Case Law Details

Case Name : Radhey Shyam Agarwal HUF Vs. CIT (ITAT Agra)
Appeal Number : ITA No. 399/Ag/2008
Date of Judgement/Order : 31/03/2009
Related Assessment Year :


9 . From the plain reading of the above provision it is manifestly clear that an order can be revised if and only if the twin conditions, viz., one that the order is erroneous and two – that to that extent it is prejudicial to the interest of the Revenue co-exist. Or in other words, an order can be revised if it is both erroneous as well as prejudicial to the interests of the Revenue. An order, which is only erroneous but not prejudicial, cannot be revised. Likewise an order, which is only prejudicial to the interest of the Revenue but not erroneous, cannot be revised. To put it in, still simpler words, it is mandatory for the Commissioner to revise an order that both the above conditions must “co-exist”. An order which is not “erroneous” cannot be revised even if it is prejudicial to the interest of the Revenue, and the vice-versa.

10. The subject of “revision U/s 263” has been vastly examined and analysed by various Courts including that of Honourable Apex Court. The revisional power conferred on the Commissioner vide S. 263 is of vide amplitude. It enables the Commissioner to call for and examine the records of any proceeding under the Act. It empowers the Commissioner to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. The only limitation on his powers is that he must have some material(s) which would enable him to form a prima- facie opinion that the order passed by the Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he comes to the above conclusions on the basis of the ‘material’ that the order of the A.O. is erroneous and also prejudicial to the interests if the Revenue, the Commissioner is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct to frame a fresh assessment. He is empowered to take recourse to any of the three courses indicated in S. 263. So, it is clear that the Commissioner does not have unfettered and unchequred discretion to revise an order. The Commissioner is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair- play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well in section 263. An order can be treated as “erroneous” if it was passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts. The “prejudice” that is contemplated under S. 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the Commissioner under section 263 may be summarised below:-

(i) The Commissioner must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the conditions must be ful-filled

(ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted

(iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being erroneous.

(iv) If the order is passed without application of mind, such order will fall under the category of erroneous order.

(v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law.

(vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the Commissioner, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer.

(vii) The Assessing Officer exercise quasi-judicial power vested in him and if he exercise such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion.

(viii) the Commissioner, before exercising his jurisdiction under section 263, must have material on record to arrive at a satisfaction.

(ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.

11. Now reverting back to the facts of the case in hand, it is found that the AO has made proper enquiries during the re-assessment proceedings and after examining the proofs so filed by the assessee before him, has allowed the claim on being satisfied with the explanation of the assessee. When the AO has reopened the same very issue which is under revision and has examined all the details and after verifying and being satisfied, has taken a plausible view, how can his order be treated as erroneous simply because in his order, he has not made elaborate discussion with reference to his satisfaction.

12. From the records submitted before the Id. AO, the identity of donor was found to be not at all in doubt. The main gist of testing a gift to be genuine or not is to verify the creditworthiness and the genuineness of gift transaction. The donors are assessed to income-tax. The order of Id. AO shows that these are family gifts. Thus, the allegations of the Id. CIT are not found to be correct.


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