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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SANJAY ARORA, AM & SHRI AMARJIT SINGH, JM
O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Assessee agitating the revision of its assessment u/s. 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 16.12.2011 by the Commissioner of Income Tax-15, Mumbai (‘CIT’ for short) vide his order u/s. 263 of the Act dated 24.3.2014 for the assessment year (A.Y.) 2009-10.
None appeared for and on behalf of the assessee when its’ appeal was called out for hearing. In fact, we observe no appearance by the assessee-appellant on any date of hearing despite service of notices of hearing per registered post. There is also no adjournment application on record, and neither has the assessee, on the basis of the material on record, appointed/authorized any counsel to represent its’ case before the (A.Y. 2009-10) Good Morning vs. CIT Tribunal. The appeal contests the order of revision, which is to be taken up on a priority basis in-as-much as it has implication on quantum assessment. It was, accordingly, considered proper to proceed to hear this appeal ex parte the assessee, and decide the same on merits after hearing the party before us and considering the material on record.
The ld. CIT(A) has invoked the power of revision u/s. 263, assuming jurisdiction there-under on the ground of non-application of mind by the Assessing Officer (A.O.) while framing the assessment in respect of two issues, i.e., allowance of interest on delayed payment of service tax and interest on negative capital of the partners. The assessee has contested the impugned order on both these issues per its Grounds I and II. The ld. CIT has, per paras 3 and 10 of his order, given a categorical finding of there being no reference in the assessment order to both the aspects of assessment so that he, setting aside the assessment qua the same, directed the assessing authority to verify and examine the validity of the assessee’s claim and decide in accordance with the law vide para 22 of his order, which reads as under: 22. Thus relying upon the decision of Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. 243 ITR 83 and the legal position hitherto discussed in this order, I hold that the order passed by ITO 15(2)(3), Mumbai in the case of the assessee for A.Y. 2009-10 is erroneous in so far as prejudicial to the interest of revenue. The order u/s. 143(3) dated 05.12.2011 is therefore, set aside with directions to the AO to pass assessment order afresh after appropriate enquiry in line with the requirement given in CASS and allowing reasonable opportunity of hearing to the assessee.’ Referring inter alia to the decisions in the case of Malabar Industrial Co. vs. CIT [2000] 243 ITR 83 (SC); CIT vs. Electro House [1971] 82 ITR 824 (SC); Green World Corporation vs. ITO [2006] 285 ITR 118 (HP); Ashok Leyland Ltd. vs. CIT [2003] 260 ITR 599 (Mad); CIT vs. Emery Stone Manufacturing Co. [1995] 213 ITR 843 (Raj); and Dawjee Dadabhoy and Co. vs. S. P. Jain [1957] 31 ITR 872 (Cal).
(A.Y. 2009-10) Good Morning vs. CIT 4. We have heard the parties, and perused the material on record. That non-application of mind would make an order per se erroneous in-so-far as it is prejudicial to the interest of the Revenue is well-settled. The Hon’ble Apex Court in Malabar Industrial Co. Ltd. (supra) laid down a four-way test toward an order being erroneous and prejudicial to the Revenue. Succinctly put, these are: incorrect assumption of facts; incorrect application of law; without applying the principles of natural justice; and without application of mind. This, as explained by the Hon’ble High Court in Gee Vee Enterprises vs. CIT [1975] 99 ITR 375 (Del), is for the reason that the assessing authority under the Act is both an adjudicitor as well as an investigator. Relying on two decisions by the Apex Court, viz. Rampyari Devi Saraogi [1987] 67 ITR 84 (SC) and Tara Devi Aggarwal [1973] 88 ITR 323 (SC), it stands explained therein that the position and function/s of an Income Tax Officer is different from that of a civil court. In its words: ‘……..the statements made in a pleading proved by the minimum of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives a decision on the basis of the pleading and the evidence which comes before it. The Income-tax Officer, on the other hand, is not only an adjudicator but also an investigator. He could not remain passive in the face of a return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. It is because it is incumbent on the Income Tax Officer to further investigate the facts cited in the return when circumstances would make such an enquiry prudent that the word ‘erroneous’ u/s.263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made, and not because there is anything wrong with the order if all the facts therein are assumed to be correct.’ This has, over the years, translated into a series of decisions by the hon’ble courts of law, to some of which we have referred to earlier, and which forms the basis of our stating of it as being trite law. As such, where a wrong decision has been taken by the Assessing Officer on the basis of materials on record or he has not made an