Where two views are possible and the assessing officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the assessing officer is unsustainable under law.: Calcutta High Court

The above-mentioned was opined by the Calcutta High Court in the case of Principal Commissioner v. M/S Britianna Industries Limited of Income Tax 1, Kolkata, ITAT/211/2022, IA NO. GA/01/2022 before the Honourable Justices T.S. Sivagnanam and Hiranmay Bhattacharya on 23rd December 2022. 


There were three questions were raised-

Whether the Learned Tribunal was justified in overturning the order made pursuant to Section 263 of the aforementioned Act on the grounds that the Assessing Officer had already made inquiries regarding the matters on which the order pursuant to Section 263 of the Income Tax Act, 1961 was made, when the Assessing Officer’s order is incorrect and based on a failure to use reasonable judgement, is in violation of the law, and when there is no such embargo stated in the section’s language that or to make the revenue suffer a continuous wrong?

If the Assessing Officer conducts a thorough investigation but fails to recognise that the deductions the Assessees are claiming are not in compliance with the law, and it is determined that the Assessing Officer failed to apply his mind, can the provisions of Section 263 of the aforementioned Act be invoked?

Whether the Learned Tribunal committed a legal error in reading Section 263 of the aforementioned Act and concluding that the learned PCIT’s action in the current instance is not justified and cannot be upheld in light of the relevant facts and circumstances.


We now take note of the ruling in Malabar Industrial Company Limited v. Commissioner of Income Tax 1 by the Hon. Supreme Court, which stated that every loss of revenue cannot be considered detrimental to the interest of revenue if the assessing officer has chosen one of the legal options or, in cases where two views are possible, has chosen the one that the CIT does not agree with.

The tribunal correctly noted the decision in Income Tax Officer Versus DG Housing Projects Limited and further found that the PCIT did not conduct any independent investigation, instead simply setting aside the assessment order and returning the file to the assessing officer to re-examine the issues. This is against the law as established by numerous decisions.

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