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TMI Blog1998 (12) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... f of brought forward unabsorbed depreciation. In support, reliance was placed on the decision of I.T.A.T. Hyderabad Bench in Andhra, Pradesh State Electricity Board v. ITO [1994] 49 ITD 552. On consideration of the factual position and in view of the decision, we are of the view that the fee payable by the assessee was Rs. 250 only as the total income after set off of unabsorbed depreciation of earlier years was nil. 3. The assessee is a private limited company and derives income from rent charges of Hotel, Bar and Restaurant. For the assessment year 1990-91, the assessee filed return on 28-11-1990 declaring loss of Rs. 23,92,423 after setting off of income of Rs. 4,39,423 for the assessment year under consideration against carried forward losses of Rs. 28,32,170. The Assessing Officer completed the assessment on total income at nil vide his order dated 30-10-1991 under section 143(3) of the Act. The assessment was sought to be revised by the Commissioner as on scrutiny of the records he found that profit under section 115J remained to be brought to tax. He issued a show-cause notice dated 25-1-1994 giving calculation of book profit under section 115J as per which the income requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93] 45 ITD 1 and ITAT Indore Bench decision in Brite Automotive Plastics Ltd. v. Dy. CIT [1993] 47 ITD 591. 5. The submissions of Shri Chhajed did not find favour with the Commissioner. According to the Commissioner, the scope of section 263 is very wide. It takes into account any type of error in the order passed by the Assessing Officer. This error may be with reference to non-verification of facts or wrong interpretation of the provisions of law. There are many decisions holding that where the Assessing Officer accepts the contention of the assessee without due enquiry as a result of which prejudice is caused to the revenue, the provisions of section 263 have to be invoked. According to him, in the instant case when the assessee submitted the working of profit liable to tax under section 115J, the Assessing Officer accepted the same without making any enquiry. This has been caused due to incorrect interpretation of provisions of section 205 of the Companies Act. According to him, the contention of the assessee that proper enquiry was made by the Assessing Officer is not borne out from the record. Simply because some information had been furnished by the assessee does not mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l discipline will come to an end if the subordinate authority is allowed to flout the decision of an higher authority. He referred to the decision of Bombay High Court in K. Subramanian, ITO v. Siemens India Ltd [1985] 156 ITR 11. Relying on the Calcutta High Court decision in Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229. Shri Jain argued that an order passed by the Assessing Officer following the decision of the Tribunal cannot be held to be erroneous and such an order cannot be revised. He also referred to the Bombay High Court decision in CIT v. Gabriel India Ltd. [1993] 203 ITR 108 wherein their Lordships have held that if the Assessing Officer acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him, the order should have been written more elaborately. He also referred to the decision in CIT v. Orissa State Financial Corpn. [1993] 203 ITR 747 wherein it has been held that if the Assessing Officer followed the decision of the Tribunal in earlier year, his order is not erroneous and cannot be revised under section 263. Inviting our attention to the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to tax. This is factually correct. The assessment order is totally silent on income under section 115J of the Act. Why was it so ? The contention of the assessee before the Commissioner was that as per computation of book profit under section 115J submitted before the Assessing Officer, there was negative book profit of Rs. 36,810 on account of adjustment inter alia, of brought forward business loss amounting to Rs. 10,66,184 of the earlier years. The Assessing Officer accepted the said computation and hence he passed regular assessment under section 143(3) and did not compute book profit under section 115J, as there was no book profit at all. This plea canvassed by the assessee has been rejected by the Commissioner for the reason that the Assessing Officer accepted the working of book profit submitted by the assessee without making any enquiry and without applying his mind. The assessment order speaks for itself. Section 115J was enacted with the objective of bringing the zero tax prosperous companies within the taxable net. There were companies which had, in fact, large profits in its books but for the purpose of Income-tax Act, by virtue of various deductions claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax under section 115J, had he applied his mind to this aspect of the matter. Curiously enough, there is no mention at all of section 115J in the entire assessment order what to say of any enquiry or application of mind on the working of book-profit submitted by the assessee. To say the least, arbitrary exercise of quasi-judicial power by the Assessing Officer would certainly invite invocation of section 263 of the Act by the Commissioner. We have scrutinised the decision of Hon'ble M.P. High Court in Ratlam Coal Ash Co.'s case. To our mind, this decision will not come in the way of the Commissioner. Their Lordships have observed therein that it is well-settled that where assessment is made accepting what the assessee stated in the return without making any enquiries, Commissioner would be justified in holding the assessment order to be erroneous. In the said case, the Tribunal had found that the assessee had furnished all the requisite information about the receipt of Rs. 73,500 and expenses of Rs. 44,873 and consideration all facts the Assessing Officer framed an assessment on total income of Rs. 35,000 as against the total income declared in the return at Rs. 26,324. It was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to the interests of the revenue' occurring in section 263 have not been defined. In Addl. CIT v. Mukur Corpn. [1978] 111 ITR 312, their Lordships of Gujarat High Court agreeing with the observations made in Dawiee Dadabhay Co. v. S.P. Jain [1957] 31 ITR 872 (Cal.) observed that the words 'prejudicial to the interest of the revenue' must mean that the orders of the assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the state has not been realised or cannot be realised. In a recent decision in CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81/79 Taxman 184 their Lordships of Gujarat High Court have observed as under: "The well-settled principle in considering the question as to whether an order is prejudicial to the interests of the Revenue or not is to address oneself to the question whether the legitimate revenue due to the exchequer has been realised or not or can be realised or not if the orders under consideration are allowed to stand. For arriving at this conclusion, it becomes necessary and relevant to consider whether the income in respect of which tax is to be realised has been subjected to tax or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of rectification of mistake under section 154 of the Act. It was only in the context of section 154 of the Act that Supreme Court has in T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50, observed that, when the issue is debatable, the power of rectification cannot be exercised. According to their Lordships of Gujarat High Court, this decision of the Supreme Court has no application whatsoever so far as power under section 263 are concerned. At this stage, we are remainded of the observations of Madras High Court in the celebrated case of Venkata Krishna Rice Co. v. CIT [1987] 163 ITR 129/30 Taxman 528, wherein their Lordships said that the prejudice that is contemplated under section 263 is prejudice to the income-tax administration as a whole. As stated earlier, the intention of the Legislature in bringing section 115J on the statute book was mobilisation of additional resources. In Circular No. 495 dated 22/9/1987, It is stated, thus: It is accepted canon of taxation to levy tax on the basis of ability to pay. However, as a result of various tax concessions and incentives certain companies making huge profit and also declaring substantial dividends, have been managing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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