9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (4) TMI 244 - HC - Income TaxRevision u/s 263 by CIT - selecting a return under CASS - expressions 'erroneous', 'erroneous assessment' and 'erroneous judgment' - order of assessment being erroneous and prejudicial to the interest of Revenue - non-consideration of any issue or an issue arising under Section 56(2)(viib) read with Section 68 by the AO - HELD THAT - The picking up of a return under CASS for scrutiny must be restricted only to the selected reasons. Therefore, it is procedurally legal for the Assessing Officer to confine the scrutiny to the limited reasons selected under CASS. AO are not allowed to expand the limited scrutiny introduced through the faceless interface of scrutiny to other aspects, because the ease desired through CASS is effaced. The CBDT, in its jurisdiction, inputs received and wisdom, restrained the AO to the reasons for selecting a return under CASS and computing the assessment. In this case, it is not a complaint of the assessee that the Assessing Officer committed a breach of the binding instructions communicated through the Circulars read above. However, the extended argument by referring to the circulars is that omission to notice an error under Section 56(2)(viib) by the Assessing Officer cannot be termed as erroneous, much less prejudicial to the interest of the Revenue. By resorting to a different method, a larger tax can be levied and collected cannot be the sole consideration to attract section 263, as prejudicial to the interest of the Revenue, unless the said method is the only mode legally applicable S.S. Muddanna v. State of Karnataka, 1991 (1) TMI 425 - KARNATAKA HIGH COURT The expressions 'erroneous', 'erroneous assessment' and 'erroneous judgment' have been defined in Black's Law Dictionary, Sixth Edition, page 542. According to the definition, 'erroneous' means 'involving error; deviating from the law'. 'Erroneous assessment' is an assessment that deviates from the law and is therefore invalid. It is a defect that is jurisdictional in its nature and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, 'erroneous judgment' means 'one rendered according to the course and practice of the Court, but contrary to law, upon a mistaken view of law, or erroneous application of legal principles. Error', here, should be an error in approach, error in computation, error in applying the relevant law or facts, or error in selecting a principle which would not govern the fact situation; arbitrary exercise of quasi-judicial power certainly would fall within the scope of section 263. For the limited purpose of examining whether the assessment order has looked at the computation obligated under Section 56(2)(viib), it is more than clear that the effect of these entries is not at the first instance captured in CASS and prevented by Circulars while taking up scrutiny assessment. It is an error going by the literal meaning excerpted above. The supervisory power, which is axiomatic given the precedents on the point, would take within its reach even the orders wherein the proceedings are dropped, or the proceedings are filed. By juxtaposing the Circulars and Section 263 of the Act, we are convinced that the Circulars are not applicable vis- -vis the power under Section 263. The Commissioner has supervisory jurisdiction not only on a proceeding dropped or filed by the Assessing Officer but the legality of a proceeding resulting in an assessment. In the said context, the Commissioner certainly has jurisdiction to find out the omission in the assessment order. In the case on hand, the Commissioner has precisely done the same and recorded the views for setting aside the assessment dated 16.12.2016. The reasoning in para 3 of the Commissioner s order dated 29.03.2019, namely that the Assessing Officer is seen not to have examined the above issue, which resulted in the said order being erroneous insofar as it is prejudicial to the interest of the Revenue is the background of an assessment order but not by referring to the Circulars. A contrary view would restrict the discretion to be exercised by the Commissioner under Section 263 of the Act vis- -vis limited scrutiny under CASS. For the above reasons, questions 1 to 3 are answered in favour of the Revenue and against the assessee. Whether, on the facts and circumstances of the case, the order is erroneous insofar as it is prejudicial to the interest of the revenue? - We are convinced that the Tribunal s order on the twin requirements, whether the assessment order is erroneous and prejudicial to Revenue's interest, needs to be re-examined. The argument that the Tribunal either has substituted or expanded the reasoning of the Commissioner is not without merit. By relying on the decisions relied on by the assessee, this finding of the Tribunal warrants our interference. Therefore, the findings recorded by the Tribunal on this behalf need to be set aside, and the matter remitted to Tribunal for reconsideration afresh.
Issues Involved:
1. Limited scrutiny assessment scope. 2. Commissioner's power under Section 263. 3. Applicability of Explanation 2 to Section 263. 4. Legality of the Tribunal's decision. 5. Justification for converting limited scrutiny to complete scrutiny. Detailed Analysis: 1. Limited Scrutiny Assessment Scope: The assessee's return for the Assessment Year 2014-15 was selected for limited scrutiny under CASS, focusing on significant interest expenses related to exempt income and substantial interest paid not matching the loans raised. The CBDT Circulars Nos. 7/2014, 20/2015, and 5/2016 direct Assessing Officers to confine scrutiny to specific points noted under CASS. The assessee argued that the Assessing Officer adhered to these guidelines, and thus, omission to examine issues under Section 56(2)(viib) should not be considered erroneous. 2. Commissioner's Power under Section 263: The Principal Commissioner issued a notice under Section 263, identifying that the Assessing Officer did not verify the details regarding the applicability of Sections 56(2)(viib) and 68. The Commissioner found the assessment order erroneous and prejudicial to the Revenue's interest due to the omission of examining the valuation of optionally convertible cumulative preference shares. The Commissioner directed the Assessing Officer to re-do the assessment after obtaining relevant details. 3. Applicability of Explanation 2 to Section 263: The assessee contended that Explanation 2 to Section 263 was not applicable to the relevant assessment year. They argued that the Assessing Officer's adherence to the limited scrutiny guidelines cannot be deemed erroneous, thus not invoking Section 263. The Revenue countered that the Commissioner's supervisory power under Section 263 is independent of the Circulars and is aimed at correcting errors prejudicial to the Revenue. 4. Legality of the Tribunal's Decision: The Tribunal upheld the Commissioner's order, stating that the Assessing Officer should have made a prima facie inquiry into potential income escapement and sought permission to convert limited scrutiny to complete scrutiny. The assessee argued that the Tribunal supplemented the Commissioner's reasons, which is not permissible. 5. Justification for Converting Limited Scrutiny to Complete Scrutiny: The Tribunal reasoned that the Assessing Officer failed to convert limited scrutiny to complete scrutiny despite potential income escapement exceeding Rs.10 lakh. This failure justified the Commissioner's invocation of Section 263. The High Court found merit in the assessee's argument that the Tribunal expanded the Commissioner's reasoning and remitted the matter to the Tribunal for reconsideration. Conclusion: The High Court concluded that the Commissioner's power under Section 263 is not restricted by CBDT Circulars and can address errors and omissions in the assessment order. The Tribunal's decision to uphold the Commissioner's order was set aside, and the matter was remitted for fresh consideration regarding the legality of the Tribunal's decision and the justification for converting limited scrutiny to complete scrutiny.
|
