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TMI Blog2016 (6) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. As such the order passed under section 263 of the Income-tax Act, 1961, is bad in law and the same is liable to be cancelled. (iv) That the learned Commissioner of Income-tax did not appreciate that the books of account were duly produced before the Assessing Officer and were duly examined by the Assessing Officer thoroughly and after satisfying himself the Assessing Officer accepted the return income, thus the Assessing Officer has fully applied his mind and has passed the assessment after order having regard to the material on the record. As such the order of the learned Commissioner of Income-tax is bad in law and the same is liable to be cancelled. (v) That the order under section 263 of the learned Commissioner of Income-tax is bad in law because the audit objection cannot be made the basis for revision of an assessment. The Assessing Officer while completing the assessment has accepted the books of account after due examination. Thus, the order of the Assessing Officer is neither erroneous nor prejudicial to the interests of the Revenue and as such the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, is illegal, inval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passing of the order the Assessing Officer again required the assessee to explain the so-called cash payments and a detailed reply was filed which is placed at the paper book pages 24 to 27. The learned authorised representative submitted that in this reply the assessee had elaborately explained that no payment in cash in excess of Rs. 20,000 was made and, therefore, there was no violation of the said section. The learned authorised representative further submitted that on the same issue the Assessing Officer had reopened the case under section 148 and in this respect our attention was invited to the paper book pages 28-29 where a copy of the reasons recorded was placed. The learned authorised representative submitted that a reply to the reasons recorded was filed a copy which was placed at the paper book pages 30 to 38, wherein the assessee again explained that there was no violation of the provisions of section40A(3). The learned authorised representative submitted that on receipt of such reply from the assessee, the assessment proceedings under section 147 were dropped by the Assessing Officer and in this respect invited our attention to the paper book page 39 where a copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hand, submitted that the assessment order passed by the Assessing Officer does not talk about the examination of this aspect and, therefore, the action under section 263 was rightly taken by the Commissioner. He submitted that the Department had dropped the proceedings under section 147 to strengthen its case for action under section 263. 8. The learned authorised representative, in his rejoinder submitted that during reassessment proceedings under section 147 the Department had accepted that it was a change of opinion, therefore, had admitted that this issue was already examined by the Assessing Officer. Therefore, the order passed by the Commissioner needs to be quashed. 9. We have heard the rival parties and have gone through the material placed on record. We find that the Assessing Officer during the course of assessment proceedings specifically asked about the violation of the provisions of section 40A(3), vide questionnaire No. 19 placed at the paper book page 13 and in reply the assessee specifically replied that there was no violation of the provisions of section 40A(3), the relevant portion of his reply is placed at the paper book page 17. Furthermore, we note that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. Our aforesaid conclusion gets full support from a decision of Sabyasachi Mukharji J., as his Lordship then was, in Russell Properties Pvt. Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 (Cal). In our opinion, any other view in the matter will amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. As already stated it is a quasi-judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, that is, in favour of the assessee and against the Revenue. Under the facts and in the circumstances of the case, we make no order as to costs." Similarly, the decision of the honourable Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) has held as under (page 87) : "A bare reading of the provisions of section 263 makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner of Income-tax suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner of Income-tax has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is non-prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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