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The Tax Publishers2015 TaxPub(DT) 4425 (Kol-Trib) : (2016) 067 (II) ITCL 0451div class=Section1> India Finance Ltd. v. CIT INCOME TAX ACT, 1961 --Revision under section 263--Erroneous and prejudicial orderCIT revised assessment order merely on suspicion and presumption--The original assessment was completed under section 143(3) in the hands of assessee, wherein the AO accepted the returned income. The CIT invoked his powers under section 263 on the ground that the assessee had set off the loss on sale and purchase of cotton yarn from the interest income and there was no such business in the earlier years and the records allegedly did not show any evidence of having been furnished to support the said claim of the loss nor the AO had raised any query or inquiry regarding the genuineness of the loss. *Held:* A perusal of the order passed under section 263 shows that there was no specific finding by the CIT as to how the order was erroneous and prejudicial to the interest of revenue. All that was being said was that the assessee “very likely” had tried to reduce its income by booking fictitious loss and that non-verification appeared to be “highly suspiciousâ€. CIT's powers under section 263 admittedly would not be invoked on mere presumptions and surmises nor on suspicion. Just because the AO does not make a complete recording of what was happened in the assessment proceedings per se does not make the assessment order erroneous and prejudicial to the interest of revenue. In fact, a perusal of the provisions of section 263 requires for making or causing to be made of such inquiry as the CIT deems necessary. This itself shows that there must be application of mind by the CIT on the basis of inquiries done by the CIT. However, no enquiry had been done by the CIT which was not permissible. In these circumstances, the order passed under section 263 by the CIT was unsustainable on the facts mentioned above and consequently, the same was quashed. Income Tax Act, 1961, Section 263 *Relied:*CIT v. J.L. Morrison 366 ITR 593 (Cal). *REFERRED :* CIT v. Jawahar Bhattacharjee (2012) ITA No. 2 of 2008 (Guwahati) Krishna Shriram in ITA No. 1649/Del./2011, dt. 29-1-2014 and Nine Star Enterprises (P) Ltd. In ITA No. 1054/Hyd./2011, dated 31-12-2012. FAVOUR : In assessee's favour. A.Y. : 2007-2008 IN THE ITAT, KOLKATA C BENCH SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2015 TaxPub(DT) 4425 (Kol-Trib) : (2016) 067 (II) ITCL 0451div class=Section1>

India Finance Ltd. v. CIT

INCOME TAX ACT, 1961

--Revision under section 263--Erroneous and prejudicial orderCIT revised assessment order merely on suspicion and presumption--The original assessment was completed under section 143(3) in the hands of assessee, wherein the AO accepted the returned income. The CIT invoked his powers under section 263 on the ground that the assessee had set off the loss on sale and purchase of cotton yarn from the interest income and there was no such business in the earlier years and the records allegedly did not show any evidence of having been furnished to support the said claim of the loss nor the AO had raised any query or inquiry regarding the genuineness of the loss. Held: A perusal of the order passed under section 263 shows that there was no specific finding by the CIT as to how the order was erroneous and prejudicial to the interest of revenue. All that was being said was that the assessee “very likely” had tried to reduce its income by booking fictitious loss and that non-verification appeared to be “highly suspiciousâ€. CIT's powers under section 263 admittedly would not be invoked on mere presumptions and surmises nor on suspicion. Just because the AO does not make a complete recording of what was happened in the assessment proceedings per se does not make the assessment order erroneous and prejudicial to the interest of revenue. In fact, a perusal of the provisions of section 263 requires for making or causing to be made of such inquiry as the CIT deems necessary. This itself shows that there must be application of mind by the CIT on the basis of inquiries done by the CIT. However, no enquiry had been done by the CIT which was not permissible. In these circumstances, the order passed under section 263 by the CIT was unsustainable on the facts mentioned above and consequently, the same was quashed.

Income Tax Act, 1961, Section 263

Relied:CIT v. J.L. Morrison 366 ITR 593 (Cal).

REFERRED : CIT v. Jawahar Bhattacharjee (2012) ITA No. 2 of 2008 (Guwahati) Krishna Shriram in ITA No. 1649/Del./2011, dt. 29-1-2014 and Nine Star Enterprises (P) Ltd. In ITA No. 1054/Hyd./2011, dated 31-12-2012.

FAVOUR : In assessee's favour.

A.Y. : 2007-2008

IN THE ITAT, KOLKATA C BENCH