I-T - If assessment order contains grievous error & is subversive of Revenue's interests, it falls within ambit of erroneous order u/s 263: ITAT
By TIOL News Service
MUMBAI, MAR 06, 2019: THE ISSUE IS - Whether an assessment order which contains grievous error & is subversive of the Revenue's interests, falls within the ambit of 'erroneous order' u/s 263. YES IS THE ANSWER.
Facts of the case
THE assessee- Company engaged in the business of producing feature films/TV serials declared nil income in its return. The assessee was then served with notices u/s 143(2) & u/s 142(1) along with questionnaire. The assessment was framed u/s 143(3). However, Pr. CIT, invoking the revisional jurisdiction u/s 263, observed that a loan was taken by the assessee, the genuineness of which was neither examined nor questioned by the AO. In consonance of the same, Pr. CIT held that as the creditworthiness of the loan transaction was not proved, the assessment was erroneous and prejudicial to the interest of the Revenue. The AO was directed to pass fresh assessment order after considering the assessee's claims. In furtherance of the same, the assessee approached the ITAT against the order of the Pr. Commissioner of Income Tax. The assessee claimed that the source of loan and its genuineness was already examined by the AO & hence there was no case against him.
On appeal, the ITAT held that,
++ admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase "prejudicial to the interest of the Revenue" u/s. 263, has to be read in conjunction with the expression "erroneous" order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue, meaning thereby, "prejudice" must be prejudice to the Revenue administration. At the same time, if another view is possible, revision is not permissible. This view is fortified by the decision from Himachal Pradesh Financial Corp., Bismillah Trading Co. and CIT vs. Green World Corpn.. For invoking revisional jurisdiction u/s. 263 of the Act, the assessment order must contain grievous error which is subversive of the administration of Revenue. Further, exact error must be disclosed by the Commissioner as was held in CIT vs. G.K. Kabra. Section 263 of the Act enables the Commissioner to have a re-look at the orders or proceedings of the lower authority to effect correction, if so needed, particularly, if the order is erroneous and prejudicial to the interest of the Revenue. The object of the provision is to raise revenue for the state and section 263 is enabling provision conferring jurisdiction upon the Commissioner to revise the order;
++ if the judicial pronouncements are kept in juxtaposition with the facts of the present appeal and analyzed, the Assessing Officer while framing the assessment made no discussion with the claim of the assessee and simply framed the assessment in a slip shot manner. Such an approach of the Assessing Officer cannot be appreciated. Thus, it is clear that the assessment order was passed without verification, application of mind, consequently, it is erroneous as well as prejudicial to the interest of the Revenue, consequently, the revisional jurisdiction was rightly invoked.
++ whether the assessment order is erroneous as well as prejudicial to the interest of Revenue. The Pr. CIT observed that the Assessing Officer should have made enquiries/verification, to satisfy himself with respect to the creditworthiness of the lender and genuineness of the transactions before framing the assessment, thus, the Assessing Officer was directed to pass fresh assessment order after providing due opportunity of being heard to the assessee. Even the direction by the Pr. Commissioner to the Assessing Officer, is not going to cause any prejudice to the assessee because the direction has been issued to the Assessing Officer to examine the genuineness of the loan and after providing due opportunity of being heard to the assessee, the assessment be reframed. The assessee is at liberty to substantiate its claim, thus, there is no infirmity in the order, resultantly, the appeal of the assessee is without any merit, consequently, dismissed.
(See 2019-TIOL-584-ITAT-MUM )
