ETA Star Infopark Vs PCIT (ITAT Bangalore)
ITAT Bangalore held that AO allowed the claim of assessee after due application of mind and on proper consideration of the material available on record. Therefore, the order of Ld. CIT passed u/s 263 of the Act cannot be sustained.
Facts- Prior to issuing the aforesaid notice u/s 133C of the Act, the learned Income Tax Officer had telephonically called the appellant to furnish copies of the Joint Development Agreement, relevant Power of Attorneys executed in favour of the Developer and also copies of Partnership Deed for his verification and in response to the same, the appellant had submitted all such documents.
AO, after finding that the appellant has not done any business activity and nor earned any income from business during the A.Y.2015-16, the AO had sought the approval of the Principal Commissioner of Income-tax to convert the limited scrutiny into complete scrutiny for disallowing the general and establishment expenses claimed as deduction by the appellant in the Return.
The learned Pr.CIT, after examining the records of the appellant and found that the appellant had neither carried out any business activities and nor earned any income from business, accorded approval to convert the assessment proceedings into complete scrutiny, for disallowing the general and administrative expenses claimed by the appellant as a deduction in the return.
Conclusion- Hon’ble Karnataka High Court in the case of CIT Vs. Cyber Park Development & Construction Ltd. (276 Taxmann 460), wherein held that when the AO allowed the claim of assessee after due application of mind and on proper consideration of the material available on record, the order passed by AO can neither said to be erroneous nor prejudicial to the interests of revenue. Therefore, the order of Ld. CIT passed u/s 263 of the Act cannot be sustained.
Held that considering the totality of the facts and circumstances of the case, in our opinion, there was proper examination of the issue disputed by Ld. PCIT by AO at the stage of assessment and the Ld. PCIT cannot find fault with the action of the AO in accepting the claim of assessee that income arose out of the JDA dated 28.3.2011 to be treated as business income instead of Long term capital gain offered by assessee.
The assessee offered entire revenue received from developer through escrow collection account towards land contribution after deducting nominal land cost for tax as long term capital gain and no proportionate cost for development and construction of flats to the extent of its revenue share is being deducted from the said revenue. Hence, it is a capital gains derived from sale of lands/UDS under JDA.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Per Chandra Poojari, Accountant Member:
ITA Nos.415/Bang/2020 and 248/Bang/2020 are appeals by the assessee directed against the orders of PCIT dated 18.12.2017 and 30.03.2021 for the assessment year 2015-16 and 2016-17 respectively, passed under section 263 of the Income-tax Act,1961 [‘the Act’ for short]. Since the issues in both the appeals are common in nature, these appeals are heard and disposed off together for the sake of convenience. First, we will take up ITA No.415/Bang/2020 for adjudication. The grounds of appeal in ITA No.415/Bang/2020 are as follows:-
1. “The order of the learned Pr. Commissioner of Income Tax, Bangalore passed under section 263 of the Income Tax Act dated 18/03/2020 for Assessment Year 2015-16 in so far as it is against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case.
2. The learned Pr. Commissioner of Income-tax has grossly erred in revising the order passed by the learned Assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned Pr. Commissioner of Income Tax is ultra vires to the scope of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant’s case. The direction to make fresh assessment amounts to ordering for making fishing and roving enquiries without any material in support thereof and consequently the impugned order passed is bad in law is liable to be cancelled.
3. The Learned Principal Commissioner of Income Tax ought to have appreciated that regarding the issue relating to long term capital gains the view adopted by the Assessing Officer is one of the possible views and hence the assessment order is not erroneous on the facts and circumstances of the case.
4. The Learned Pr. Commissioner of Income Tax failed to appreciate that the case of the appellant was selected for scrutiny to verify the claim of the appellant regarding examination of Long Term Capital Gains as per the scrutiny notice issued by the Assessing Officer and consequently erred in holding that the Assessing Officer has not examined the activity of the appellant on the facts and circumstances of the case.
5. The learned Pr. Commissioner of Income Tax is not justified in exercising revisionary powers under section 263 of the Act as the entire proceeding is without jurisdiction and not in accordance with law on the facts and circumstances of the case.
6. The learned Pr. Commissioner of Income Tax is not justified in law in setting aside assessment order passed u/s 143(3) of the Act by holding that the assessment order is erroneous and prejudicial to the interest of revenue on the facts and circumstances of the case.
7. The learned Pr. Commissioner of Income Tax was not justified in law holding that the income earned by the appellant from the sale of land is taxable under the head income from business instead under the head Income from Capital Gains, on the facts and circumstances of the case of the appellant.
8. The Learned Pr. Commissioner of Income Tax erred in holding that the Assessing Officer has not verified the issue of short term capital gains shown in the computation of income which is not part of the notice issued under Section 263 of the Act and consequently the entire order passed under Section 263 of the Act is bad in law on the facts and circumstances of the case.
9. The learned Pr. Commissioner of Income Tax grossly erred in holding that the activity entered into by the appellant with the Developer is that of an adventure in the nature of trade on the facts and circumstances of the case.
10. Learned Pr. Commissioner of Income Tax erred in invoking clause (a) to Explanation – 2 to Section 263 of the Act for passing order under Section 263 of the Act which was not put in the notice under Section 263 of the Act and consequently the order u/ s 263 of the Act is in violation of the principles of natural justice.
11. The learned Pr. Commissioner of Income-tax failed to consider the entire objections dated 10/03/2020, notice issued under Section 263 of the Act and the decisions relied by the appellant in its submissions on the facts and circumstances of the case.
12. The Learned Pr. Commissioner erred in directing the Assessing Officer to consider the income offered under -the head Long Term Capital Gains as business income on the facts and circumstances of the case.
13. The learned Pr. Commissioner of Income-tax erred in holding that twin conditions contemplated in section 263 of the Act are satisfied in the present case on the facts and circumstances of the case.
14. The appellant craves leave of this Hon’ble Tribunal, to add, alter, delete, amend, or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing.
15. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
Legal grounds: Findings:-
2. Ground Nos.1 to 6, 10, 11 & 13 are relating to validity of exercise of jurisdiction by Ld. Principal CIT u/s 263 of the Act. Hence, these grounds are clubbed together and adjudicated collectively.
A.R’s Submissions for the A.Y. 2015-16 on legal issue:
2.1 Original Scrutiny Proceedings u/s.143(3) of the Act before the Assessing Officer. Firstly, certain information relating to AYs 2009-10 to 2015-16 (including JDA dated 28-3-2011, ITRs and audited financial statements) were called for u/s 133C of the Act for verification by prescribed authority.
2.2 On filing the Return of Income for A.Y.2015-16 on 02.09.2015, initially, the Income-tax Officer, Ward-1(2)(3), Bangalore vide letter dated 11-2-2016 had called for certain information under provisions of section 133C of the Act. In response to said notice, the appellant vide letter dated 17-2-2016 had furnished copies of ITRs from A.Ys.2009-10 to 2015-16 along with all audited financial statements, etc. for all these Assessment Years, for verification of the prescribed authority u/s.133C of the Act. Prior to issuing the aforesaid notice u/s 133C dated 11-2-2016, the learned Income Tax Officer had telephonically called the appellant to furnish copies of the Joint Development Agreement dated 28-3-2011, relevant Power of Attorneys executed in favour of the Developer and also copies of Partnership Deed for his verification and in response to the same, the appellant had submitted all such documents to him.
2.3 Subsequently, the appellant case was initially selected for limited scrutiny vide notice u/s. 143(2) dated 19-9-2016 to examine the following issues:-
(i) Long-term Capital Gain
(ii) Mismatch in income/capital gain on sale of land or building
2.4 In response to said notice, the appellant vide its letter dated 27-9-2016 submitted copies of ITR, Statement of Total Income, audited Financial Statements, etc. to the learned Assessing Officer.
2.5 During the course of assessment proceedings, the learned AO had called for additional details vide notice u/s 142(1) rws 129 dated 4-8-2017 & 10-11-2017 and had also raised a specific query regarding the details of business carried out by the appellant during AY.2015-16. The appellant vide its reply dated 22-8-2017 informed the AO that “The Assessee does not carry out business activities during the FY ended 31.03.2015. The assessee has returned the long-term capital gains for sale of land and interest on deposits during the relevant previous year.” The learned AO has reproduced this reply of the appellant in para 4.2 of the assessment order dated 18-122017.
2.6 The learned AO vide letter dated 10-11-2017 asked the appellant to explain as there is no business activities carried out during the relevant FY 2014-15, for what business purpose the assessee has claimed by way of deduction certain expenses in the return of income? The appellant vide its letter dated 15-11-2017 submitted a detailed reply to the said query. The gist of its reply is reproduced in para 4.4 of the assessment order dated 18-12-2017 by the learned AO.
2.7 When the learned AO, after finding that the appellant has not done any business activity and nor earned any income from business during the A.Y.2015-16, the AO had sought the approval of the then Principal Commissioner of Income-tax-1, Bengaluru (PCIT-1) to convert the limited scrutiny into complete scrutiny for disallowing the general & establishment expenses claimed as deduction by the appellant in the Return.
2.8 The learned Pr.CIT-1, after examining the records of the appellant and finding that the appellant had neither carried out any business activities and nor earned any income from business, accorded his approval to convert the assessment proceedings into complete scrutiny, for disallowing the general & administrative expenses claimed by the appellant as a deduction in the return.
2.9 On verification of the details furnished by the appellant in the course of assessment proceedings, as described above, the learned A.O. had passed the assessment order dated 18-12-2017 accepting the Long term Capital gains and Interest income returned by the appellant. Since the appellant has not had any business activity and no business income earned in AY 2015-16, learned AO had disallowed the expenses claimed by the appellant amounting to Rs.51,74,991/-.
2.10 From the above facts, it is obvious that the Return of Incomes, audited Financial Statements, Joint Development Agreement and other relevant records of the appellant have been verified & scrutinized at following three levels before the assessment order is passed by learned A.O. –
i) first by the prescribed authority u/s.133C of the Act,
ii) secondly by learned Assessing Officer (AO) during scrutiny proceedings u/s.143(3) of the Act, and
iii) thirdly by then learned Pr.CIT-1, while granting approval for converting the limited scrutiny into complete scrutiny on a reference by the learned AO.
2.11 On scrutiny of the records of the appellant, all the above mentioned Authorities have found that the income received from the JDA by the appellant as a Landowner pursuant to JDA terms, is longterm capital gains taxable u/s.45(1) of the Act. On completion of scrutiny proceedings, the learned AO has accepted the LTCG returned by the appellant for A.Y.2015-16. As mentioned in the assessment order dated 18-12-2017, during scrutiny proceedings, five hearings were taken place, i.e. on 19/09/2016, 4/8/2017, 14/8/2017 and 11/10/2017. In the course of assessment proceedings, the learned AO and on a reference, the then learned Pr.CIT-1 have found that the appellant had not carried out any business activities and not earned any income from business during A.Y.2015-16. As such, in the absence of income from business, the learned A.O. had disallowed the general & establishment expenses of Rs.51,74,991/- claimed by the appellant as deduction in the ITR, relying the concept on “matching principle” followed in Accounting Standards.
2.12. It was submitted by Ld. A.R. that as explained herein above, during the course of assessment proceedings, the learned A.O. has made detailed inquiries and ascertained the details of business activities carried out by the appellant during AY 2015-16. The learned AO has found that the appellant has not done any business activity and not derived any income from business during the year. Hence, the learned AO has accepted the Long-term Capital gains and interest income, as returned by the appellant and disallowed the general & establishment expenses due to NIL business income and no business activity.
2.13 According to Ld. A.R., the learned AO being conscious and well aware of the nature of business of the appellant has stated in the assessment order dated 18.12.2017 (at Sr. No.10 of page-1) as “Income from capital gains” The learned A.O. having gone through the records and satisfied that income from Capital gains returned by the appellant was accepted without any additions or deletions under the jurisdictions and guidance of the higher authorities.
2.14 In the Assessment Order, the following observations made by the learned AO corroborates the fact that the learned A.O. had scrutinized the records of the appellant comprehensively in arriving at a conclusion that the appellant has neither carried out any business activities nor earned any income from business during the A.Y.2015-16:-
i) At Sl. 10 of Page-1 of the assessment order, the “Nature of Business” has been mentioned as “Income from Capital Gains.”
ii) In para 4.1 “4.1 After perusal of the submitted documents, it is observed that the assesse has “NIL” business income during F.Y.2015-2016. However, the assesse is claiming the following expenditures:
ii) In para 4.5 “5 After going through the submissions, the assessee has placed reliance on Madras High Court case CIT vs Electron India (241 ITR 166). In the referred case, the assessee is a manufacturing concern engaged in the manufacturing of cadmium sulphide sale. However, there were no sales during the year. However, in the present case, the assessee firm is engaged in the business of real estate development and there is no business activity performed during the relevant previous year. Hence the case law relied by the assessee firm cannot be applicable in the present case.”
iv) In Para-5.2 “5.2 During the scrutiny proceedings, it is noticed that the assessee is showing NIL income in his P&L Account for A.Y.2015-2016. It was also noticed that the assessee is claiming business expenses to the extent of Rs.51,74,991/-. In the absence of any business activity, the same may be added back to the total income of the assessee. Since none of the CASS reason is about business expenses, a proposal was sent to Pr.CIT-1, Bengaluru on 412-2017 to convert scrutiny assessment from limited to complete. The revenue potential is above Rs.10 Lakhs, as prescribed vide CBDT instruction No.7/2014 dated 26/09/2014. The approval for the same was accorded by Pr.CIT-1, Bengaluru vide letter dated 8/12/2017 received in this office on 13/12/2017.”
v) “6. Conclusion
6.1. Under the provisions of section 37(1) any expenditure laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head “Profits and Gains of Business or Profession.” As there is no corresponding business income during the relevant financial year 2014-15, the business expenses claimed by the assessee in his return filed for A.Y.2015-16 is not allowable as per provisions of section 37(1) of the Income-taxAct,1961.”
2.15 According to Ld. A.R., the observations and findings given in the assessment order cogently establishes the fact that the learned AO has conducted a detailed inquiry on the nature of business activities undertaken by the appellant during AY 2015-16 and applied her mind in reaching a conclusion that the appellant has not done any business activity & not derived any income from business. The learned AO on perusal all the records and being satisfied with the submissions of the appellant, has accepted long-term capital gains & interest income declared by the appellant in the Return & disallowed the general & establishment expenses claimed by the appellant.
2.16. The appellant wish to submit that the present learned Pr.CIT-1 cannot review the same records for A.Y. 2015-16, once already examined by his learned predecessor of same rank on merits while granting approval for converting limited into complete scrutiny. The then learned Pr.CIT-1 had concurred with findings of the AO that the appellant had not carried out any business activity and had not earned any income from business during AY 2015-16. In the Instructions No.20/2015 dated 29-12-2015 issued by CBDT in para-3 it is mentioned that –
“However, such an approval shall be accorded by the Pr.CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating “Complete Scrutiny” in that particular case. Such Case shall be monitored by the Range Head concerned.”
2.17. From the above CBDT Instructions, it can be inferred that before granting the approval for converting limited into complete scrutiny, the then Pr.CIT-1, Bengaluru has applied his mind and satisfied on merits of the issue (i.e the appellant has neither carried out any business activity and nor earned any income from business) after going through entire records of the appellant for A.Y.2015-16.
2.18.The appellant places reliance on the decision of the Hon’ble High Court of Karnataka in the case of CIT vs Smt. Annapoornamma Chandrashekar reported in (2012) 204 Taxman 158.
2.19. According to Ld. A.R, it was only change of opinion, the Ld. PCIT invoked the provisions of section 263 of the Act and he cannot take a different view from that of his predecessor of same rank and conclude that the appellant has done business activity by signing JDA dated 28-3-2011 with a Developer and proposing to receive sale proceed on year-to-year basis, make the activity of the appellant as an adventure in the nature of trade.
2.20. He submitted that on going through the facts of the appellant case, it emerges that the learned AO has done proper inquiry on the nature of activities carried out by the appellant during A.Y.2015-16 and hence the learned Pr. CIT’s view that AO has passed the assessment order without making inquiries or verification which should have been made is incorrect.
2.21. The learned Pr. CIT did not demonstrate how the Assessing Officer, without making inquiries and verification, who is in the custody and possession of all the records including that of JDA, Statement of Accounts, Books of Accounts, Financial Statements, other documents including submissions made in the course of scrutiny proceedings, has accepted & taxed the income from JDA as LTCG. It is not in dispute that such records are in possession at the time of examination by the then learned Pr. CIT as well as the Assessing Officer, besides the investigating officers. It is submitted that the documents and records in the custody of the Revenue are consequent to inquiry by the Revenue and hence, the present learned Pr. CIT erred in concluding that the learned AO has passed the assessment order without making enquiries or verification.
2.22 It is submitted that the learned Pr. CIT did not pass speaking order after considering all the submissions made by the appellant giving due weightage to the facts, circumstances of the case. In the revision order, the learned Pr. CIT has failed to consider the entire objections given by the appellant in its reply dated 10-03-2020 against treating the income received by the appellant from JDA (as per its terms) on account of sale of Undivided share of Land, under heading “Income from Business & Profession” instead of LTCG. The learned Pr. CIT did not even consider the various decisions of Hon’ble Supreme Court, jurisdictional High Court of Karnataka and other High Courts and Hon’ble Tribunal, Bengaluru and other ITATs relied upon by the appellant in its reply dated 10-03-2020 in support of the merits of its case and lack of jurisdiction for invoking revision proceedings under section 263 of the Act. Thus, the learned Pr. CIT has passed the revision order dated 18-3-2020 u/s.263 of the Act summarily without application of mind.
2.23 It is submitted that the observations of the learned Pr. CIT in the revision order that the amendment in section 263 in the form of Explanation-2 (w.e.f.1.6.2015) has widened the scope of power of revision u/s.263 and hence the decisions of Hon’ble SC and HCs cited by the appellant prior to said amendment do not apply in the instant case is based on wrong interpretations of law. The Hon’ble ITAT Benches of Kolkata, Ahmedabad & Delhi in the below mentioned cases, had occasions to examine & interpret the newly added “Explanation-2” to provisions of section 263. Their observations in this regard are as follows:-
i) The Ld. A.R. relied on order of Kolkata bench in the case of Eveready Industries India Ltd. Vs Pr.CIT in ITA No.805/Kol/2019 for A.Y.2014-2015 decided on 13.12.2019 wherein held that:-
“It has to be kept in mind that while the Commissioner is exercising his revisional jurisdiction over the assessment order, he has to exercise his power in an objective manner and not arbitrarily or subjectively since he is discharging quasi judicial powers vested in him while doing so. Thus according to us, Explanation (2) inserted by the Parliament u/s.263 cannot override the main section i.e. section 263(1) of the Act. The learned CIT can exercise his revisional jurisdiction in the event the assessment order is erroneous as well as prejudicial to the interest of the Revenue as discussed above & not otherwise.”
ii) The Ld. A.R. also relied on the order of Tribunal, Ahmedabad in case of Torrent Pharmaceuticals Ltd. Vs DCIT in ITA No.164/Ahd/2018 for A.Y.2014-2015 decided on 8-8- 2018.
2.24 Thus, he submitted that the findings of learned Pr. CIT that the A.O. has not done proper inquiry and hence assessment order is erroneous pursuant to sub-clause (a) to Explanation-2 to Section 263(1) of the Act is based on unfounded grounds and untenable. The learned Pr. CIT having failed to establish that the order of the A.O. is erroneous, the revision order dated 18-3-2020 u/s.263 of the Act is not valid in law.
2.25 The Ld. A.R. submitted that the observations and findings given by the learned Pr.CIT-1 in the revision order amounts to change of opinion which is outside the ambit of an erroneous order. It is submitted that change of opinion to tax is much larger and broader in nature than the scope of erroneous order which is limited in its scope. For change of opinion, there are more than two opinions or treatment and interpretations possible, but in the case of erroneous order, there is no scope for discretion and interpretation. In the appellant case, on examination/ verification of records and other details submitted by the appellant during scrutiny proceedings, the learned AO has concluded that the income received from JDA being a Landowner is taxable under heading LTCG. However, just because the findings as arrived by the learned AO is at a variation of the opinion of the learned Pr. CIT, would not grant the learned Pr. CIT the powers of revision u/s 263 of the Act.
2.26 According to Ld. A.R,, the reliance placed by Ld. PCIT on the judgement in the case of M/s Daniel Merchants Pvt. Ltd. vs ITO dated 29-11-2017 is not applicable to facts of the case. This judgement relates to a case wherein order passed u/s 263 of the Act was confirmed by Hon’ble Kolkata High Court against which SLP was filed and dismissed by Hon’ble Supreme Court. In that case Hon’ble High Court confirmed the revision order of learned Pr. CIT for conducting of detailed verification on raising of bogus share capital by the Companies through the device of money laundering and hence it is not applicable on the facts and circumstances of the present case and the same is distinguishable on facts.
2.27 It is submitted that it is a well settled principle that if the learned Assessing officer has taken one of the possible views i.e. the income received on the JDA by the assessee is taxable under long term capital gains which is permissible in law, then the learned Pr. CIT cannot subscribe or impose a different view and treat the assessment order as erroneous prejudicial to the interests of the revenue. At the time of passing the assessment order dated 18.12.2017. He relied on following case laws wherein it was held that income received from JDA by a Landowner towards contribution of Land or sale of land after development is capital gains and not income from business arising from adventure in the nature of trade:-
(i) CIT v. Razia Sulaiman, ITA No. 412 of 2007 dated 19.09.2011 (Karn. HC)
(ii) CIT vs Smt. Suparna Mahesh ITA No.3232 of 2005 dated 8-2-2011 (Karn.HC)
(iii) CIT v. M/s. Bagmane Developers, Bangalore, ITA No. 157 of 2011 dated 03.11.2016 (Karn HC)
(iv) Bangalore ITAT in case of M/s. Thirumala Venkateshwara Estates and Agencies, Bangalore in ITA No.553/Bang/2010 – Dated 2810-2010.
(v) CIT v. M/s. Rungta Properties Pvt. Ltd. (2018) 403 ITR 234 (Calcutta)
(vi) CIT v. Kasturi Estates Pvt. Ltd., 62 ITR 578 (Mad)
(vii) CIT vs MLM Mahalingam Chettiar (1977) 107 ITR 236 (Mad)
(viii) CIT vs Suresh Chand Goyal (2008) 298 ITR 277 (MP)
(ix) Income Tax officer v. Sitaram Chamaria (2006) 6 SOT 594 (Mumbai-Trib.)
2.28. The Ld. A.R. submitted that it is a well settled principle of law that in order to invoke the provisions of section 263 of the I.T. Act, 1961, the learned Pr. CIT shall ascertain from the records that twin conditions embedded in said provision i.e, the assessment order of the learned AO is erroneous and it is prejudicial to the interest of the revenue are to be satisfied cumulatively. In the appellant’s case, the learned AO has passed the assessment order after making adequate inquiry and after having examined the replies of the appellant with due application of mind and hence it is not the case where no inquiry was made. Therefore, appellant’s case cannot be treated as a case of “no inquiry”. From the facts of the appellant’s case as explained herein above, the first conditions regarding the term “erroneous” has not been satisfied. The findings given by the learned Pr. CIT in the revision order tantamount to change of opinion which is outside the ambit of erroneous order. An assessment order should not be subject to revision u/s.263 of the Act merely because another view is possible on the issue decided by the AO.
2.29. The Ld. A.R. placed reliance on the judgement of Hon’ble Supreme Court in case of Malabar Industrial Company Ltd. vs CIT – 243 ITR 83 (SC) has laid down the following legal positions on exercising powers under section 263 of the Act by a Commissioner of Income-tax.
“The phrase ‘prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of assessing officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income Tax Officer is unsustainable in law.”
2.30 He also relied on the judgement of the Hon’ble Supreme Court in the case of CIT vs Max India Ltd (2007) 295 ITR 282 (SC), wherein referring its decision in case of The Malabar Industrial Co. Ltd. vs CIT (supra) and also by the judgement of the Calcutta High Court in the case of Russell Properties Pvt. Ltd. vs Addl.CIT, reiterated that –
“when the Assessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of the revenue, unless the view taken by the Assessing Officer is completely unsustainable in law.”
2.31. He also placed reliance on following case laws:-
(i) CIT vs M/s. Chemsworth Pvt. Ltd. in ITA No.423 of 2013 – Judgement dated 16.9.2020
(ii) CIT vs M/s. Aztec Software Technology Ltd. in ITA No.348 of 2013 – Judgement dated 16.9.2020
(iii) CIT v. Saravana Developers (2016) 387 ITR 239 (Karn), wherein held that
From close scrutiny of section 263, it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction u/s 263 of the Act, firstly, the order of the Assessing Officer is erroneous and secondly, that it is prejudicial to the interest of the Revenue on account of error in the order of assessment.
