2011 (9) TMI 999 - AT - Income Tax

Revision u/s 263 - Held that - CIT for revising the assessment framed by AO has not recorded, anywhere, that the order of AO is erroneous so as to prejudicial to the interest of revenue. Keeping in mind this fact and circumstances, we are of the view that section 263 of the Act postulates that the Commissioner can revise an order passed by the Assessing Officer only if (i) it is erroneous, and (ii) it is prejudicial to the interests of the revenue. If the order sought to be revised is not prejudicial to the interests of the revenue the Commissioner has no jurisdiction to revise it. For instance, an order of assessment Passed by an Assessing Officer without complying with the procedure laid down in the pre 1989 section 144B is erroneous, but cannot be said to be prejudicial to the interests of the revenue. Similarly, an assessment order passed without obtaining approval of the Inspecting Assistant Commissioner as required by the pre-1989 section 52(2) cannot be said to be prejudicial to the interests of the revenue. The orders of the Assessing Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to the interests of the Revenue. Writing an order in detail may be a legal requirement, but the order not fulfilling this requirement, cannot be said to be erroneous and prejudicial to the interests of the Revenue. It is for the Commissioner to point out as to what error was committed by the Assessing Officer in having reached the conclusion that the income has escaped assessment. The Commissioner having failed to point out any error, no error can be inferred from the orders of the Assessing Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interests of the Revenue. The appeal of the assessee is allowed

Summary

Issues:
Appeal against revision order of CIT-XVII, Kolkata under Section 263 of the Income Tax Act, 1961.

Analysis:
1. The only issue in this appeal is against the revision order of CIT-XVII, Kolkata. The assessee raised six grounds challenging the revision order. The grounds mainly focus on the alleged misconstruction of Section 263, mechanical application of provisions, failure to consider objections, time-barred order, and the intent behind the revision order.

2. The facts reveal that the assessee is involved in the business of stitching job, particularly hand-made embroidery. During the assessment proceedings, the assessee provided various details and documents, which were duly verified by the Assessing Officer. The CIT-XVII, Kolkata issued a show cause notice highlighting several discrepancies in the assessment, prompting a revision order directing further verification by the Assessing Officer.

3. The CIT's revision order emphasized the need for additional verification regarding various aspects such as payments to subcontractors, lack of bank statements examination, absence of confirmation of unsecured loans, and verification of sundry creditors and debtors. The order set aside the original assessment and directed a fresh assessment after necessary verification.

4. The tribunal noted that for a revision under Section 263 to be valid, the order passed by the Assessing Officer must be both erroneous and prejudicial to the interests of revenue. It was highlighted that mere errors in the assessment order do not automatically warrant revision unless they are also prejudicial to revenue. The tribunal relied on the decision in Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC) to emphasize the necessity of errors being both present and prejudicial for a valid revision under Section 263.

5. Ultimately, the tribunal found that the CIT failed to demonstrate that the original assessment order was both erroneous and prejudicial to revenue. As a result, the appeal of the assessee was allowed, emphasizing the strict criteria outlined in Section 263 for revising an assessment order.

6. In conclusion, the tribunal allowed the appeal of the assessee, highlighting the importance of errors in the assessment order being not only present but also prejudicial to the revenue for a valid revision under Section 263.

7. The order was pronounced in open court, concluding the proceedings regarding the appeal against the revision order of CIT-XVII, Kolkata under Section 263 of the Income Tax Act, 1961.