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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 ..... on 263 were initiated on the basis of the audit objections as is noted by the learned Commissioner in his order. The honourable Punjab and Haryana High Court in the case of CIT v. Sohana Woollen Mills [2006 (9) TMI 157 - PUNJAB AND HARYANA High Court ] wherein held Commissioner of Income-tax not justified in invoking jurisdiction under section 263 on the strength of an audit note - Decided in favour of assessee - I. T. A. No. 154 (Asr)/2015 - - - Dated:- 25-2-2016 - A. D. Jain (Judicial Member) And T. S. Kapoor (Accountant Member) For the Petitioner : P. N. Arora For the Respondent : R. K. Sharda ORDER T. S. Kapoor (Accountant Member) 1. This is an appeal filed by the assessee against the order of the learned Commissioner of Income-tax, Bathinda, dated February 23, 2015, for the assessment year 2010-11. 2. The following grounds of appeal has been taken by the assessee. (i) That the order of the Commissioner of Income-tax passed under section 263 of the Income-tax Act, 1961, dated February 23, 2015, is against the facts of the case and untenable in law. (ii) That the learned Commissioner of Income-tax did not appreciate that the order passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 263 for the so-called violation of the provisions of section 40A(3) was not correct as in fact the assessee had not made payments in violation of the provisions of section 40A(3) and this angle was already examined by the Assessing Officer before passing the assessment order. The learned authorised representative in this respect invited our attention to a copy of questionnaire issued by the Assessing Officer placed at the paper book pages 12 to 14 and our specific attention was invited to question No. 19 placed at the paper book page 13. Inviting our attention to the reply to this notice, the learned authorised representative took us to the paper book pages 15 to 17 and our specific attention was invited to the reply to question No. 19 placed at the paper book page 17. The learned authorised representative further invited our attention to a copy of the audit report placed at the paper book pages 2 to 11 and submitted that the auditor in his report has not pointed out any violation in the provisions of section 40A(3) and in this respect our specific attention was invited to the paper book page 5. The learned authorised representative, therefore, submitted that the necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law. (i) Roshan Lal Vegetable Products Pvt. Ltd. v. ITO [2011] 9 ITR (Trib) 431 (Amritsar) ; [2012] 51 SOT 1 (Amritsar) (URO) ; (ii) CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom) ; and (iii) Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC). Besides the above case law the learned authorised representative further placed his reliance on a number of case law. 6. Without prejudice the learned authorised representative submitted that reassessment proceedings in this case were initiated on the basis of the audit objection and which were later on dropped, however, on the same date of dropping the reassessment proceedings proposal for initiation action under section 263 was initiated on the basis of the same audit objection which was not warranted by law as held by the Punjab and Haryana High Court in the case of CIT v. Sohana Woollen Mills [2008] 296 ITR 238 (P H) and in this respect filed a copy of the case law reported at 296 ITR 238. The learned authorised representative submitted that detailed submissions were filed with the Commissioner of Income-tax along with the relevant case law but the learned Commissioner of Income-tax ignored all the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laces the advances were made to various supervisors engaged working in various locations and these supervisors used to submit the details of material purchased by them and for making payments to labour and each payment was less than ₹ 20,000 and, therefore, in fact, there was no violation of the provisions of section 40A(3). The Bombay High Court in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom), has elaborately dealt with the powers under section 263 and which, vide paragraphs 14 to 17 has held as under (page 116) : We, therefore, hold that in order to exercise power under sub- section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That, in our opinion, is not permissible. Further, inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. Without doing so, he does not get the power to set aside the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he phrase 'prejudicial to the interests of the Revenue' has to read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. In the case before us, we find that the Assessing Officer has already applied his mind and has taken a concise decision of not making addition for violation of the provisions as there were no violation at all and, therefore, the order passed by the Assessing Officer was not erroneous and was not prejudicial to the interests of the Revenue. 10. Furthermore, we find that the proceedings under section 263 were initiated on the basis of the audit objections as is noted by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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