CIT v. DLF Power Ltd. - Taxpublishers.in

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The Tax Publishers2012 TaxPub(DT) 2036 (Del-HC) : (2012) 345 ITR 0446 INCOME TAX ACT, 1961 --Revision under section 263--ValidityAspect of bifurcation of interest income in respect of two units not examined by CIT--For assessment year 2005-06, assessee filed a return declaring loss. Vide assessment order dated 26-12-2007, the assessing officer calculated book profits under section 115JB and assessed gross total income and from that amount allowed deduction under section 80-IA. Some more amounts were added and thereby book profits were ultimately computed at more than Rs. 19 lakhs. Later on, Commissioner issued notice under section 263 as he was of the opinion that deduction under section 80 IA had been wrongly computed by interest credited to Profit and Loss Account. Commissioner recording the finding that there was lack of enquiry and investigation and thus; the order passed by assessing officer was erroneous and prejudicial to the interest of revenue, set aside the assessment order to be redone afresh. Assessee filed an appeal before the Tribunal. The Tribunal quashed the order passed by Commissioner. Thereafter, the Tribunal went into bifurcation of interest income, and examined it on merits and decided whether or not a particular income qualifies for deduction under section 80-IA. Held: An order under section 263 of the Act cannot be set aside on the ground of change of opinion, formed by two different authorities unless both opinions are legally tenable. In the instant case, the Tribunal went into the bifurcation of interest income submitted by assessee and examined it on merits and decided whether or not a particular income qualifies for deduction under section 80-IA. This aspect had not been examined by Commissioner. The right and proper course in the present case was to ask the Commissioner to examine the said factual aspect rather than Tribunal giving their own factual finding without there being factual examination and verification or full or proper rebuttal. In view of the above, the Commissioner will pass a fresh order under section 263. The findings recorded by the Commissioner are clear that there was lack of enquiry and investigation and thus the order passed by assessing officer was erroneous and prejudicial to the interest of the revenue. He did not examine the merits, bifurcation and justification elucidated by the assessee. [Para 6] The assessee filed an appeal before the Tribunal, which had been allowed by the impugned order dt. 7-1-2011. The Tribunal examined nature and character of the interest income on merits including bifurcation and held that the aforesaid income had to be substantially included for computing deduction under section 80-IA. Thus, there was no error in the order passed by the assessing officer and the said order was not erroneous and, therefore, there was no question of prejudice to the revenue. It was stated that these aspects were already examined by the assessing officer at the time of the original assessment and therefore the Commissioner was wrong in holding that the assessing officer had not examined the said issues. Section 263 gives supervisory jurisdiction to the Commissioner to interfere when twin conditions are satisfied, i.e., when the order passed was erroneous and prejudicial to the interest of the Revenue. An order is erroneous, if it involves an error; deviates from law; was contrary to law; upon mistaken view of law or upon erroneous application of legal principle. This decision can be rectified by exercise of revisionary power under section 263. [Para 8] The term 'prejudicial to the interest of the revenue' were of wide import and if the assessing officer fails to apply his mind to the case in the right perspective, there was prejudice to the interest of the Revenue. Loss of revenue may not be the sole criteria. [Para 9] When two views were possible and the assessing officer has taken one view with which the Commissioner did not agree, power under section 263 could not be exercised. This, however, was subject to the condition that view taken by assessing officer is permissible and not erroneous. [Para 10] If the view taken by assessing officer is erroneous, or was not permissible, the order was erroneous and can cause prejudice to the revenue. An order under section 263 cannot be set aside on the ground of change of opinion, formed by two different authorities unless both opinions were legally tenable. The Commissioner, being a higher officer; exercises revisionary and supervisory jurisdiction. When an order was erroneous, he can exercise jurisdiction under section 263 and disagree with the wrong order which is contrary to law. [Para 10] In the present case, the Tribunal had disagreed with the Commissioner and felt that the assessing officer had examined the question and formed an opinion. The finding of the Commissioner that there was lack of enquiry was incorrect. Thereafter, the Tribunal went into the bifurcation of interest income submitted by the assessee and examined it on merits and decided whether or not a particular income qualifies for deduction under section 80-IA. The right and proper course in the present case was to ask the Commissioner to examine the said factual aspect rather than the Tribunal giving their own factual finding without there being factual examination and verification or full and proper rebuttal. [Para 11] The Commissioner will pass a fresh order under section 263 after hearing the assessee. The contentions and issues raised by the assessee will be dealt with by the Commissioner. He shall also examine whether the issue in question was raised before the assessing officer and considered and verified or the course adopted is permissible. If this is correct, then his jurisdiction will be ascribed and limited to the extent of deciding whether the finding is erroneous, i.e., contrary to law, etc. [Para 12] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 2036 (Del-HC) : (2012) 345 ITR 0446

INCOME TAX ACT, 1961

--Revision under section 263--ValidityAspect of bifurcation of interest income in respect of two units not examined by CIT--For assessment year 2005-06, assessee filed a return declaring loss. Vide assessment order dated 26-12-2007, the assessing officer calculated book profits under section 115JB and assessed gross total income and from that amount allowed deduction under section 80-IA. Some more amounts were added and thereby book profits were ultimately computed at more than Rs. 19 lakhs. Later on, Commissioner issued notice under section 263 as he was of the opinion that deduction under section 80 IA had been wrongly computed by interest credited to Profit and Loss Account. Commissioner recording the finding that there was lack of enquiry and investigation and thus; the order passed by assessing officer was erroneous and prejudicial to the interest of revenue, set aside the assessment order to be redone afresh. Assessee filed an appeal before the Tribunal. The Tribunal quashed the order passed by Commissioner. Thereafter, the Tribunal went into bifurcation of interest income, and examined it on merits and decided whether or not a particular income qualifies for deduction under section 80-IA. Held: An order under section 263 of the Act cannot be set aside on the ground of change of opinion, formed by two different authorities unless both opinions are legally tenable. In the instant case, the Tribunal went into the bifurcation of interest income submitted by assessee and examined it on merits and decided whether or not a particular income qualifies for deduction under section 80-IA. This aspect had not been examined by Commissioner. The right and proper course in the present case was to ask the Commissioner to examine the said factual aspect rather than Tribunal giving their own factual finding without there being factual examination and verification or full or proper rebuttal. In view of the above, the Commissioner will pass a fresh order under section 263.

The findings recorded by the Commissioner are clear that there was lack of enquiry and investigation and thus the order passed by assessing officer was erroneous and prejudicial to the interest of the revenue. He did not examine the merits, bifurcation and justification elucidated by the assessee. [Para 6] The assessee filed an appeal before the Tribunal, which had been allowed by the impugned order dt. 7-1-2011. The Tribunal examined nature and character of the interest income on merits including bifurcation and held that the aforesaid income had to be substantially included for computing deduction under section 80-IA. Thus, there was no error in the order passed by the assessing officer and the said order was not erroneous and, therefore, there was no question of prejudice to the revenue. It was stated that these aspects were already examined by the assessing officer at the time of the original assessment and therefore the Commissioner was wrong in holding that the assessing officer had not examined the said issues. Section 263 gives supervisory jurisdiction to the Commissioner to interfere when twin conditions are satisfied, i.e., when the order passed was erroneous and prejudicial to the interest of the Revenue. An order is erroneous, if it involves an error; deviates from law; was contrary to law; upon mistaken view of law or upon erroneous application of legal principle. This decision can be rectified by exercise of revisionary power under section 263. [Para 8] The term 'prejudicial to the interest of the revenue' were of wide import and if the assessing officer fails to apply his mind to the case in the right perspective, there was prejudice to the interest of the Revenue. Loss of revenue may not be the sole criteria. [Para 9] When two views were possible and the assessing officer has taken one view with which the Commissioner did not agree, power under section 263 could not be exercised. This, however, was subject to the condition that view taken by assessing officer is permissible and not erroneous. [Para 10] If the view taken by assessing officer is erroneous, or was not permissible, the order was erroneous and can cause prejudice to the revenue. An order under section 263 cannot be set aside on the ground of change of opinion, formed by two different authorities unless both opinions were legally tenable. The Commissioner, being a higher officer; exercises revisionary and supervisory jurisdiction. When an order was erroneous, he can exercise jurisdiction under section 263 and disagree with the wrong order which is contrary to law. [Para 10] In the present case, the Tribunal had disagreed with the Commissioner and felt that the assessing officer had examined the question and formed an opinion. The finding of the Commissioner that there was lack of enquiry was incorrect. Thereafter, the Tribunal went into the bifurcation of interest income submitted by the assessee and examined it on merits and decided whether or not a particular income qualifies for deduction under section 80-IA. The right and proper course in the present case was to ask the Commissioner to examine the said factual aspect rather than the Tribunal giving their own factual finding without there being factual examination and verification or full and proper rebuttal. [Para 11] The Commissioner will pass a fresh order under section 263 after hearing the assessee. The contentions and issues raised by the assessee will be dealt with by the Commissioner. He shall also examine whether the issue in question was raised before the assessing officer and considered and verified or the course adopted is permissible. If this is correct, then his jurisdiction will be ascribed and limited to the extent of deciding whether the finding is erroneous, i.e., contrary to law, etc. [Para 12]