Judgment :- N.V. BALASUBRAMANIAN, J. In pursuance of the directions of this Court in TCP No. 330 of 1984 dt. 26th February, 1985, the Tribunal has stated a case and referred the following questions of law for the asst. yr. 1977-78 for our consideration : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the order of the CIT passed under s. 263 in the assessee's case for the asst. yr. 1977-78 ? 2. Whether the Tribunal's view that the order of the ITO got merged with the appellate order of the CIT(A) and therefore, the CIT had no jurisdiction to invoke the provisions of s. 263 is sustainable in law especially when the point considered by the CIT(A) was not the subject-matter of appeal at all ? 3. Whether, on the facts and in the circumstances of the case, the assessee was entitled to weighted deduction under s. 35B in respect of the expenditure of Rs. 37, 26, 317 detailed in the statement of the case ?" 2. The assessee for the asst. yr. 1977-78 filed a return of income admitting the income of Rs. 1, 63, 72, 720. The ITO called for the particulars under s. 143(2) of the Act and the details submitted by the assessee were examined by the ITO. The ITO found that there was a variation between the income returned and the income proposed to be assessed which exceeded the figure of Rs. 1, 00, 000 and therefore, he forwarded the draft assessment order under s. 144B of the IT Act, 1961 (hereinafter to be referred to as 'the Act') to the IAC calling upon the assessee to file its objection to the proposed order. The assessee did not furnish any reply and the ITO presumed that the assessee had no objection to offer and completed the assessment under s. 143(3) r/w s. 144B of the Act. In the assessment made the ITO infer alia, granted a relief of a sum of Rs. 18, 63, 159 under s. 35B of the Act and after granting the deduction completed the assessment. 3. In the assessment made the ITO infer alia, granted a relief of a sum of Rs. 18, 63, 159 under s. 35B of the Act and after granting the deduction completed the assessment. 3. The assessee preferred an appeal to the CIT(A) and it is relevant to mention here that the relief granted by the ITO under s. 35B of the Act was not the subject-matter of the appeal before the CIT(A), and it is not necessary to refer to the appellate order passed by the CIT(A) except to notice, for the purpose of this judgment, that the relief granted under s. 35B of the Act was not the subject-matter of appeal before the first appellate authority. 4. After the disposal of the appeal by the CIT(A), the CIT, who is having administrative control over the ITO, perused the order of the ITO in exercise of his powers conferred upon him under s. 263 of the Act. He was prima facie of the view that the ITO has allowed weighted deduction under s. 35B of the Act in respect of the following expenses incurred by the assessee : Rs. (i) Commission and brokerage paid outside India to brokers, charterers and charterers' brokers through whom contracts were finalised 36, 53, 088 (ii) Expenditure on membership subscription to 20, 732 association and subscription to various magazines and purchase of booklets for obtaining information regarding markets outside India. (iii) Postage, telegram, telephone expenses etc. 52, 497 incurred by the brokers in London. 37, 26, 317 He was of the view that the aforesaid expenses did not qualify for weighted deduction under s. 35B of the Act, and issued a show cause notice to the assessee calling upon him to file objection as to why the assessment should not be modified. The assessee filed its detailed objections. The CIT went through the records, written submissions filed on behalf of the assessee and came to the conclusion that the payments of commission and brokerage did not fall under any specific sub-clause of s. 35B of the Act. He also stated that the assessment has been completed by the ITO in a perfunctory manner without verifying the nature of the expenses and their eligibility for weighted deduction. He also stated that the assessment has been completed by the ITO in a perfunctory manner without verifying the nature of the expenses and their eligibility for weighted deduction. He was of the view that weighted deduction claimed by the assessee has been accepted by the ITO without verifying as to the sub-section of s. 35B of the Act under which the claim would be admissible. He was, therefore, of the view that the matter should be restored to the ITO for reconsideration and he held that the assessment order passed by the ITO was erroneous and prejudicial to the interest of the Revenue and set aside the assessment order with a direction to the ITO to pass a fresh assessment order in accordance with law after giving an opportunity to the assessee. 5. The assessee filed an appeal to the Tribunal against the order passed by the CIT under s. 263 of the Act. The Tribunal held that the CIT did not have any jurisdiction to pass order under s. 263 of the Act on the ground that the order of assessment was the subject-matter of appeal before the CIT(A) and the order was also passed by the CIT(A) resulting in the merger of the order of assessment with the appellate order. The Tribunal also held that the ITO had allowed the weighted deduction after examining the details of the expenditure and the question of examining the claim for the weighted deduction under Expln. 2 to s. 35B of the Act did not arise on the facts of the case. The view of the Tribunal was that the ITO had applied his mind to the eligibility of the claim made by the assessee for weighted deduction and he has not mechanically allowed the claim. According to the Tribunal, the finality of an order of assessment should not be lightly disturbed, and the view of the CIT that the ITO had mechanically or perfunctorily made the assessment without proper examination was incorrect. The Tribunal also came to the conclusion that the CIT did not come to any belief that the allowance of deduction under s. 35B of the Act was erroneous as he has merely set aside the order to be redone by the AO afresh according to law. In this view of the matter, the Tribunal allowed the appeal preferred by the assessee. 6. In this view of the matter, the Tribunal allowed the appeal preferred by the assessee. 6. The Tribunal, on the basis of the directions of this Court, has stated a case and referred the questions of law set out supra. 7. Learned counsel for the Revenue submitted that the Tribunal was wrong in holding that there was a merger of the assessment with the appellate order passed by the CIT(A). He further submitted that the ITO was wrong in granting a relief under s. 35B of the Act without properly verifying the nature of the expenditure and without holding under which clause the expenditure in question would fall. He also submitted that the CIT considered the matter and was of the prima facie view that the items claimed by the assessee would not fall under any one of the sub-clause of s. 35B of the Act. According to him, the view of the Tribunal that the ITO has applied his mind before granting deduction is also not correct as the order of the ITO does not indicate that he has applied his mind for the deduction in question as the expenditure incurred did not come under any specific provisions of s. 35B of the Act. 8. Mr. Janarthana Raja, learned counsel for the assessee, on the other hand, submitted that the order of the ITO clearly shows that the AO called for the details and examined the same and the grant of deduction was not against any provision of law. According to the learned counsel for the assessee, the CIT had not applied his mind properly and in the absence of any finding that the order was erroneous and prejudicial to the interest of the Revenue, the CIT had no jurisdiction to revise the order of assessment. Learned counsel for the assessee submitted that the finding of the Tribunal that the ITO had examined the matter in an elaborate manner is a finding of fact and, therefore, this Court should not interfere with the finding of fact. According to the learned counsel for the assessee, the payments were made to foreign brokers through whom information were obtained in respect of cargo availabilities and freight rates and on the basis of the information furnished, the freight contracts were finalised and the expenditure was incurred for obtaining market information. 9. We have carefully considered the submissions of the learned counsel. 9. We have carefully considered the submissions of the learned counsel. The order of the CIT discloses that he has gone through the records of assessment and on the basis of assessment records, he recorded a finding that the assessment was completed by the ITO in a perfunctory manner without verifying the nature of the expenditure and the eligibility of the claim for weighted deduction under s. 35B of the Act. The Tribunal has recorded a finding that the ITO called for certain clarifications with regard to certain items of expenses for which the payments were made to the parties in India and only after examining the same, the ITO allowed the deduction. It is not clear from the order of the Tribunal whether the Tribunal perused the records of assessment as was done by the CIT in exercise of his power of revision. A careful reading of the order of the Tribunal indicates that it has gone only through the order of the assessment passed by the ITO. The Tribunal has not indicated the basis for its conclusion that the expenses claimed by the assessee were examined by the ITO in detail, when the CIT, after the perusal of records of assessment, arrived at a finding that the claim of the assessee was allowed in a perfunctory manner or in a mechanical manner. The Tribunal, no doubt, referred to the claim of deduction of the assessee under s. 35B(1)(b)(ii) and (iv) of the Act. The Tribunal overlooked the fact that the objection of the CIT was that the ITO had not examined the question of allowability of the claim for weighted deduction under which sub-section of s. 35B of the Act, the claim would fall. We are of the view that even assuming that the ITO had called for the particulars, which were also furnished by the assessee, if the ITO without probing the matter further and allowed the claim of the assessee for weighted deduction and if the CIT on the basis of materials forms an opinion that the grant of allowance made by the officer was erroneous and not warranted by law, the jurisdiction of the CIT under s. 263 of the Act is not ousted. The CIT may not have recorded his final conclusion, but the question for exercising the power of revision by the CIT is whether the order of the AO can be regarded as erroneous and prejudicial to the interest of the Revenue. It may be erroneous in law or in fact. It may be erroneous in the sense that the ITO had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed was against the provisions of law. Therefore, the view expressed by the Tribunal that the ITO had allowed the claim after examining the records is inconsistent with the positive finding of the CIT who recorded the finding on perusal of entire assessment records. When the Tribunal, on appeal, differs from the finding of fact of the CIT, it should have recorded its finding indicating the material on which it came to such a conclusion. 10. Learned counsel for the assessee produced before us a copy of the reply sent by the assessee to the show cause notice issued by the CIT under s. 263 of the Act and according to the statement filed along with the show cause notice which was apparently filed before the ITO at the time of completion of assessment, the commission and brokerage on freight demurrage amounting to Rs. 36, 53, 088 represented the payments made to the brokers, charterers and charterers' brokers through whom the contracts were finalised and in the reply to the show cause notice, the assessee has stated that the expenditure was incurred for obtaining information regarding markets outside India as regards cargo availabilities and freight rates and the payments were made to foreign brokers through whom the information was obtained. The CIT in his order referred to the allowance made by the ITO of Rs. 36, 53, 088 being the expenditure incurred by way of commission and brokerage paid outside India to brokers, charterers and charterers' brokers through whom the contracts were finalised. A reading of the order of the CIT shows that the ITO allowed the weighted deduction on the commission paid to the brokers, charterers and charterers' brokers through whom the contracts were finalised, though the assessee in its reply stated that the payments were made to foreign brokers through whom information was obtained in respect of cargo availabilities and freight rates. The conflicting stand in the claim made before the AO as well as before the CIT would warrant a view that the expenses were allowed by the ITO without properly verifying the claim. Further, the CIT passed the order of revision on two points, one, the expenditure in question did not appear to fall under any one of the specific sub-clauses of s. 35B(1)(b) of the Act and further, the assessment was completed by the ITO in a perfunctory manner. The Tribunal, in our view, was not correct in holding that the CIT has not properly examined the case and it is also not correct in its view that the CIT had not come to any conclusion on the basis of records that the allowance under s. 35B of the Act was erroneous, but merely set aside the order as not in accordance with law. This view of the Tribunal is also not correct as the CIT in exercise of his power of revision can pass such orders as the circumstances of the case would justify including an order enhancing or modifying the assessment or cancelling the assessment or directing a fresh assessment. 11. The Supreme Court in CIT vs. Shree Manjunathesware Packing Products & Camphor Works held that the revisional powers conferred on the CIT under s. 263 of the Act are of wide amplitude enabling the CIT to call for and examine the records under any proceeding of the Act and empowering the CIT to make or cause to make such enquiry as he deems necessary in order to find out whether any order passed by the AO was erroneous and prejudicial to the interest of the Revenue. Therefore, when the powers conferred upon the CIT are of wide amplitude enabling the CIT to pass any order, it is not necessary for the CIT to record his final conclusion regarding the allowability of the claim of the assessee under s. 35B of the Act on merits of the case. Therefore, when the powers conferred upon the CIT are of wide amplitude enabling the CIT to pass any order, it is not necessary for the CIT to record his final conclusion regarding the allowability of the claim of the assessee under s. 35B of the Act on merits of the case. In our opinion, it would be sufficient if he comes to the conclusion on materials that the order of the ITO was erroneous and prejudicial to the interest of the Revenue and if such a conclusion is arrived at on materials on record, it is not necessary for him to record his final conclusion on merits of the case and it is open to the CIT to record his prima facie opinion in that matter and set aside the order of assessment and direct the ITO to pass a fresh assessment order in accordance with law. The order of the Tribunal that the CIT should record his final conclusion on the question, if accepted, would take away the powers conferred upon the CIT under s. 263 of the Act to pass such order as the circumstances of the case would justify. 12. This Court in Indian Textiles vs. CIT, has taken a view that where the ITO had given relief without any proper verification then, such an order would be prejudicial to the interests of the Revenue and can be subject-matter of revision. In K. R. Ramaswamy Chettiar vs. CIT, another Bench of this Court held that when the ITO is expected to make an enquiry of a particular item of income and if he does not make any enquiry as expected, that would be a ground for the CIT to interfere under s. 263 of the Act with the order passed by the ITO, as the order passed by the ITO can be construed to be an order which is erroneous and prejudicial to the interest of the Revenue. 13. Furthermore, it was a claim for weighted deduction made by the assessee and when the ITO allowed the claim for weighted deduction, he should have atleast in a brief manner indicated whether the assessee was eligible to claim weighted deduction, under which sub-section of s. 35B of the Act the expenses claimed by the assessee would fall and whether the statutory conditions for allowing the weighted deduction were fulfilled. Even if the order is wholly silent, the records should indicate that the ITO has satisfied himself that the statutory conditions were fulfilled. It is well settled that there cannot be blanket allowance of weighted deduction. 14. The statement filed by the assessee before the ITO shows that the expenditure was incurred by way of brokerage and commission paid, and the CIT was, therefore, justified in coming to the prima facie conclusion that the assessee was not entitled to claim weighted deduction under any one of the sub-clauses of cl. (b) of s. 35B(1) of the Act. The CIT has recorded a prima facie finding that the expenses incurred do not appear to come under any specific sub-clause of s. 35B of the Act and the absence of his final conclusion in the matter by the CIT would not in any way debar him from exercising his revisional jurisdiction nor would render the jurisdiction properly exercised by the CIT as non est in law. Though the Tribunal referred to the claim of the assessee that the expenses would fall under sub-cls. (ii) and (iv) of s. 35B(1)(b) of the Act, it has not recorded any finding that the view of the CIT that they do not come under any sub-clause of s. 35B of the Act was in any way erroneous. The Tribunal referred to the order in the case of Indian Hotel Limited, and it is not clear how the decision in Indian Hotel Limited is relevant in considering the question whether the expenses claimed would fall under any of the sub-clauses of s. 35B of the Act. 15. The Gujarat High Court in CIT vs. M. M. Khambhatwala held that the CIT would be entitled to exercise his power of revision if he is of the view that the order of the ITO is erroneous and prejudicial to the interests of the Revenue and it is open to the CIT to exercise the power even in a case where the issue is debatable. Therefore, the view of the Tribunal that the CIT should have finally determined the matter regarding the deduction under s. 35B of the Act is not warranted on the plain terms of s. 263 of the Act. 16. Therefore, the view of the Tribunal that the CIT should have finally determined the matter regarding the deduction under s. 35B of the Act is not warranted on the plain terms of s. 263 of the Act. 16. Learned counsel for the Revenue invited our attention to a decision of the Karnataka High Court in Chief CIT vs. Mysore Sales International Ltd., wherein the Karnataka High Court held that the maintenance of the agency should be for the promotion of sale and the commission paid for procuring a particular sale would not qualify for weighted deduction. In Srivilas Cashew Co. vs. CIT, the Kerala High Court has taken a view that the assessee would be entitled to weighted deduction on the commission paid to a local agent under s. 35B of the Act. The decisions of the Karnataka and Kerala High Courts, in our opinion, turn on the merits of the case and it is not necessary to express any view on the merits of the case. 17. Learned counsel for the assessee strongly placed reliance on a decision of the Bombay High Court in CIT vs. Gabriel India Ltd., wherein the Bombay High Court was considering an order of CIT cancelling the order of ITO. In that case, the CIT found that the order of the ITO did not contain any discussion with regard to the allowability of the claim for deduction, which indicated the non-application of mind and therefore, according to the CIT, the claim of the assessee required further examination as to whether the expenditure in question was revenue or capital in nature. The CIT, therefore, cancelled the assessment order with a direction to the ITO to make a fresh assessment on the line indicated by him. The Bombay High Court in the above case accepted the tests laid down by the Calcutta High Court in Dawjee Dadabhoy & Co. vs. S. P. Jain, wherein it was held that the words, 'prejudicial to the interests of the Revenue' in s. 263 of the Act should be construed to mean that the order of assessment challenged is such as that it is not in accordance with law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. The Bombay High Court held that there must be materials available on record for the CIT to satisfy himself, though prima facie, that the order of the ITO was not in accordance with law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. The Bombay High Court held that merely because the ITO had not made an elaborate discussion about the allowance of the claim of the assessee, would not render the order of the ITO as erroneous and prejudicial to the interests of the Revenue. It is significant to notice, in the case before the Bombay High Court, the CIT even after invoking the revisional jurisdiction, has not recorded his prima facie view that the claim of the assessee was erroneous and the expenditure was not revenue in nature, but of capital in nature, but, merely directed the ITO to re-examine the matter. However, in the instant case, the CIT, on examination of records, prima facie came to the conclusion that payments of commission and brokerage did not appear to come under any of the sub-clause of s. 35B(1)(b) of the Act and he also came to the conclusion that the ITO had, in a perfunctory and mechanical manner, allowed the claim of the assessee and that the order was erroneous and prejudicial to the interests of the Revenue as the ITO allowed the claim without verifying under what sub-clause of s. 35B(1)(b) of the Act, the claim would fall. Therefore, when the CIT prima facie came to the conclusion that the order passed by the ITO was not in accordance with law and the assessment records disclose that the ITO had not undertaken the enquiry which was expected of him before allowing the claim of the assessee for weighted deduction, we hold that the Tribunal was not justified in holding that the CIT lacked the jurisdiction to exercise his power of revision. 18. Learned counsel for the assessee strongly placed reliance on a decision of this Court in Venkatakrishna Rice Co. vs. CIT, wherein this Court held as under : "In our judgment, the expression, 'prejudicial to the interests of the Revenue' is not to be construed in a petty fogging manner, but must be given a dignified construction. It may be noticed that the use of the expression, 'Revenue', in our opinion, is significant. vs. CIT, wherein this Court held as under : "In our judgment, the expression, 'prejudicial to the interests of the Revenue' is not to be construed in a petty fogging manner, but must be given a dignified construction. It may be noticed that the use of the expression, 'Revenue', in our opinion, is significant. It denotes some kind of abstraction or symbol in the same sense in which the expression 'crown' is used to distinguish it from any person enthroned. The interests of the Revenue is not to be equated to rupees and paise, merely. There is a biblical saying that we do not live by bread alone. Varying this saying, it may be said that the Revenue does not live by tax alone. In this sense, therefore, the interests of the Revenue are not tied up merely with realising as much Revenue as possible, willy nilly, merely looking to the productivity aspect of taxation. The jurisdiction of the CIT under s. 263 is undoubtedly a supervisory jurisdiction. It is intended for interference in special cases to counteract orders which are erroneous as well as prejudicial to the interests of the Revenue. In this context, therefore, the expression, 'prejudicial to the interests of the Revenue' must be regarded as involving a conception of acts or orders which are subversive of the administration of Revenue. There must be some grievous error in the order passed by the ITO, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the CIT might think to be prejudicial to the interests of revenue administration. There might be cases where the CIT might wish to interfere with an order of the ITO in order to safeguard the fair name and reputation of the IT Department without any thought of going into the particular aspects of the assessment. Assessments which are mala fide, politically and communally motivated may be, however, set aside as being prejudicial to the interests of the Revenue. It is unnecessary, for us to illustrate the point any further. All that we wish to observe is that the scope of the interference under this section is not to set aside merely unfavourable orders and bring to tax some more money to the treasury. It is unnecessary, for us to illustrate the point any further. All that we wish to observe is that the scope of the interference under this section is not to set aside merely unfavourable orders and bring to tax some more money to the treasury. Nor is the section meant to get at sheer escapement of revenue which, as is well known, is taken care of by provisions elsewhere in the Act such, for instance, as s. 147 of the Act. The prejudice must be prejudice to the revenue administration" .The above decision is distinguishable on the facts of the case as the CIT in the instant case has come to a prima facie view that the order was not in accordance with law and as such, it is prejudicial to the interests of the Revenue. Therefore, in our opinion, the Tribunal was not correct in holding that the CIT lacked the jurisdiction and the Tribunal was also not correct in holding that the CIT was not justified in exercising his powers of revision. Accordingly, we answer the first question of law in the negative, in favour of the Revenue and against the assessee. 19. In so far as the second question of law is concerned, it relates to the question of merger. In our view, the order of the ITO which was the subject matter of revision before the CIT under s. 263 of the Act did not merge with the order of the first appellate authority as the subject-matter of appeal before the first appellate authority was different. Therefore, on the basis of the decisions of the Supreme Court in the case of CIT vs. Shri Arbuda Mills Ltd. and CIT vs. Shree Manjunathesware Packing Products & Camphor Works (supra), the Tribunal was not correct in holding that there was a merger of the order of the ITO with the order of CIT(A) precluding the CIT from exercising his revisional powers. Our answer to the second question of law also is in the negative and in favour of the Revenue. 20. In so far as the third question is concerned, it relates to the claim of the assessee on the merits of the case. We have seen that the CIT in exercising his power of revision has not finally decided the question of allowability of deduction on merits of the case. 20. In so far as the third question is concerned, it relates to the claim of the assessee on the merits of the case. We have seen that the CIT in exercising his power of revision has not finally decided the question of allowability of deduction on merits of the case. The Tribunal also has not considered the question on the merits of the case. Therefore, it would not be proper or appropriate at this juncture to render our answer to the third question of law. Since we are upholding the order of the CIT on the question of jurisdiction, we are not answering the third question of law referred to us and we deem fit that it will be proper for the Tribunal to consider the question on merits. It is made clear that it will be open to the Tribunal to consider the claim or remit the matter to the ITO to consider the question on the merits of the claim. Hence, we are not answering the third question of law. 21. Accordingly, the questions referred to us are answered in the following manner : 1st question .... It is answered in the negative and in favour of the Revenue. 2nd question .... It is answered in the negative and in favour of the Revenue. 3rd question .... The question is not answered. The Revenue will be entitled to the costs of the reference of a sum of Rs. 1, 500.