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TMI Blog2024 (5) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be firstly erroneous and by virtue of the order being erroneous prejudice has been caused to the interests of the revenue. Both the conditions has to be satisfied. The satisfaction must be on the material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present and that if the action of the authority is challenged before the Court it would be open to the Courts to examine whether the relevant objective factors were available from records called for and examined by such authority. In Baijnath Biswanath vs. State of Assam [ 1998 (7) TMI 678 - GAUHATI HIGH COURT ] this Hon'ble Court held that the suo moto power of revision conferred on the Commissioner cannot be exercised mechanically or at the behest of some other authority other than on the own discretion of the assigned Officer. Commissioner is authorized to take any decision as he deems fit and is free to draw any interference from the facts available. The Commissioner, however, is to act on factual material and not on conjectures, assumptions and presumptions, else the decision will suffer from the vice of perversity. In the present case the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 declaring a total income of Rs. 43,95,310/- (Rupees Forty-three lakh ninety-five thousand three hundred ten) only. Later, vide Notice No. ITBA/AST/S/143(2)/2018-19/1010911976(1) dated 09.08.2018 under Section 143(2) of the Act, the case of the petitioner was selected for limited scrutiny under Computer Assisted Scrutiny Selection ( CASS ). During the course of assessment proceedings, Show Cause Notice dated 29.09.2018 was issued by the then Assessing Officer (i.e. predecessor of respondent No. 4) and the same was duly replied to vide letter dated 19.12.2018 by the petitioner. Thereafter, the then Assessing Officer (i.e. predecessor of respondent No. 4) passed the final assessment under Section 153D/143 (3) of the Act vide Assessment Order dated 28.12.2018, accepting the returned income of Rs. 43,95,310/- (Rupees Forty-three ninety-five thousand three hundred ten) only. 4. However, later, after completion of Assessment, vide Show Cause Notice No. ITBA/REV/F/REV-1/2020-21/1031736689(1) dated 24.03.2021 (received by the petitioner through Email at 20:14 PM) the respondent No. 2 directed the petitioner to show cause as to why order should not be passed under Section 263 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the revenue, the Commissioner cannot exercise power under section 263 of the Act. He accordingly submits that an order can be said to be erroneous or prejudicial to the interest of revenue only in accordance with law. 9. He further submits that there must be material available on record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If the aforesaid two conditions are not present, the Commissioner shall have no authority to initiate proceedings under section 263 of the Act inasmuch as exercise of powers under section 263 for suo moto revision under such circumstances will amount to arbitrary exercise of powers. 10. He further submits that it is well settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy it in that regard. 11. He thus submits that both the twin conditions need to be satisfied before assumption of valid jurisdiction under Section 263 of the Act. 12. He further submits that the respondent No. 2 in his impugned order dated 28.03.2021 has undisputedly failed to establish as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 4 to make the assessment afresh after examining all the issues/aspects involved in the case properly and after making detailed enquiry and after affording a reasonable opportunity of being heard to the assessee. 18. The questions that falls for determination is as whether the Assessment Order dated 28.12.2018 can be said to be erroneous and prejudicial to the interest of the revenue for non-disclosure of Rs. 5,30,257 as long-term profit in the computation sheet though the same is shown in the capital account, warranting exercise of revisional jurisdiction under section 263 of the Act. 19. Pertinent to refer to Section 263 of the Act, which provides for revision of orders prejudicial to revenue. Section 263 is reproduced below for the sake of convenience- Revision of orders prejudicial to revenue. 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find that the expressions erroneous , erroneous assessment , and erroneous judgment have been defined in Black's Law Dictionary. According to definitions Erroneous means involving error; deviating from the law . Erroneous assessment refers to an assessment that deviates from the law and is therefore invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the assessing officer in fixing the amount of valuation of the property. Similarly 'erroneous judgment' means: 'One rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles . 23. This Hon'ble Court in Rajendra Singh (supra) in paragraph 10 further held as under: From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an officer acting in accordance with law makes certain assessment and determines the turnover of a dealer, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. 24. Thereafter, another Division Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one view for the other, merely on the ground that a different view was possible. If read as a whole, the judgment does not exclude error in assessment order, by ignoring relevant material. Not holding such inquiry as is normal and not applying mind to relevant material would certainly be 'erroneous' assessment warranting exercise of revisional jurisdiction. Judgment has to be read as a whole and an observation during the course of reasoning in the judgment should not be divorced from the context in which it was used. The judgment is neither to be interpreted as an Act of Parliament nor as a holy book. If this principle is kept in mind, we do not find any conflict in the view taken in Rajendra Singh and Daga Entrade (P.) Ltd. Disagreement in Daga Entrade (P.) Ltd. is only to the interpretation which limits the ratio of the judgment by relying only one sentence in isolation divorced from the entire judgment an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being 'erroneous' non-application of mind and omission to follow natural justice is in same category. 23. Accordingly, we hold that Daga Entrade (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable manner could have come to such a conclusion. The very initiation of proceedings by him will be illegal and without jurisdiction. It was further held that the Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. In the aforesaid case, the Bombay High Court held as under: From a reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263 is a quasi-judicial power hedged with limitation and has to be exercised subject to the same and within its scope and ambit. 30. Section 263 of the Act would not be invoked merely to correct a mistake or error committed by the Assessing Officer unless it has caused prejudice to the interests of the revenue. If an order is based on incorrect assumption of facts or on incorrect application of law or without applying the principles of natural justice and without application of mind, it would be treated as erroneous. If due to an erroneous order of the Assessing Officer the Revenue is losing tax lawfully payable by a person, it would be certainly prejudicial to the interests of the Revenue. Reference is made to the decision of Delhi High Court in CIT v. Leisure Wear Exports Ltd., (2012) 341 ITR 166 (Del). 31. In the present case, the suo moto revisional proceeding was initiated on the basis of a proposal under section 263 of the Act dated 22.03.2021 submitted by the Assistant Commissioner of Income Tax which was duly forwarded by the Joint Commissioner of Income Tax. On the basis of the said proposal, the notice of hearing under section 263 of the Act dated 28.12.2018 was issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with law in consequences of which the State is deprived of its lawful revenue. The power reposed on the Commissioner, no doubt, is a power of judicial nature and therefore such power is to be exercised lawfully and with due application of mind. The power cannot be exercised mechanically or at the behest of some other authority other than on the own discretion of the assigned officer. The Commissioner, therefore, is not to exercise his discretion on the dictation of some other authority. 34. It was further held that the Commissioner is authorized to take any decision as he deems fit and is free to draw any interference from the facts available. The Commissioner, however, is to act on factual material and not on conjectures, assumptions and presumptions, else the decision will suffer from the vice of perversity. 35. In the present case the learned Principal Commissioner of Income Tax has initiated the proceedings simply on the basis of the proposal of the subordinate authority and has not applied his mind after perusal of the records called for by him and thereby the very initiation of the proceeding in the instant case is illegal, without jurisdiction and not tenable in law. In th ..... 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