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TMI Blog2007 (2) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... es for holding an order erroneous and prejudicial to the interest of revenue as held by Their Lordships of the Supreme Court in well-known case such as in Malabar Industrial Co. Ltd. v. CIT 243 ITR 83 as per which Their Lordships held that the Commissioner has to satisfy that both the aforesaid conditions were satisfied and if any one of them was absent, recourse could not be had to section 263(1) of the Act. 4. That disallowance of Rs. 17,38,106 claimed under the head Selling and Distribution Expenses and the issue of deduction under section 80HHC claimed at Rs. 32,20,387 were dealt with in appeal by the learned CIT (Appeals) and thus could not be considered by the learned CIT for action under section 263. 5. That viewing the issue in the total circumstances, order dated 6-2-2004 being neither erroneous nor prejudicial to the interest of revenue, could thus not be set aside by resort to action under section 263 and hence this appeal." 2. Rival contentions have been heard and record perused. Facts in brief are that assessee is engaged in the business of manufacturing and export of garments. During the year under consideration, the assessee filed its return of income s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 6.99 crores but no details of export were filed. He also observed that assessee had shown income of Rs. 1.61 crores as exchanged rates difference, whereas in the immediately preceding year, there was no such gain. The assessee had shown insurance claim amounting to Rs. 1.21 crores but no details have been furnished by the assessee to show the nature of insurance claim recoverable and whether it is taxable and where it has been shown or not. CIT, therefore, concluded that Assessing Officer has made no third party inquiry, as a result of which he has passed a very weak order. Accordingly, the order passed by the Assessing Officer under section 143(3) dated 14-3-2005 was set aside with a direction to examine the issue pointed out and pass a fresh order de novo after giving adequate opportunity to the assessee. 5. Aggrieved by the order of the CIT passed under section 263 of the Income-tax Act, 1961, learned AR Shri Ashwani Kumar contended that whatever information was available with the assessee, were furnished before the Assessing Officer and since its books of account, vouchers etc. were lost, proper FIR was also lodged with the police station, the same could not be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the order of the Assessing Officer and for doing the assessment de novo. 7. We have considered the rival contentions carefully gone through the orders of the lower authorities and also deliberated on the various case laws cited by the learned AR and DR during the course of hearing before us, in the context of factual matrix of the case. A bare reading of provisions of section 263 makes it clear that the prerequisite to exercise of jurisdiction by the CIT suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, ( i ) the order of the Assessing Officer sought to be revised is erroneous; and ( ii ) by virtue of the order being erroneous, prejudice has been caused to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1). There can be no doubt to the well-settled legal proposition that the provision cannot be invoked to correct each and every type of mistake or error committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision is not meant to be exercised for purpose of directing officer to hold another investigation when the order of the Assessing Officer is not found to be erroneous. Where assessment order has been passed by the Assessing Officer after taking into account assessee s submissions and documents furnished by him and no material whatsoever has been brought on record by the Commissioner which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of Assessing Officer cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. For making a valid order under section 263 it is essential that the Commissioner has to record an express finding to the effect that order passed by the Assessing Officer is erroneous which has caused loss to the revenue. Furthermore where acting in accordance with law the Assessing Officer frames certain assessment order, same cannot be branded as erroneous simply because according to the Commissioner, the order should be written more elaborately. In the instant case we found from the record that during the course of scrutiny assessment, the Assessing Officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany nor any assurance was given for making any payment on account of such loss. Income is liable to be taxed under the Income-tax Act on the basis of its accruing or arising to the assessee, or on the basis of its receipt by the assessee, during the relevant previous year. The words "accrue", "arise" and "is received" are not synonymous. The expression "is received" conveys a clear and definite meaning. The words accrue or arise depend upon the rights of the assessee to secure the income though the actual receipt of the income may not be there. Ordinarily, the income is said to have accrued to a person when he has acquired a right to the income. He must have acquired an enforceable right in regard to that income, though actual quantification and receipt may follow in due course. A mere claim to income without an enforceable right thereto cannot, therefore, be regarded as an accrued income for the purpose of the Income-tax Act. Likewise, a mere filing of claim with insurance company, is itself not sufficient to make such income to be accrued for taxing purposes. It goes without saying that the mere such filing of claim without its acceptance by the insurance company cannot accru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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