Case Law Details
RELEVANT PARAGRAPHS:
9.1 From plain 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 could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this subsection, viz.(1)the order is erroneous ; (2) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions `erroneous’, `erroneous assessment’ and `erroneous judgment’ have been defined in Black’s Law Dictionary. According to the definition, `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 defect that is jurisdictional in its nature, 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.
9.2 In the light of the above, if we consider the facts of the case under consideration, we notice that though it is stated in assessment order in para 2 for AY 1997-98 that the assessee has filed details from time to time including the details of unsecured loans, details of investment, details of loans & advances, details of professional charges, details of accounting charges, details of audit fees, details of interest & finance charges, details of filling fees, details of sundry expenses, etc. but the assessee has failed to point out about the specific details if any filed before the Assessing Officer in respect of the issues pointed out by the CIT in his order u/s 263. On perusal of original assessment orders and assessee’s explanation before CIT, we notice that the Assessing Officer has allowed the claim of the assessee u/s 36(1)(iii) without applying mind on the facts of the case. It is not clear from the assessment orders that which view has taken by the Assessing Officer whether shares purchased out of borrowed funds were stock in trade or borrowed funds were utilized for purchase of shares for controlling rights. When the Assessing Officer has not examined the issue and has not applied mind, such orders are always erroneous and prejudicial to the interests of the revenue. We find that in case under consideration both the conditions that the orders of the Assessing Officer are erroneous by virtue of order being erroneous prejudice has been caused to interests of the revenue. Therefore, it is a fit case where CIT has rightly invoked the provisions of u/s 263 and the order of the CIT for both the years under consideration is hereby confirmed.
