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TMI Blog2020 (1) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim; (iii) the order is not in accordance with any direction or instructions etc. issued by the Board u/s 119; or (iv) the order was not in accordance with binding judicial precedent. However, the said explanation would come into play only if the primary conditions i.e. order being erroneous and prejudicial to interest of revenue, were fulfilled. Applying the above principles to the case in hand, we find that a view was already taken by Ld. AO in the issues which from subject matter of revision u/s 263 and the said view could not be held to be illegal or unsustainable in law, in any manner and therefore, the exercise of jurisdiction u/s 263 would be invalid in such a case. If Ld. AO adopted one of the possible views, the Ld. Pr.CIT, in our considered opinion, would be ousted to exercise jurisdiction u/s 263. Therefore, by quashing the impugned order, we allow assessee s appeal. - I.T.A. No.2593/Mum/2018 - - - Dated:- 3-1-2020 - Shri Saktijit Dey, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : S/Shri Paras Nath And Jitendra Trivedi-Ld. ARs For the Revenue : Shri Anadi Varma-Ld.CIT-DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous and prejudicial to revenue by not appreciating the fact that Id. AO has passed the order after making detailed enquiries and also following the categorical findings of his senior authority i.e., order of Id. CIT [A) in AY 2011-12 and 2012-13 and therefore, ld. Pr. CIT has erred in holding that order passed by Id. AO is erroneous and prejudicial to the interest of revenue. 1.5. Ld. Pr. CIT has erred in holding that order passed by Id. AO is erroneous and prejudicial to interest of revenue, without appreciating that an order based on an interpretation of law where two different views are possible, the order shall not be considered as erroneous and prejudice to the revenue. Hence, Appeal. 2. Without prejudice to Ground No 1, Id. Pr. CIT has erred in law as well as on facts in considering the interest income as 'Income from Other Sources' under section 56 of the Act, without appreciating the submissions of Appellant and favorable CIT (A) order in Appellant own case for AY 2011-12 and AY 2012-13. Hence, Appeal. 2. We have heard rival submissions, perused relevant material on record including jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AO failed to verify the same during regular assessment proceedings, therefore the quantum assessment order was erroneous and prejudicial to revenue within the meaning of Sec. 263. 3.3 The assessee, in defense of quantum assessment order, submitted that Ld. AO vide point No. 10 of notice u/s 142(1) dated 14/09/2015 raised specific query as to why interest on loans should not be considered as income from other sources . The query was duly responded to by the assessee vide letter dated 12/02/2016 wherein the assessee submitted detailed explanation along-with supporting judicial decisions in relation to said query. After verifying the same, Ld. AO passed assessment order accepting the interest income as business income . Therefore, since the matter was specifically verified by Ld.AO during the course of scrutiny assessment proceedings and therefore, the said order could no be termed as erroneous or prejudicial to the revenue which would require revisions u/s 263. 3.4 However, not convinced, Ld. Pr. CIT chose to rely upon the decision of Hon ble Supreme Court rendered in Malabar Industrial Co. V/s CIT [243 ITR 83 10/02/2000] and made observation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s reply thereto would not be sufficient rather there should be proper application of mind on the part of Ld. AO to the issue in hand before it could be said that a view was taken in the matter. If Ld. AO failed to apply his mind to the subject matter, the order would certainly become erroneous warranting revisional jurisdiction u/s 263. 4.2 After going through queries raised by Ld. AO during regular assessment proceedings, we find that vide notice u/s 142(1) dated 14/09/2015, a specific query was raised by Ld. AO regarding chargeability of interest income, in the following manner: - 10. Please explain as to why interest income earned should not be taxed under head Income from Other Sources and also that why expenses, which were not incurred wholly exclusively for earning of such interest income should not be disallowed while working out you taxable income for the year under consideration. In response, the assessee vide submissions dated 12/02/2016, inter-alia, drew attention to the fact that borrowings and grant of loans by assessee were well within the permitted objects as per Memorandum of Association of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue - recourse cannot be had to Section 263 of the Act as held by Hon ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] noted by Hon ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. The Hon ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue' has to be 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 does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualized where the Income-tax Officer 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 estimate 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 figure higher than the one determined by the Income-tax Officer. 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 Income-tax Officer has exercised the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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