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TMI Blog2013 (12) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... he block assessment appeal, which clearly points out to the genuineness of the transactions and the disclosure of the transactions in the books of accounts and consequently on the sustainability of the claim on the depreciation, which was also the subject matter of consideration in the block assessment. There is no material at all for the Commissioner of Income Tax to exercise his jurisdiction under Section 263 of the Income Tax Act to deny the assessee on the deduction as well as on the depreciation claim considered by the Assessing Officer in the assessment relating to the assessment years 1995-96 and 1996-97. - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... al justice, the order of assessment need not be annulled, but had to be sent back to the Assessing Officer for granting an opportunity and pass orders accordingly. The order of the Third Member was thus made on 31.1.2002. Admittedly, the Revenue had not preferred any appeal before this Court; consequently, the view taken by the majority members had become final. 6. It is seen from the documents placed before this Court that for the assessment year 1995-96, the first assessment order was made on 30.3.1998, wherein the Officer had accepted the income offered by the assessee. Except for certain additions made under certain heads, the assessment was completed and the income offered under the sale and lease back transactions were assessed under the provisions of the Act. As far as the assessment year 1996-97 is concerned, the returns filed by the assessee on 28.11.1996 was taken up for scrutiny under Section 143(2) and ultimately, the assessment order was passed under Section 143(3) on 22.3.1999. The Assessing Officer observed that the leasing transaction already dealt with in the block assessment was pending before the Income Tax Appellate Tribunal. However, the Assessing Officer comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Commissioner of Income Tax passed the revision order rejecting the contention of the assessee. The Commissioner pointed out that as regards the payment of margin money, the same was not claimed as expenditure in the Profit and Loss account and there was no disallowance of the margin money paid in the hire purchase transaction as originally proposed. 9. As regards the hire management fee, the Commissioner viewed that the depreciation claimed in respect of the assets involved in the purchase and lease back transaction was disallowed in the block assessment on account of the transactions found to be bogus or the transfer of assets in question was found to be invalid. In the circumstances, the Commissioner directed the Assessing Officer to disallow the assessee's claim in regard to hire management fee for the assessment years 1995-96 and 1996-97 and modify the assessment. 10. As regards the depreciation allowed in respect of Mechanical Reactor purchased from and leased back to M/s.Morgan Industries Limited, New Delhi, the Commissioner viewed that the genuineness of the purchase and lease back transaction had not been gone into by the Assessing Officer and hence, he directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchase and lease back transactions with M/s.Morgan Industries Limited and the disallowance of hire management fee were not matters referred to and considered by the Tribunal in the block assessment. For the purpose of exercise of jurisdiction under Section 263, the Commissioner had to satisfy himself that the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue and once the Commissioner was satisfied about the presence of conditions necessary for the exercise of jurisdiction, the block assessment and regular assessment, being two different concepts, there was no inhibition in the Commissioner exercising his jurisdiction under Section 263 of the Income Tax Act. There was no overlapping of assessment made under Chapter XIV-B and the regular assessment made under Section 143(3) of the Income Tax Act. Thus, when the regular assessment procedures were kept intact providing for appeal, revision and other remedies, when the assessment made by the Assessing officer was erroneous and prejudicial to the interest of the Revenue, the Commissioner was justified in exercising his jurisdiction under Section 263 of the Income Tax Act. Consequently, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, learned standing counsel appearing for the assessee supported the view of the Tribunal as to the availability of jurisdiction under Section 263 of the Income Tax Act to revise the order, particularly when the transaction with M/s.Morgan Industries Limited were found to be just a finance transaction; when the assessee was granted an unsustainable relief under law by ignoring the true state of affairs, rightly the Commissioner assumed jurisdiction to set aside the order and hence, no exception could be taken to the order passed by the Tribunal. 18. Heard learned counsel appearing for the assessee and the learned standing counsel appearing for the Revenue and perused the materials placed on record. 19. As pointed out in the preceding paragraph, admittedly, when the revisional authority assumed jurisdiction and issued notice on 25.2.2000, the block assessment had already been made on 31.7.1997 covering the period 1.4.1986 to 3.7.1996. The second notice issued on 12.3.2001 on the change of the Commissioner is on the very same line as was given on 25.2.2000. The notice dated 25.2.2000 issued by the Commissioner reads as follows: "On a perusal of the assessment orders made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the assets, which was the subject matter of the transaction with M/s.Morgan Industries Limited. 21. Learned counsel appearing for the assessee placed before us a copy of the block assessment order covering the period 1.4.1986 to 03.7.1996 dated 31.7.1997. A perusal of the said order shows that the transactions concerned therein were related to buy and lease back transactions and the lessesses were Ponni Sugars & Chemicals Ltd., Morgan Industries Ltd., Prakash Industries Ltd., Otoklin Plants & Equipments Ltd. The transactions made with these concerns were held as falling under the category of finance lease. The block assessment order referred to the fact that the lessee company were in need of money and they raised money through these transactions for their use. Apart from this, there were transactions with Sivananda Steels Ltd., Regency Ceramics Ltd., Namaste Exports Ltd., Terry Gold (India) Ltd., Goldwon Textiles Ltd., Coduras Exports Ltd., and Restile Ceramics Ltd., which were held to be not genuine transaction. 22. The sum and substance of the block assessment was while questioning the genuineness of the transactions, the order on block assessment also considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment procedure. In the absence of any undisclosed income, there was complete lack of jurisdiction for the Department to proceed under Chapter XIV-B in the form of Block assessment. Taking such a view the learned Vice President also went into the question of enquiry made and the assessment made based on that without giving the assessee an opportunity of cross examination and on analysis of facts, the learned Vice President came to the conclusion that the assessment was totally uncalled for and there was no need at all for setting aside the order to remit it back to the Officer for fresh enquiry granting the assessee an opportunity. On the facts found that there was no concealment and hence, the entire assessment was annulled. 24. The learned Accountant Member, however, went into the question on the violation of principles of natural justice alone in not granting an opportunity to the assessee to cross examine the third parties, who denied the transactions. Learned Accountant Member viewed that it was a procedural remedy and for that, block assessment need not be quashed and the assessee could be granted adequate opportunity to cross examine the witnesses. In the circumstances, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal arising out of the block assessment was that the transactions were held to be genuine and were reflected in the books of accounts, in which event, the question of granting depreciation or a deduction, which is available to an assessee, could not be denied at all. It is no doubt true that on any matter which was not subject matter of block assessment, it is always open to the Commissioner to exercise his Authority under Section 263 of the Income Tax Act to revise the assessment if the same is erroneous or prejudicial to the interests of the Revenue, unlike in the case considered by this Court in an unreported decision in the case of R.Srinivasan V. The Assistant/Deputy Commissioner of Income Tax, Central Circle I, Coimbatore in T.C.(A)No.354 of 2006 dated 11.9.2012, where the block assessment itself was subjected to revisional proceedings under Section 263 of the Income Tax Act, the present case is whether the Commissioner of Income Tax has jurisdiction to exercise his revisional powers as regards the regular assessment made. Strictly speaking, there is no wanting of any jurisdiction if there are merits in exercise of such an authority. However, as far as the facts in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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