Income Tax Appellate Tribunal - Hyderabad
A.P.S.E.B. vs Joint Commissioner Of I.T., Special ... on 5 April, 2004
ORDER
1. Both these appeals are filed by the assessee. ITA No. 1055/Hyd/02 is directed against the order of the Commissioner of Income-tax, AP-I, Hyderabad, dated 17.3.2002 passed under Section 263 of the Act for the assessment year 1997-98, whereas the other appeal, ITA No. 1055/Hyd/03 is directed against the order of the CIT(A)-II, Hyderabad, dated 18.8.2003, whereby the first appellate authority confirmed the assessment made for the assessment year 1997-98 in pursuance of the above order of the CIT under Section 263. As the issues arising out of both these appeals are common and pertain to the same assessment year, for the sake of convenience, they are heard together and disposed of, by way of this common order.
2. The assessee is State Electricity Board formed under Electricity (Supply) Act, 1948. It filed its return of income for the assessment year 1997-98 on 30.11.1998 declaring total income at 'nil', after setting off 'current year's profit of Rs. 6,69,21,424 against brought forward losses of assessment years 1968-69 to 1970-71. The assessing officer accepted this return on 24.2.2000, vide his order made under 3.143(3) of the Act. The Commissioner of Income-tax has invoked his powers under Section 263, and held vide his order dated 7.3.2002 that the assessment made is erroneous and prejudicial to the interests of Revenue, inasmuch as Section 115JA of the Act has not been applied to the assessee by the, assessing officer. Appeal, ITA No. 1055/Hyd/2002 has been filed by the assessee against this order of the CIT passed under Section 263 of the Act.
3. In pursuance of the directions of the CIT in the aforesaid order under Section 263, the assessing officer framed fresh assessment on 25.2.2003, wherein he levied the Minimum Alternate Tax(MAT) under Section 115JA of the Act. On appeal, the CIT (A) by the impugned appellate order dated 18.8.2003 confirmed this order of assessment. Aggrieved by the same, assessee preferred appeal, ITA No. 1055/Hyd/03.
ITA No. 1055/Hyd/20024. We first take up the appeal against the order of the CIT under Section 263.
5. The learned counsel for the assessee submitted that:
.1. The order dated 7.3.2002 passed under Section 263 was served on the assessee only on 16.10.2002, when the Chartered Accountant appearing on behalf of the assessee had taken a copy of the same from the assessing officer. It is his contention that the order Under Section 263 has not been communicated to the assessee within the period of limitation and hence the order is barred by limitation. Reliance was placed on the decision of the Hon'ble Kerala High Court in the case of CIT v. Sree Narayana Chandrika Trust (212 ITR 456).
.2. It is stated that the assessee is not a company for the purposes of Section 115JA of the Act. It is his argument that the assessee-Board cannot be construed to be a company for the purposes of charging Minimum Alternate Tax (MAT). Reliance was placed on the judgment of Mumbai Bench of the Tribunal in the case of Maharashtra State Electricity Board v. JCIT (82 ITD 422). He submitted that accounts of the assessee are maintained as per the Electricity (Supply) Act, 1948 and profits are arrived at under Section 69 of the said Act, 1948, and consequently assessee's Profit and Loss Account was not drawn up in accordance with the provisions of Part-II and Part-III of Schedule VI of the Companies Act, 1956, as required by Section 115JA(2) of the Income-tax Act. In the circumstances, it is submitted that Minimum Alternate Tax under Section 1215JA could not be levied.
.3. The object of the assessee is not profit, but development of electricity, and the assessee cannot declare any dividend, as there is no provision for the same in the Electricity (Supply) Act, and as such the assessee does not fall in the category of assessees to which Minimum Alternate Tax is applicable, as deeming provisions cannot be extended to it.
.4. Further, the Finance Minister in his Budget Speech, while moving the Finance Bill, 1996 stated that companies engaged in the power and infrastructure sector will be exempted from the levy of Minimum Alternate Tax (220 ITR 107-St.). Clause 37 of the Finance (No. 2) Bill of 1996 seeks to insert special provisions relating to certain companies and that new section, is not applicable to companies engaged in the business of generation and distribution of power. From the notes on clauses also it would be clear that the intention was to exempt such power companies from the application of 115JA.
.5. No Electricity Board in the country, let alone, APSEB runs on commercial lines, and no Electricity Board is making profit. In this connection, attention is invited to the Preamble of the Electricity Supply Act, 1948 which reads as under-
"An Act to provide for the rationalization of the production and supply of Electricity and generally for taking measures conducive to electricity development."
It is submitted from the above preamble, that there is no object to make profit at all and the Electricity Supply Act contains no provision for declaration of dividends.
.6. Section 80 of the Electricity (Supply) Act deems the Board as a Company for the purposes of Income-tax Act, and that but for this provision, its income would not have been assessable under the Income-tax Act. The Hon'ble Supreme Court in the case of Rajasthan State Electricity Board v. Mohanlal (AIR 67 SC 1857) held that Electricity Board is 'State' within the meaning of Article 12 of the Constitution.
.7. The Finance Minister's speech introducing the provisions, should be looked into for the purposes of ascertaining the mischief sought tobe remedied by the legislation and the objects and purposes for which the legislation is enacted, and for this proposition, he relied on the judgment of the Hon'ble Supreme Court in the case of K.P. Verghese v. ITO Ernakulam (131 ITR 597).
.8. The CIT was wrong in invoking the provisions of Section 263 as the twin conditions of being erroneous and prejudicial to the interests of Revenue have not been satisfied. The assessing officer passed his order on 24.2.2000 in accordance with the CBDT's Circular No. 762 dated 18.2.1998 explaining the provisions of Finance (No. 2) Act 1996, wherein it was categorically stated that the companies engaged in the business of generation and distribution of power are exempted from the levy of Minimum Alternate Tax. That circular of the Board is binding on all income-tax authorities under Section 119 of the Act. For this purpose, reliance is placed on the judgments of the Hon'ble Supreme Court in the case of K.P. Verghese v. ITO (supra); Collector of Central Excise v. Dhiren Chemical Industries (254 ITR 554) and in the case of Ranadey Micro Nutrients v. CCE (1996) 97 ELT 19. He vehemently contended that the Hon'ble Supreme Court had laid down that the department cannot take a plea that is contrary to the circular, since consistency and discipline is more important than winning or losing a case. He submitted that the Department is estopped from arguing that the Circular is not valid.
.9. For the proposition that there is no prejudice to the interests of Revenue, so as to authorise the CIT to invoke the provisions of Section 263, reliance is placed on the decision of the Gujarat High Court decision in CIT v. Aravind Jewellers (259 ITR 502) His argument is that the assessing officer has not erred, as he had followed the binding circular of the CBDT, and such following of the Circular of the Board cannot be held neither erroneous nor prejudicial to the interests of the Revenue, to enable the CIT to invoke power under Section 263 of the Act.
.10. He also relied on the decisions of the Supreme Court in Shri Arbuda Mills Ltd. v. CIT (231 ITR 50) and Shri Manjunatheshware Packing Product and Camphor Works (231 ITR 53)1 and argued that 'record' shall include and shall be deemed to always to have included all records relating to any proceeding under the Act available at the time of examination by the Commissioner. In March, 2002 when the CIT passed the impugned order under Section 263, the appellate order in the very same case was available, as the CIT(A)-II Hyderabad in her order dated 21.11.2001 for the assessment year 1998-99 on the same issue held in favour of the assessee. That order was part of the record, and as such the CIT was preempted from exercising his powers under Section 263.
.11. Under the circumstances, it is pleaded that the CIT has not only ignored the order of the CIT(A), but also ignored the Board's circular on the issue, and thus has acted in excess of his jurisdiction. The CIT has ignored the decision of the Mumbai Bench of the Tribunal, though brought to his notice.
.12. On merits, he submitted that the CIT erred in not directing the assessing officer to compute the book profits as per the provisions of Companies Act, in which case, once the book profit are computed under the Companies Act, there would be a loss or a very negligible profit. He also erred in treating bad debt as liability, as such disallowance is not permitted under Section 15JA(2) of the Act.
.13. He further submitted that the Mumbai Bench of the Tribunal in the case of Maharashtra State Electricity Board (supra) held in favour of the assessee, and this Bench should not straight away differ from the said decision of the Mumbai Bench, as held in the case of CIT Central v. L.G. Ramamurthy (110 ITR 543) as well as the judgment of the Supreme Court in the case of ITAT v. DCIT (218 ITR 275). He argued that this Bench has to necessarily follow the order of the coordinate Bench of the Tribunal.
.14. For the above reasons, he submitted that the order of the CIT is illegal, untenable and factually erroneous, and as such the same should be cancelled.
6. The learned Senior Standing Counsel for the Revenue vehemently controverted the arguments of the learned counsel, for the assessee and supported the order of the Commissioner passed under Section 263. He submitted that the judgment of the Mumbai Bench of the Tribunal in the case of MSEB (supra) should not be followed by this Bench, as it is, 'per incurium', as it has not considered some of the decisions of the Supreme Court on the point at issue. He submitted that the assessee itself has been filing its income returns for a number of years in the status of a company, and it should be estopped from turning round now to say that it is not a company and provisions of Section 115JA are not applicable to it.
.2. On the aspect of legislative intent, he pleaded that the Finance (No. 2) Bill, 1996, which introduced the new Section 115JA on the statute book, vide Clause 37 of the Bill (220 ITR ST.141), categorically specified in Sub-section (1) that companies engaged in the business of generation or generation and distribution of power are excluded from the purview of Section 115JA. During the course of consideration various clauses in the Bill including the newly introduced Section 115JA, there was. change of thinking in the Parliament and the exclusion was restricted to only in respect of incomes derived by an industrial undertaking from generation and distribution of power by way of a new Clause (iv) of Explanation to Section 115JA. At the same time, the bracketed portion in Sub-section (1) found in the Bill was omitted in the enactment (221 ITR St. 45 & 46). Therefore, the Parliament intended to exclude only profit derived by an industrial undertaking from the business of generation or generation and distribution from the levy of MAT. With regard to the interpretation of the term "derived from", he relied on the interpretation of the Hon'ble Supreme Court in a number of cases, the leading one being Cambay Electricals (113 ITR 84) and Pandian Chemicals (262 ITR 278). He therefore, submitted that only the profits derived by the undertaking from the business of generation or generation and distribution alone are excluded from the purview of Section 115JA of the Act.
.3. On the scope of the circulars of the CBDT, he submitted that the circulars of the CBDT are no doubt, binding on the authorities, provided they are issued for proper administration of the Act. Since the language of Section 115JA is demonstratively clear, according to him, no circular could have been issued by the CBDT which runs counter to the Scheme of the Statute. He submitted that acceptance of the theory that Circulars which ere inconsistent with the statutory piece also could be issued under Section 119 of the Act, would lead to anomalous consequences, apart from the fact that it nullifies the expression in Section 119(1) "for the proper administration of the Act". In as much as, nullification of a statutory provision made by the Parliament cannot be said to be "proper administration" of the Act. On the role of external tools, like Board circulars, etc. in the matter of interpretation of statutory provisions, it is further stated in the written submissions of the learned Departmental Representative as follows-
"It is settled law now by decisions of the Supreme Court that when once enactment is made by the Parliament, the scope and ambit of the statute must be understood in the light of the expressions used in the statute. If language as employed in the statute is clear, it is not permissible to look at to the title of the section much less to the objects and reasons and the Ministers speech while introducing the bill. Only in the event of there being an ambiguity, perhaps, the Supreme Court has permitted looking into the aforesaid external aids.
It is not in dispute that the marginal heads of the section, objects and reasons and the Ministers speech would at least have been considered by the Parliament. Even in such cases, if the said external aids were excluded for the purpose of interpretation of legislative piece, affortiori, enactment cannot be understood in the light of CBDT circulars, which in no case would have been placed before the Parliament."
.4. It is further pleaded that The Circulars considered by the Supreme Court in Ajadi Bachao Andolan (263 ITR 706), are entirely different. If the Circulars are issued Under Section 119(1) or (2) by the CBDT giving orders, instructions and directions, then only they can be considered as Circulars falling within the purview of Section 119(1) and (2) of the Act. If the nature and text of the Circular is such that it cannot be considered as an order or an instruction or a direction that cannot be elevated to the status of the Circular falling within the purview of Section 119(1) or (2) of the Act. Merely because CBDT chose to call a communication as a Circular, he pleaded, it does not mean that it should be treated as a circular issued Under Section 119 of the Act. For this proposition, reliance is placed on the Full Bench decision of the Bombay High Court in 185 ITR 6; wherein it was held that the Circulars issued by the CBDT in the context of explaining the provisions in Finance Act cannot be considered as a Circular within the purview of Section 119(1) or (2) of the Act, as there was no order or direction or instruction issued in the said circular.
.5. He further submitted that the ratio of the said Full Bench decision is "unless the Circular has conveyed some orders, instruction or directions, it cannot be considered as Circular, within take purview of Section 119 of the Act." The phraseology found in circular in the present case clearly also demonstrates that there are no directions, orders much less instructions, and the decision of the Bombay High Court in 185 ITR 6 squarely operates in the present case. The expressions found in the Circular in the present case can, by no stretch of imagination be considered as an order or instruction, and on other hand, it clearly depicts the perception of the Board on the Bill rather than the legislative enactment. Such a perception of the Board, according to him cannot be construed as a Circular or instructions within the purview of Section 119(1) or (2) of the Act.
.6. In this view of the matter, he pleaded that the cases cited by the learned counsel for the assessee have no relevance to the facts of the present case and the provisions of Section 115JA are clearly applicable to the case of the assessee. He therefore, submitted that the order of assessment is not only erroneous but also prejudicial to the interests of the Revenue inasmuch as the Marginal Alternate Tax in terms of Section 115JA was not charged, and as such the CIT according to him was justified in passing the impugned order under Section 263. He therefore, prayed that the impugned order of the CIT should be upheld.
8. Rival contentions heard and all the papers on record perused. The case-law cited by the parties as well as the impugned orders of the Revenue authorities have been carefully gone through. Sub-section (2) of Section 115JA reads as follows-
"Section 115JA(1)....
(2) Every assessee, being a company, shall for the purposes of this section prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956(1 of 1956)."
Explanation to Section 115JA to the extent relevant for our purpose, reads as under:-
"Explanation-For the purposes of this section, "book profits" means the net profit as shown in the profit and loss account for the relevant previous year prepared under Sub-section (2), as increased by-
(a) to (f).......
if any amount referred to in Clauses (a) to (f) is debited to the profit and loss account, as reduced by-
(i) to (iii)
(iv) the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power, or.
v) to (ix)..............."
This means that from the Book Profit as arrived at as per Sub-section (2) of Section 115JA, in terms of Clause (iv) of Explanation to Section 115JA profit derived from the business of generation and distribution of power should be reduced and only the balance should be considered for the purposes of computation under Section 115JA. It is an undisputed fact that the assessee derives its profits wholly and exclusively from the business of generation and distribution of power.
9. Para 46.6 of the Board's Circular No. 762 dated 18/2/98 reads as under-
"46.6 Companies engaged in the business of generation and distribution of power and those enterprises engaged in developing maintaining and operating infrastructure facilities under Sub-section (4A) of Section 80IA are exempted from the levy of MAT, so that the incentive given to infrastructure development is not affected."
10. Now, the question is whether the Revenue can ignore this categorical interpretation of the provisions of Section 115JA by the Board. The Revenue's contention based on the judgment of Full Bench of Bombay High Court in the case of Central Bank of India (supra) is that no part of paragraph 46.6 can be read as being an order or instruction or direction of the Board. This interpretation of the Board's circular cannot be accepted by us. At para 46.6, the Board has stated categorically that the companies engaged in the business of generation and distribution of power are exempted from the levy of MAT. This interpretation or understanding of the Board arises from Sub-section (2) of Section 115JA read with Sub-clause (iv) of the Explanation to Section 115JA extracted by us herein above. It cannot be held that the Circular is in contravention of the Act, especially when the assessee in question is a State Electricity Board, and has derived income wholly and exclusively from the business of generation and distribution of power.
11. Hon'ble Supreme Court has in the case of Ranadey Micronutrients (supra), had occasion to consider the binding nature of a Circular issued by CBEC. In that case by its Circular dated 21.11.1994 issued by the CBEC, the earlier circular dated 20.6.1990 was withdrawn. On the binding nature of the Circulars, it is held as follows-
"The first question now, is whether the earlier and later circulars are orders, instructions or directions to Central Excise officers within the meaning of Section 37B which the Central Excise Officers are bound to observe and follow. Both circulars are addressed to all Principal Collectors of Central Excise and Customs, all Collectors of Central Excise and Customs, all Collectors of Central Excise, all Collectors of Customs and all Collectors of Central Excise and Customs (Appeals). Both circulars require that their contents be "brought to the notice of the lower field formations and the trade interests may also be suitably advised." Both circulars, require, "All pending assessments may be finalized on the above basis". Both circulars have been issued in the context of doubts having arisen and representations having been received by the Board. Both circulars have been issued by the Board in consultation with the Chief and Deputy Chief Chemist and, in the later case, the Ministry of Agriculture. There can be no doubt whatsoever, in the circumstances, that the earlier and later circulars were issued by the Board under the provisions of Section 37B and the fact that they do not so recite does not mean that they do not bind Central Excise Officers or become advisory in character. If the later circular is contrary to the terms of the statute, it must be withdrawn. While the later circular remains in operation the Revenue is bound by it and cannot be allowed to plead that it is not valid."
Hon'ble Supreme Court further proceeded to observe as follows-
"One should have thought an officer of the Ministry of Finance would have greater respect for circulars such as these issued by the Board, which also operates under the aegis of the Ministry of Finance, for it is the Board which is by statute, entrusted with this task of classifying excisable goods uniformly. The whole objective of such circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of Excise duty. It does not lie in the mouth of the Revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are of far greater importance than the winning or losing of court proceedings."
Hon'ble Supreme Court further held that it is not open to the Revenue to raise a contention that is contrary to a binding circular issued by the Board The Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. Indra Industries (248; ITR 338) at page 340, held as under-
"A circular by tax authorities is not binding on the courts. It is not binding on the assessee. However, the interpretation that is thereby placed by the taxing authority on the law is binding on that taxing authority. In other words, the taxing authority cannot be heard to advance an argument that is contrary to that interpretation."
Further, the Apex Court has further in the case of Collector of Central Excise v. Dhiren Chemical Industries (259 ITR 554 at 557) held as under-
"We need to make it clear that, regardless of interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs, which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue."
Similar is the judgment of the Hon'ble Supreme Court in the case of UCO Bank v. CIT(237 ITR 889).
12. Hon'ble Supreme Court had considered at length the binding nature of a Circular of the Board in the case of Ajadi Bachao Andolan (263 ITR 706). In that case, the Union of India was arguing that Circulars issued by the Board are binding on all the Revenue authorities. This proposition of the Union of India has been accepted by the Hon'ble Supreme Court at page 727 of the Report (263 ITR). The Entire issue has been discussed. At page 730 the issue whether the Circular of the Board was ultra vires of Section 119 was considered, and at page 732 it was held as under-
"This circular was enunciation of the provisions contained in the DTAC which would have overriding effect over the provisions of Sections 4 and 5 of the Income-tax Act, 1961, by virtue of Section 90(1) of the Act. If, in the teeth of this clarification, the Assessing Officers chose to ignore the guidelines and spent their time, talent and energy on inconsequential matters, we think that the Central Board of Direct Taxes was justified in issuing "appropriate" directions vide Circular No. 789 (see (2000) 243 ITR (St) 57) under its powers under Section 119, to set things on course by eliminating avoidable wastage of time, talent and energy of the Assessing Officers discharging the onerous public duty of collection of revenue. Circular No. 789 (see (2000) 243 ITR (St.) 57) does not in any way crib, cabin or confine the powers of the Assessing Officer with regard to any particular assessment. It merely formulates broad guidelines to be applied in the matter of assessment of assessees covered by the provisions of the DTAC.
We do not think the circular in any way takes away or curtails the jurisdiction of the Assessing Officer to assess the income of the assessee before him. In our view, therefore, it is erroneous to say that the impugned Circular No. 789 dated April 13, 2000 (see (2000) 243 ITR (St.) 57) is ultra vires the provisions of Section 119 of the Act. In our judgment, the powers conferred upon the Central Board of Direct Taxes by Sub-sections (1) and (2) of Section 119 are wide enough to accommodate such a circular."
The Circular considered by the Hon'ble Supreme Court in that case was similar to the Circular No. 762 of the Board, the nature and binding effect of which is being disputed by the Revenue in these appeals. Hence, the above observations of the Hon'ble Supreme Court apply with equal force to circular No. 762. The reliance placed by the Revenue on the judgment of the Full Bench of the Hon'ble Bombay High Court in the case of CIT v. Central Bank of India Ltd. (185 ITR 6) does not further its case. The relevant portion of the said decision is as under-
"This brings us to Paragraph 32 of the Circular explaining the provisions of the Finance Act, 1966. The sentences therein relevant to the controversy before us are the first, the penultimate and the ultimate sentences. The first sentence says that a company receiving dividends from any domestic; company is entitled, under Section 85A, to a rebate of income tax which has the effect of limiting the tax on such dividends to a specific percentage of the dividends. The penultimate sentence says that income-tax on inter-corporate dividends received by a company other than a foreign company from any domestic company is limited to 25 per cent thereof and the ultimate sentence says that the Finance Act, 1966, had not made any change in the effective rates of tax in respect of inter-corporate dividends. The understanding of the Board, as suggested by these sentences, appears to be that Section 85A has the effect of limiting the tax on inter corporate dividends to a specified percentage thereof and that, in the case of inter corporate dividends received from a domestic company, it is limited to 25 per cent. We agree with the submission of Mr. Jetley, learned counsel for the Revenue, that no part of paragraph 32 can be read as being an order, instruction or direction, which it has categorically to be if it is to bind the officials of the Revenue. Furthermore, the paragraph states that the Companies Act, 1966, which it explains, has not made any change in Section 85A. Implicitly, therefore, it refers to the earlier circular explaining the Finance Act, 1965, paragraph 19 whereof we have already analysed."
The interpretation in that case was that no part of that Circular has a categorical order, instruction or direction and that that circular refers to Finance Act, 1965 and not Finance Act, 1966. It is not the case of Revenue that this circular is not for this particular Finance Act. It also cannot be said that the circular giving interpretation is contrary to the Act. In this case, the Board categorically states that-
"46.6 Companies engaged in the business of generation and distribution of power and those enterprises engaged in developing maintaining and operating infrastructure facilities under Sub-section (4A) of Section 80IA are exempted from the levy of MAT,.............."
In any event the subsequent Supreme Court judgment settle the controversy and the revenue is raising contentions contrary to the circular. When the Hon'ble Supreme Court had stated that the interpretation of the Supreme Court itself on a phrase should not be followed by the Revenue, when there is a contrary interpretation by the Circular (254 ITR @ 554). We do not see how an interpretation of a Commissioner which is contrary to that of the Board's interpretation can be sustained. Also, when it had stated that the revenue should not argue contrary to the stated position of the Board in the circular, we do not see how we can sustain these submissions of the Revenue. In view of this stated position of law, the litigation itself is unnecessary and the Revenue should dutifully follow the instructions and not question the same.
13. This being the legal position, we revert back to the facts of the present case and find that the assessing officer had not computed the income of the assessee under Section 115JA to levy Minimum Alternate Tax, presumably on the ground that the Board's Circular is categorical and when it is read with in conjunction with Section 115JA, no computation under that section need to be made in the case of the assessee. This view of the assessing officer cannot be treated as an erroneous view in view of the legal position discussed above. This is a possible view taken by a quasi-judicial authority and no revision under Section 263 lies on the same. The fact that this is a possible legal view is supported by the order of the Commissioner (Appeals)-II Hyderabad order dated 21.11.2001 for the assessment year 1998-99 in the assessee's own case as well as the order of the Mumbai Bench of the Tribunal in the case of M.S.E.B.(supra). Both these orders were put forward to the Commissioner, and were a part of his record.
14. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (243 ITR 836) held that the Commissioner for assuming jurisdiction under Section 263(1) has to be satisfied cumulatively of the two conditions, viz. (1)the order of the assessing officer sought to be revised is erroneous, and (2) it is prejudicial to the interests of the Revenue. If only one of the two is present, i.e. if the order of the ITO is erroneous but is not prejudicial to the interests of the Revenue, or otherwise it is not erroneous but prejudicial to the interests of the Revenue, recourse cannot be had to the provisions of Section 263(1) of the Act. It further held that every loss of revenue as a consequence of an order of the assessing officer, cannot be treated as prejudicial to the interest of Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it had resulted in loss of revenue, or when two views are possible and the Income Tax Officer has taken one view which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of Revenue, unless the view taken by the ITO is unsustainable in law. In this case, the view taken by the assessing officer is supported by a Tribunal decision, and this cannot be taken as a view that is unsustainable in law. The Board circular itself permits the view and a CIT (A) had followed this view. This order of the Commissioner under Section 263 is contrary to the circular issued by the Board and as such has to be struck down, and it cannot be said that the view of the Commissioner is the only view possible.
15. In the light of the above discussion, respectfully following the above judgment of the Hon'ble Supreme Court in Ajadi Bachao Andolan (263 ITR 706), relevant portion of the ratio in which is, extracted above, we hold that Circular No. 762 of the Board dated 18.2.1998 is fully applicable to the facts of this case, especially when the assessee before us is a State Electricity Board, deriving income exclusively from the generation and distribution of power. In this view of the matter, we have to hold that the provisions of Section 115JA are not applicable to the assessee before us. Consequently, the assessment order dated 24.2.2000 passed without applying the provisions of Section 115JA cannot be said to be erroneous. That being so, the twin conditions of not only being erroneous but also prejudicial to the interests of the Revenue are not satisfied simultaneously, and as such, respectfully following the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (243 ITR 836), we have to hold that the CIT was not justified in invoking his jurisdiction under Section 263. His order dated 7.3.2002 is accordingly cancelled, and the assessee's appeal, ITA No. 1055/Hyd/02 is allowed. As the assessee gets relief on this argument based on the Circular, we do not go into the other contentions, as it would be academic to do so. In the result, this appeal of the assessee is allowed.
ITA No. 1055/Hyd/03:16. As already noted above, the orders of the Revenue authorities passed in pursuance of the order of the Commissioner under Section 263, has given rise to this appeal. As the very order of the Commissioner dated 07.03.2002 passed under Section 263 is cancelled by us hereinabove, in the context of assessee's appeal ITA No. 1055/Hyd/02 there-against, the proceedings taken up in pursuance of the order of the CIT under Section 263, have no legs to stand. As such, they are liable to be cancelled. We cancel the same accordingly, and allow this appeal of the assessee.
17. In the result, both the appeals of the assessee are allowed.