9911796707
TMI Blog2021 (12) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 11.3.2016. The alleged loss of revenue to the tune of ₹ 216,89,00,773/- has already been brought to tax by the revenue in the order dated 30.3.2015 in the reassessment proceedings. Hon'ble Karnataka High Court in the case of V. G. Krishnamurthy [ 1984 (3) TMI 28 - KARNATAKA HIGH COURT] has held that Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue.Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading, manufacturing and sale of computer hardware and peripheral products. The Assessee filed its return of income on 30 September 2009 for AY 2009-10 declaring a loss from business amounting to ₹ 3,956,399. During the assessment proceedings, the Assessee was asked to explain as to why there is a difference in the sales as per sales tax return as compared to sales revenue disclosed in the financial statement. The Assessee explained that it offers post sales warranty services as well as post sales maintenance and services. The sale price includes warranty charges and post sale maintenance for the period beyond the relevant AY. It was specifically submitted that revenue from extended warranty service contracts, which spreads over tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to demonstrate that it has offered to tax substantial amount out of ₹ 2,168,900,773, however, it was mentioned that there is no concept of deferred revenue under the Income-tax Act and accordingly the order u/s 147 of the Act was passed on 30 March 2015 by making an adjustment for deferred revenue of ₹ 2,168,900,773. 4. Subsequently, the Assessee challenged the re-assessment proceedings and filed a writ petition before the High Court contending that since there is a change of opinion, tie initiation of re-assessment proceedings is null and void. The writ petition was dismissed by the single member bench and hence the Appellant filed a writ appeal before the High Court of Karnataka against the order of Honourable single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. In fact by virtue of the order dated 30.3.2015 passed u/s.147 of the Act, the deferred revenue was already brought to tax. There was no prejudice or loss to the revenue whatsoever when the show cause notice u/s.263 of the Act, dated 22.1.2016 was issued by the CIT and when the CIT passed the impugned order dated 11.3.2016. The alleged loss of revenue to the tune of ₹ 216,89,00,773/- has already been brought to tax by the revenue in the order dated 30.3.2015 in the reassessment proceedings. 7. The law is well settled that by the decision of the Hon'bIe Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC), wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65 has held that Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue.Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivable error committed by an ITO. Before the suo moto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that the order sought to be revised is prima fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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