9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (9) TMI 924 - AT - Income TaxPower of Commissioner u/s 263 - Assessing officer passed order u/s 154 holding the fixed deposits amounting to Rs. 38, 54, 595/- under the head income from other sources - Commissioner revoked AO s order u/s 263 - Held that - The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing officer it is only when the order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind - order passed by the Assessing officer u/s. 154 of the I.T. Act cannot be said to be prejudicial to the interests of the Revenue.. Hence we cannot uphold the order passed by the CIT u/s. 263 of the I.T. Act. At the time of hearing it was brought to our notice by the Ld. AR that the order passed by the Assessing officer u/s. 154 of the Act is pending before the CIT(A) for adjudication. Hence we make it clear that our findings herein cannot be influenced by the CIT(A) order while deciding the appeal against the order passed u/s. 154 of the I.T. Act and he is required to decide the issue on merits - Decided in favour of assessee.
Issues:
1. Jurisdiction of CIT under section 263 of the I.T. Act. 2. Correct application of law by the Assessing officer. 3. Prejudicial impact on Revenue due to erroneous order. Analysis: Issue 1: Jurisdiction of CIT under section 263 of the I.T. Act The appeal challenged the order under section 263 of the I.T. Act by the CIT, which was based on the premise that the Assessing officer's order rectifying the assessment under section 154 was erroneous and prejudicial to the interests of the Revenue. The CIT invoked section 263 to rectify the Assessing officer's order, emphasizing the necessity for the order to be both erroneous and prejudicial to the Revenue's interests. The Tribunal highlighted that section 263 can only be utilized when the Assessing officer's order is erroneous and prejudicial to Revenue, underscoring the importance of these twin conditions for the Commissioner to exercise jurisdiction under this section. Issue 2: Correct application of law by the Assessing officer The Tribunal scrutinized the Assessing officer's actions in rectifying the assessment order under section 154, specifically focusing on the treatment of interest income from fixed deposits. It was observed that the Assessing officer rectified the assessment to include the interest income under the head of income from other sources. However, the CIT, through section 263 proceedings, sought to bring this amount into taxation by annulling the Assessing officer's order under section 154. The Tribunal emphasized that the Assessing officer's rectification under section 154 was not prejudicial to the Revenue's interests, thereby questioning the correctness of the CIT's intervention under section 263. Issue 3: Prejudicial impact on Revenue due to erroneous order The Tribunal delved into the interpretation of what constitutes an order prejudicial to the interests of the Revenue. It highlighted that mere loss of revenue does not automatically qualify as prejudicial unless the order is both erroneous and detrimental to the Revenue's interests. The Tribunal clarified that the phrase "prejudicial to the interests of the Revenue" must be viewed in conjunction with an erroneous order by the Assessing officer. It stressed that not every loss of revenue due to an Assessing officer's decision can be deemed prejudicial, especially in cases where different legal interpretations are possible. The Tribunal concluded that in the present case, the Assessing officer's order under section 154 was not prejudicial to Revenue, leading to the allowance of the assessee's appeal against the CIT's order under section 263. In conclusion, the Tribunal allowed the assessee's appeal, emphasizing the importance of meeting the twin conditions of an erroneous and prejudicial order for the Commissioner to exercise jurisdiction under section 263 of the I.T. Act. The judgment underscored the significance of correct application of law by the Assessing officer and the necessity for an order to be both erroneous and prejudicial to the Revenue's interests for section 263 to be invoked.
|
