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TMI Blog2017 (5) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 20.3.2013 passed under sec.263 of the Act, for the assessment year 2008-09. 2. The assessee in this appeal is challenging the jurisdiction of the CIT u/s.263 of the Act and also merits of the additions. 3. The facts of the issue are that the assessee claimed set off of business loss for an amount of _5 lakhs, which was the income from other sources. It was allowed by the AO while framing the assessment u/s.143(3) of the Act. +The CIT took up the isuse forrevision u/s.263 of the Act and according to the CIT, business loss cannot be set off against other sources as per sec.71 of the Act, unless the income is from any of five heads, the benefit of sec.71 of the Act cannot be given to the assessee. Accordingly, the assessment made by the Assessing Officer u/s.143(3) is set aside by the CIT to the extent of cash credit disallowed and benefit given u/s.71 of the Act was withdrawn and has also given the direction to the AO to reframe the assessment after giving an opportunity to the assessee. Against this, the assessee is in appeal before us. 3. We have heard both the sides and perused the material on record. Section 263 of the Income-tax Act seeks to remove the prejudice ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has not been examined where the inquiries ought to have been made and the genuineness of the claim ought to have been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. 4. In view of the foregoing, it can safely be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69A, 69B and 69C, treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head Income from other sources . Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions : Held, on the facts, that it was clear that when the investment in or acquisition of gold, which was recovered from the assessee was not recorded in the books of account and the assessee offered no explanation about the nature and source of such investment or acquisition and the value of such gold was not recorded in the books of account, nor the nature and source of its acquisition explained, there could arise no question of treating the value of such gold, which was deemed to be the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of them is absent-if the order of the Income-tax Officer 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) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the Revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner simply because according to him the order should have been written more elaborately. This section does not visualise a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, left to the Commissioner, he would have estimated the income at a higher figure than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It 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 to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has already been concluded and controversy about which has been set at rest, is again set in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authority. There must be materials available from records called for by the Commissioner. -Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC), Sirpur Paper Mills Ltd. vs. ITO 1977 CTR (AP) 138 : (1978) 114 ITR 404 (AP), Dawlee Dadabhoy Co. vs. S.P. Jam Anr. (1957) 31 ITR 872 (Cal) and Russell Properties Pvt. Ltd. vs. A. Chowdhury, Addl. CIT (1977) 109 ITR 229 (Cal) relied on. 9. In view of the above, we are of the opinion that there is a divergent view on the issue of set off of bs loss out of unexplained income u/s.71 of the Act while computing the income of assessee. Being so, the AO had taken one of the possible views, which is supported by the judgement of jurisdictional High Court in the case of Chensign Ventures (supra) and we are of the opinion that the ld.CIT is not justified in exercising the jurisdiction u/s.263 of the Act on this issue. Accordingly, the order of Learned Commissioner of Income Tax u/s.263 of the Act is quashed. 10. I ..... 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