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TMI Blog2006 (10) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... t, merely on the surmise that the order of the Assessing Officer is erroneous or the order is prejudicial to the Revenue, on the ground of change of the lessee. Hence, in our considered opinion, the Tribunal had rightly held that the Commissioner had erroneously exercised the power u/s 263 of the Act. In the instant case, as referred to in the order of the Tribunal, the object clause of the memorandum of association of the assessee/company specifies that the object of the company is to carry on the business of running cinema house and lease out the climate control device and other machineries and as the assessee could not get the no objection certificate for running the cinema house, it was carrying on the business by regularly leasing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business derived from the business of hiring of air conditioners. The Assessing Officer accepted the income as shown in the return. 4. Alleging underassessment of income of the assessee, the Commissioner of Income-tax issued a notice dated January 8, 2004, under section 263 of the Income-tax Act (for brevity, the Act ), to show cause as to why the order of assessment should not be revised, thereby proposing to treat the income derived from the hiring of air conditioners to the marriage halls belonging to the directors of the assessee/company as income from other sources . 5. In response to the said show-cause notice, the assessee submitted that the only business of the assessee from its inception since two decades was leasing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners were hired to other parties and during the impugned assessment year, the assessee had hired the air conditioners to a marriage hall run by one of its directors and as a consequence, set aside the revision order under section 263 of the Act. Hence, the above appeal raising the substantial questions of law referred to above. 8. Since the second question of law raised forms the basis for deciding the issues in this appeal, we propose to deal with both the questions jointly. 9. It is apt to refer section 263 of the Income-tax Act, which provides a revision jurisdiction to the Commissioner to revise the orders prejudicial to the Revenue. Section 263 of the Income-tax Act reads as under : 263. Revision of orders prejudicial to Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f examination by the Commissioner ; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal, filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 High Court of Calcutta in Dawjee Dadabhoy and Co. v. S. P. Jain [1957] 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that what was not prejudicial to the Revenue for two decades cannot be construed as prejudicial to the Revenue for the impugned assessment year, merely because the lessee happens to be one of the directors of the assessee/company, as it is well-settled that the phrase prejudicial to the Revenue must be read in conjunction with an erroneous order. In any event, when there are sufficient materials to support the claim of the assessee to treat the income derived from the hiring of air conditioners as business income for over two decades, the Commissioner has no authority to invoke the revisionary jurisdiction under section 263 of the Act, merely on the surmise that the order of the Assessing Officer is erroneous or the order is p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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