Jurispruden tiol – Tomorrow's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Income Tax

CIT can assume jurisdiction suo moto if the order of the AO is erroneous in so far as it is prejudicial to the interests of the Revenue. Absence of any inquiry, much less a proper inquiry by the Assessing Officer makes the order erroneous - ITAT

The prerequisite to exercise of jurisdiction by the CIT suo moto, is that the order of the ITO is erroneous in so far as it is prejudicial to the interests of the Revenue.

The CIT has to be satisfied of twin conditions, namely,

(i) the order of the AO sought to be revised is erroneous; and

(ii) it is prejudicial to the interests of the Revenue.

If one of them is absent -if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue -recourse cannot be had to s. 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO. However an incorrect application of law or framing the assessment without making any inquiry on the facts and figures submitted by the assessee where circumstances are such which warrants proper inquiry to be made before accepting the same, will satisfy the requirement of the order being erroneous.

Central Excise

Department cannot blow hot and cold at the same time – Once the cenvatted spares have been cleared on payment of duty, there cannot be a proposal to deny the credit – Tribunal sets aside Rs.6.81 crores religiously confirmed by the Commissioner.

FRANKLY, such an order of the Commissioner, Central Excise, as involved in the instant case, would have signalled the demise of an assessee’s aspirations with a weak ‘core’.

A demand of Rs.6.81 crores was confirmed along with interest and equivalent penalty although a similar issue had been decided by the Tribunal a decade ago in favour of an assessee.

The 6.81 crore case of the department is that the bought out spares brought into their factory are neither utilized in the manufacture of the transformer nor brought into factory for utilization in the manufacture of the final product.

Customs

Project imports – Project Import Regulations allow import of spares even for maintenance – Upto 10% of contract value allowed for spares: CESTAT

THE case also belongs to a genre of cases where the Tribunal has pulled up the adjudicating authority for non-application of mind. The appellants had registered four project contracts with the Customs for import of machinery worth USD 3.7 Million for implementation of four hydel projects. They subsequently imported spares valued at USD 69,206 for maintenance of the machinery earlier imported. Pursuant to objections raised by the C & AG auditors, the Customs authorities issued notices to deny concessional rate of duty for import of spares. The lower authority religiously confirmed the duty demand and within no time the matter travelled to the Tribunal.

See our columns Tomorrow for the judgements