S. 263 : Assessed income higher than income determined by CIT — CIT’s order bad

9 Bhuppindera Flour Mills Pvt.
Ltd. v. ITO

ITAT Amritsar Bench, Amritsar

A.Y. : 2000-01. Decided on : 15-2-2008

Counsel for assessee/revenue : P. N. Arora/

Tarsem Lal

The assessee had filed its return of income
declaring loss of Rs.1.47 lacs. However, the assessee had not filed the accounts
hence, in the order dated 1-8-2001 passed u/s.143(1)(a), the loss returned was
disallowed by the Assessing Officer. Subsequently, the Assessing Officer
assessed the income u/s.143(3) vide his order dated 12-3-2003, determining a
long-term capital gain of Rs.46.07 lacs. On appeal the CIT(A) vide his order
dated 14-5-2003 deleted the addition made by the Assessing Officer. According to
the CIT, the order passed by the Assessing Officer u/s.143(3) was erroneous and
prejudicial to the interest of the Revenue inasmuch as the book profit u/s.115JA
of Rs.1.13 crore liable to tax was not considered by the AO. Being aggrieved,
the assessee appealed before the Tribunal.

According to the Tribunal in order to confer
jurisdiction on the CIT u/s.263, both the conditions viz., the order
passed by the Assessing Officer must be (i) erroneous; and (ii) prejudicial to
the interest of the Revenue, must be fulfilled. The Tribunal found that at the
time of making assessment u/s. 143(3), the income computed as per regular
provisions of the Act was higher at Rs.46.07 lacs as against income u/s.115JA of
Rs.33.93 lacs (30% of Rs.1.13 crore). Therefore, according to the Tribunal, the
provisions of S. 115JA were not attracted. Therefore, it held that the order
passed by the Assessing Officer cannot be said to be erroneous, because the same
was as per the provisions of the Act. It further held that the order passed was
also not prejudicial to the interest of the Revenue, because there was no loss
of revenue. Therefore, the assumption of jurisdiction by the CIT u/s.263 was bad
in law.