (2) TMI 232
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.... the facts ? (II) Whether in facts and circumstances of the case tribunal was justified in law, in passing impugned order thereby holding that order passed by the Assessing Officer is not erroneous and prejudicial to the interest of the revenue and accordingly was justified to quash the order passed under Section 263 of the I.T. Act ? 3. The assessee filed return of income in the Assessment Year 2009- 10 declaring a total loss of Rs. 1,78,57,950/-. The case was selected for scrutiny under CASS and accordingly, notices were issued to the assessee. The Assessing Officer (AO), vide assessment order dated 30.09.2011 added an amount of Rs. 2,31,010/- by assessing the same as income from other sources to the total income of the assessee. However, the AO, accepted that the assessee had incurred total business income (losses) to the extent of Rs. 1,78,57,950/-, which was eventually allowed to be carried forward for the next assessment year. 4. The Commissioner of Income Tax, invoked his revisional jurisdiction under Section 263 of the Income Tax Act, 1961 (said Act) and by his order dated 06.03.2014 set aside the aforesaid assessment order dated 30.09.2011 and directed the A....
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....he assessee was also providing technical and strategic management services to its subsidiary M/s. Paradeep Phosphates Ltd. He, therefore, submits that there was no basis to hold that the assessee had not undertaken any business during the relevant assessment year. 8. Mr. Kapoor submits that the findings of fact recorded by the AO were in no manner perverse. Similarly, the view taken by the AO was entirely correct or in any case eminently plausible. He also relied upon Malabar Industrial Co. Ltd. (supra) and CIT V. Max India Ltd. - (295) ITR 282 (SC) to submit that where two views are possible and the AO has taken the view favourable to the assessee, the same cannot be interfered with, in the exercise of revisional jurisdiction under Section 263 of the said Act. 9. Mr. Kapoor submits that since the order of the AO was not at all erroneous, one of the two conditions necessary for the exercise of revisional jurisdiction under Section 263 of the said Act was not fulfilled. Further, he submits that every loss of the Revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue particularly where the AO has adopted a permissible and ....
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....its order dated 30.09.2011:- "4.2 The explanation filed by the assessee has been carefully perused. It may be true that the assessee may have to incur certain expenditure which may be relevant to keep the company in operation. However, those expenditures are relating to its business activity and the same cannot be claimed out of the income from other sources. As per section 57 of the I. T. Act, only such expenditure which are expended wholly and exclusively for the purpose of earning of such income can be allowed as deduction. The expenses claimed by the assessee out of the interest income are not expended wholly and exclusively for the purpose of earning such income. Therefore, the same cannot be allowed as deduction from the income from other sources." [Emphasis supplied] 15. The above-emboldened portion, is perhaps, the only portion in the assessment order dated 30.09.2011, which suggests that the AO has accepted the version of the assessee that during the relevant assessment year, it incurred business expenses to the tune of Rs. 2,84,09,850/- and suffered losses to the tune of Rs. 1,78,57,950/-. According to us, this is indicative of non-application of mind on th....
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....at might set a bad trend or a pattern for similar assessments. The Hon'ble Supreme Court held that such interpretation was too narrow to merit acceptance and the Act schemed to levy and collect tax in accordance with the provisions of the Act and if due to an erroneous order of the AO, the Revenue is losing tax lawfully payable by a person, then, it will be certainly prejudicial to the Revenue. 19. In Malabar Industrial Co. Ltd. (supra), the Hon'ble Supreme Court has held that the record made it evident that the assessee had stopped agricultural operation in November 1982 and the receipt under consideration did not relate to any agricultural operation. Therefore, the revisional jurisdiction was quite correctly invoked by the Commissioner in the said case. 20. In the present case as well the AO had himself held that the income of Rs. 2,31,010/- had no nexus with the business of the assessee. The record did prima facie suggest that during the relevant assessment year there was no business undertaken by the assessee though, it had claimed business expenses to the tune of Rs. 2,84,09,850/- and on which basis, sought to carry forward losses to the extent of Rs. 1,78,57,950....
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....quate discussion. Moreover, in Gabriel India Ltd. (supra), the Commissioner after initiating proceedings for revision, could not himself say that the allowance of the claim of the Assessee was erroneous and that the expenditure was not revenue expenditure, but an expenditure of capital nature. It is in these circumstances that the exercise of revision jurisdiction was interfered with by this Court. 24. The principles in Max India Ltd. (supra) and Design Automation Engineers (Supra) are of no assistance to the Assessee because this is not a case of interference with a plausible view of the AO based on some different opinion held by the Commissioner. 25. In K.A. Ramaswamy Chettiar and anr. vs. CIT - 220 ITR 657 (Mad), it was held that when an officer is expected to make inquiry of a particular item of income and if he does not make any inquiry as expected, that would be a ground to interfere with the order passed by the officer, since such an order passed by the Officer is erroneous and prejudicial to the interests of the Revenue. 26. In Rampyari Devi Sarogi v. CIT - 67 ITR 84 (SC), the Hon'ble Supreme Court has held that the Commissioner can regard the AO's order as....
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....preme Court set aside the High Court's order by holding that there was nothing wrong in the exercise of revisional powers particularly because the CIT felt that the matter needed further investigation. Such investigation was necessary because initially, the assessee had himself made such a claim but thereafter sought to withdraw the same without any substantiation. The Hon'ble Supreme Court held that making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed had been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further inquiry in the interest of the Revenue. The notice under Section 69C of the said Act could not have been simply dropped on the ground that the claim has been withdrawn. The Hon'ble Supreme Court then held that the CIT was perfectly justified in exercising its revisional jurisdiction and such exercise ought not to have been interfered with by the High Court. 30. In the present case as well, taking into consideration the reasoning of the CIT, we feel that the ITAT was not justified in interfering with the CIT's order, since, the twin conditions prescribed ....