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TMI Blog2023 (4) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to the interests of the Revenue. Only in a case where two views are possible and the Assessing Officer has adopted one view, such a decision, which might be plausible and it has resulted in loss of Revenue, such an order is not revisable u/s 263. Applying the law laid down by this Court in the case of Malabar Industrial Co. Ltd. (supra) to the facts of the case on hand and even as observed by the Commissioner, the order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of the Revenue. Assessment order was not only erroneous but prejudicial to the interest of the Revenue also. In the facts and circumstances of the case, it cannot be said that the Commissioner exercised the jurisdiction u/s 263 not vested in it. The erroneous assessment order has resulted into loss of the Revenue in the form of tax. High Court has committed a very serious error in setting aside the order passed by the Commissioner passed in exercise of powers under Section 263 of the Income Tax Act. Thus order passed by the High Court is hereby quashed and set aside and that the order passed by the Commissioner passed in exercise of powers under Section 263 of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumbrances on computation of capital gains. On the balance amount capital gain tax was offered and paid. The assessment was completed on 15.12.2019 by the AO under Section 143(3) of the Income Tax Act (for short IT Act ) accepting the long term capital gains as per sheet attached in computation of income. 3.2 However, a notice dated 24.10.2011 was issued by the Commissioner of Income Tax-7 under Section 263 of the IT Act to show cause as to why the assessment order should not be set aside under Section 263 of the IT Act. The Commissioner vide its order dated 24.11.2011 held that the assessment order passed under Section 143(3) of the IT Act was erroneous and prejudicial to the interest of the revenue on the issue relating to deduction of Rs.31.05 Crores claimed by the assessee as cost of improvement while computing long term capital gains. The claim of the assessee that the said payment was made by them towards settlement of litigation, which according to the assessee amounted to discharge of encumbrances and required to be considered as cost of improvement, was not accepted by the Commissioner as according to him it did not fall under the definition of cost of improvement containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was for ending the litigation and the litigation ended only when the building was sold and the payment was made as per the direction of the Company Law Board as well as the interim arbitral award and therefore, the same was deductible under Section 55(1)(b) of the IT Act, as allowed by the AO. 3.6 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court dismissing the appeal preferred by the Revenue and confirming the order passed by the ITAT by which the ITAT set aside the order passed by the Commissioner passed under Section 263 of the IT Act, the Revenue has filed the present appeal. 4. Shri Balbir Singh, learned ASG appearing on behalf of the Revenue has vehemently submitted that the High Court has materially erred in dismissing the appeal preferred by the Revenue and confirming the order passed by the ITAT by which the ITAT set aside the order passed by the Commissioner passed in exercise of powers under Section 263 of the IT Act. 4.1 It is submitted that the High Court has not at all appreciated the fact that the view taken by the AO in allowing the expenses of Rs.31.05 Crores while computing the capital gain from sale of the land was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of the assessee and hence, capital gains on that part of the asset sold is required to be taxed as per the provisions of Section 50A of the IT Act and hence, the entire order of Commissioner of Income Tax could not have been set aside. Making above submissions it is requested to allow the present Appeal. 5. Present appeal is vehemently opposed by Shri Firoze Andhyarujina, learned Senior Advocate appearing on behalf of the assessee. 5.1 It is vehemently submitted by learned Counsel appearing on behalf of the assessee that in the facts and circumstances of the case, no error has been committed by the High Court in upholding the order passed by the ITAT setting aside the order passed by the Commissioner holding that the Commissioner wrongly exercised the revisional powers under Section 263 of the IT Act. 5.2 It is submitted that the High Court relying upon the law laid down by this Court in the case of Malabar Industrial Co. Ltd. (supra) has specifically held that the Appellate Tribunal rightly considered the orders of assessment and the order of the Commissioner and thereafter concluded that Commissioner wrongly assumed the power under Section 263 of the IT Act. 5.3 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case the shareholders have been paid Rs.10.35 Crores each. It is submitted that the said payment was made by the Company for (i) smooth running and functioning of the business; (ii) to put an end to litigation amongst the shareholders; (iii) to preserve the assets of the company; (iv) to ensure that there is continuity and safeguard and, amicable settlement amongst the brother and two sisters, who are the shareholders of the company and (v) to remove encumbrances on the property. It is submitted that therefore the payment was necessitated and sanctioned and approved as per the orders of the High Court and the arbitration award as well as shareholders themselves. It is submitted that infact in the interim award there was a specific clause which entitles the Company to sell the assets to discharge the liabilities. It is submitted that as per the arbitration award, the claims have to be paid off of the shareholders. This was an encumbrance which has to be discharged pursuant to the orders of the Court and arbitration award. Paville House was therefore required to be sold to discharge the encumbrances and from sale proceeds to pay off the shareholders and therefore, the dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1975) 98 ITR 422 (Kant)] , the High Court of Bombay in CIT v. Gabriel India Ltd. [(1993) 203 ITR 108 (Bom)] and the High Court of Gujarat in CIT v. Minalben S. Parikh [(1995) 215 ITR 81 (Guj)] treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT [(1987) 163 ITR 129 (Mad)] interpreting prejudicial to the interests of the Revenue . The High Court held: In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration. In our view this interpretation is too narrow to merit acceptance. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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