COMMISSIONER OF INCOME TAX 7 versus M/S PAVILLE PROJECTS PVT. LTD.

Citation: [2023] 3 S.C.R. 310 · Decided: 06-04-2023 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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SUPREME COURT REPORTS
[2023] 3 S.C.R.
COMMISSIONER OF INCOME TAX 7
v.
M/S PAVILLE PROJECTS PVT. LTD.
(Civil Appeal No. 6126 of 2021)
APRIL 06, 2023
[M. R. SHAH AND A. S. BOPANNA JJ.]
Income Tax Act, 1961 – s.263 – Exercise of jurisdiction under
– Respondent filed its income tax return for the AY 2007-08, wherein
it showed sale of the property / building for an amount of Rs.33
Crores – According to the assessee, property was sold to discharge
encumbrances from the sale proceeds to pay off the shareholders
and therefore, the said discharge of encumbrances was “cost of
improvement” – Assessment accepted by AO u/s. 143(3) – However,
the Commissioner invoked jurisdiction u/s. 263 of the IT Act and
held that the assessment order passed u/s.143(3) of the IT Act was
erroneous and prejudicial to the interest of the revenue –
Commissioner set aside the assessment order passed by the AO –
ITAT concluded that the Commissioner wrongly invoked the
jurisdiction u/s. 263 of the IT Act and upheld the allowability of the
Assessee’s claim – Appeal against the ITAT’s order was dismissed by
the High Court – On appeal, held: Applying the law laid down in
the case of Malabar Industrial Co. Ltd. and on perusal of the the
assessment order as well as the order passed by the Commissioner
of Income Tax, the Court is of the opinion that the assessment order
was not only erroneous but prejudicial to the interest of the Revenue
also – In the facts and circumstances of the case, it cannot be said
that the Commissioner exercised the jurisdiction u/s. 263 not vested
in it – High Court committed a serious error – Impugned Judgment
and order passed by the High Court set aside and that the order
passed by the Commissioner passed in exercise of powers u/s. 263
of the Income Tax Act is restored.
Allowing the appeal, the Court
HELD: 1. It is true that in Malabar Industrial Co. Ltd., on
interpretation of Section 263 of the Income Tax Act, it is observed
and held that in order to exercise the jurisdiction under Section
263(1) of the Income tax Act, the Commissioner has to be satisfied
[2023] 3 S.C.R. 310
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of twin conditions, namely, (i) the order of the Assessing Officer
sought to be revised is erroneous; and (ii) it is prejudicial to the
interests of the Revenue. It is further observed that if one of
them is absent, recourse cannot be had to Section 263(1) of the
Act. [Para 7.1][318-E-F]
2. Even as observed in the case of Malabar Industrial Co.
Ltd. that the scheme of the Act is to levy and collect tax in
accordance with the provisions of the Act and this task is entrusted
to the Revenue. It is further observed that if due to an erroneous
order of the Income Tax Officer, the Revenue is losing tax lawfully
payable by a person, it will certainly be prejudicial to the interests
of the Revenue. However, only in a case where two views are
possible and the Assessing Officer has adopted one view, such a
decision, which might be plausible and it has resulted in loss of
Revenue, such an order is not revisable under Section 263 [Para
7.2][320-A-C]
3. Having gone through the assessment order as well as
the order passed by the Commissioner of Income Tax, we are
also of the opinion that the assessment order was not only
erroneous but prejudicial to the interest of the Revenue also. In
the facts and circumstances of the case, it cannot be said that the
Commissioner exercised the jurisdiction under Section 263 not
vested in it. [Para 7.3][320-D-E]
Malabar Industrial Co. Ltd. Vs. CIT (2000) 2 SCC 718
: [2000] 1 SCR 744 : (2000) 243 ITR 83 (SC) – relied
on.
CIT Vs. Smt. Shakuntala Kantilal (1991) 190 ITR 56
(Bombay); Chemosyn Ltd. Vs. ACIT (2012) (25)
Taxxman.com 325 (Bombay) – referred to.
Case Law Reference
[2000] 1 SCR 744
relied on
Paras 3.4, 7.2, 7.3
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6126
of 2021.
From the Judgment and Order dated 18.09.2017 of the High Court
of Judicature at Bombay in ITA No.78 of 2015.
COMMISSIONER OF INCOME TAX 7 v. M/S PAVILLE
PROJECTS PVT. LTD.
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SUPREME COURT REPORTS
[2023] 3 S.C.R.
Balbir Singh, ASG, Piyush Beriwal, Ms. Chinmayee Chandra,
Shyam Gopal, Shyam, Manish, Raj Bahadur Yadav, Advs. for the
Appellant.
Firoze Andhyarujina, Sr. Adv., Maneck Andhyarujina, Neerav B.
Merchant, Rajesh Kumar, Vinod Kumar, Advs. for the Respondent.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 18.0
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