1998 (2) TMI 63 - HC - Income Tax

Summary

Issues:
1. Validity of setting aside the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.
2. Justification of the Appellate Tribunal in holding that the order of the Income-tax Officer was not erroneous and prejudicial to the interests of the Revenue.

Analysis:
The case involved the assessment year 1970-71, where the Commissioner of Income-tax initiated proceedings under section 263 of the Income-tax Act, 1961, as he believed the order of assessment made by the Income-tax Officer was prejudicial to the Revenue. The issue arose due to the understated value of construction by the assessee and discrepancies in valuation reports. The Income-tax Officer passed a fresh assessment order before receiving a valuation report to avoid time constraints, which estimated the construction cost significantly higher than reported by the assessee.

The Tribunal, while acknowledging the technical jurisdiction of the Commissioner under section 263, found that the Commissioner was clutching at jurisdiction unnecessarily. The Tribunal emphasized that the earlier order of assessment had not been sought for revision by the Commissioner and that the valuation report submitted post-assessment should not have been considered for exercising jurisdiction under section 263.

The High Court referred to a recent apex court decision emphasizing the wide amplitude of revisional power under section 263. The court highlighted that the Commissioner could consider new material even if it was not available to the Income-tax Officer during assessment. The court clarified that the Commissioner was entitled to review the valuation report submitted after the assessment as it formed part of the record before him during examination.

The High Court concluded that the Commissioner had the authority to revise the assessment order based on the valuation report submitted post-assessment. The court upheld the view that the Commissioner's power under section 263 was not limited by the timing of the material's availability. Consequently, the questions referred were answered in favor of the Revenue and against the assessee.

As the Tribunal did not delve into the case's merits while issuing the order in question, the High Court directed the Tribunal to evaluate the appeal's merits filed by the assessee.