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TMI Blog2003 (7) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... funds had been deposited with the third party. Therefore, that was not considered as business income whereas, as is evident from p. 2 of the order of the AO and the submission of the learned authorised representative that the assessee is having regular business dealings of purchases from M/s Wolkem India Ltd. which takes advances from the assessee on sales made by it to the assessee and, therefore, only this interest income could be considered as income from industrial undertaking as the same has arisen during the course of regular business and, therefore, the sum of Rs. 4,85,861 would be treated as income of the 100 per cent export-oriented unit. The learned authorised representative during the course of hearing had rightly placed reliance on the case of CIT vs. Paramount Premises (P) Ltd.[ 1990 (9) TMI 33 - BOMBAY HIGH COURT] wherein it was held that the entire interest sprang from the business activity of the assessee and did not arise out of any independent activity. Therefore, the interest income earned from M/s Wolkem India Ltd. was rightly held to be income from business by the AO. Thus twin conditions for exercise of jurisdiction under s. 263, i.e., (i) the order of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der these circumstances the amount of interest received by the assessee from M/s Wolkem India Ltd. was the business income. (ii) The order passed by the AO had already been subjected to the first appal before the learned CIT(A), Udaipur. He pointed out that though, the learned CIT(A) had rejected assessee s claim regarding the exemption of the other amounts of interest of Rs. 5,61,410, he had specifically made a mention regarding the exemption allowed by the AO in regard to the amount of Rs. 4,85,861. Therefore, the order passed by the AO cannot be subjected to any revision as the issue in question was a subject-matter of appeal before the CIT(A). (iii) While allowing exemption to the assessee in regard to the aforesaid amount the AO has applied his mind and merely the possibility of another view of the matter could not justify involving of provisions of s. 263. (iv) He further argued that even otherwise 25 per cent of assessee s income could be from local sales for the purpose of exemption under s. 10B. 4. The learned CIT considered the argument of the learned counsel. In his opinion, at the outset, it was necessary to deal with the assessee s objection relating to its case being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raj) wherein income derived from surplus funds was not considered to be business income. Therefore, the CIT came to the conclusion that while considering the total taxability in assessee s own case in respect of different items he took an erroneous view without due inquiries regarding the amount of Rs. 4,85,861 received from M/s Wolkem India Ltd. 6. In addition to the arguments already advanced before the learned CIT the learned authorised representative made the following submissions: The prerequisites to the exercise of jurisdiction by the CIT under s. 263 is that the order of the AO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, viz., (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the Revenue. If any one of them is absent i.e., if the assessment order is erroneous but is not prejudicial to the Revenue, recourse cannot be had to s. 263(1). The provisions cannot be invoked to correct each and every type of mistake or error committed by the AO. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one determined by the ITO. That would not vest the CIT with power to re-examine the accounts and determine the income himself at a higher figure. This is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed erroneous simply because the CIT does not feel satisfied with the conclusion. He referred to the decision of the Bombay High Court in the case of CIT vs. Grabriel India Ltd. (1993) 114 CTR (Bom) 81 : (1993) 203 ITR 108 (Bom). 9. Thus, presently in the case where there is substitution of opinion by the officer, the ratio of above decision also applies on the facts of the present case as in this case also complete inquiries were made. 10. The learned CIT, in his impugned order under s. 263 vide para 4 p. 3 onwards, has alleged at certain places that the AO did not make due inquiries. Before proceeding to show that this is an absolutely incorrect fact, the learned authorised representative submitted that the learned CIT has not at all pointed out as to what type of inquiries were really warranted which the AO was supposed to have made and failed to do so as to make the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative and thereafter he held that the interest income of Rs. 4,85,861 received from M/s Wolkem India Ltd. would be treated as income from industrial undertaking which was exempt under s. 10B of the Act. The learned authorised representative has rightly placed reliance on the judgment of Hon ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. It was held in this case that when an AO, after going through the material on record produced by the assessee, made some additions it could not be said that he had not applied his mind. Reliance can also be placed on the judgement of CIT vs. Girdhari Lal (2002) 176 CTR (Raj) 92 : (2002) 258 ITR 331 (Raj). 14. From the above facts, it is evident that the AO has applied his mind to the facts of the case and had treated the interest income of Rs. 4,85,861 received from M/s Wolkem India Ltd. as business income. Therefore, we do not agree with the view of the learned CIT that the AO had not made due inquiries and had not applied his mind to the facts of the case. The learned CIT had also relied upon the judgement of the Hon ble Rajasthan High Court in the case of Murli Investment Co. vs. CIT wherein income derived from surplus fun ..... 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