Rain Commodities Ltd. Vs. Dy. CIT (ITAT Hyderabad)- Prejudicial to the interest of revenue appearing in section 263 is conjunction with the expression ‘erroneous’ and that every loss of revenue as a consequence of an order of the assessing officer cannot prejudice to the interest of Revenue. In case, where the assessing officer adopts one of the courses permissible in law where two views are plausible the CIT cannot exercise his power u/s 263 to defer with the AO even if there has been a loss of revenue.
On the other hand, when the AO takes a view it is patently unsustainable, the CIT can exercise his powers where the loss of revenue results as a consequence of the view taken by the assessing officer. It is also clear that while passing the order u/s 263, the CIT has to be examined not only the assessment order but also the entire facts on the record. Further, when a regular assessment is made it has to be presumed that it has been passed upon proper application of mind. The ITO is not only the adjudicator but also an investigator. He cannot be remained passive in face of an order when it calls for further enquiry. He has to ascertain the truth of the facts stated by the assessee. It is incumbent on the part of the assessing officer to make further investigation of the facts stated by the assessee when circumstances would make such an enquiry is prudent. The word ‘erroneous’ in section 263 includes failure to make such an enquiry by the AO. The assessment order becomes erroneous because such an enquiry is not made and not because there is anything wrong with the facts stated therein or assumed to be correct. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of being erroneous. An order passed by the AO without application of his mind is said to be an erroneous order.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ‘ B ’, HYDERABAD
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER
ITA No. 673/Hyd/2010
Assessment Year- 2004- 05
