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2014 (12) TMI 434 - ITAT PANAJIInvocation of section 263 by CIT – Revision of order – Erroneous and prejudicial to the interests of the Revenue or not - Held that:- In order to invoking the provisions of Section 263, both the conditions that order passed by AO is erroneous and it is prejudice to the interest of revenue must be satisfied - If one of them is absent, it may be held that provisions of Section 263 were not lawfully invoked - the AO has given clear findings that the assessee has produced books of account consisting of cash book, ledger etc. which were test checked - The information/evidence regarding the various cash credits introduced by the assessee as well as the details of expenditure debited in P&L a/c furnished by the assessee have been examined - The AO did not reject the books of account of the assessee but made addition merely by relying on the Departmental valuation report which only gives the estimated cost of construction and not the actual cost of construction incurred by the assessee - in absence of rejection of books of account, the AO is not authorised to reject the cost of construction shown by the assessee in his books of account - in the absence of rejection of books of account by the AO, allow the appeal of the assessee and delete the addition made by the AO on the basis of departmental valuation report. Relying upon DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION [2013 (7) TMI 483 - DELHI HIGH COURT] wherein it has been held that an order cannot be termed as erroneous unless it is not in accordance with law - in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue - It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste - an order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realized - when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. The Income-tax Officer had made enquiries in regard to the nature of the expenditure incurred by the assessee - The assessee had given detailed explanation in that regard by a letter in writing - the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not 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 - inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue - Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order - the course adopted by the AO of not resorting to or attempting estimate, after first accepting the books as correct and complete, is the mandate of law - Thus the course adopted by the AO was fully justified in the facts and circumstances of the case - the AO would have been in error, if he had resorted to estimate, while the books were found correct - the view adopted by the AO was the only view sustainable in law – thus, the order passed by the AO was not erroneous or prejudicial to the interest of revenue in any way – hence, the CIT had no jurisdiction to take action u/s 263 – Decided in favour of assessee.
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