1993 (7) TMI 67 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the show-cause notice dated June 22, 1981.
2. Nature of the order dated March 19, 1979, by the Income-tax Officer.
3. Inclusion of capital gains from the sale of standing trees and applicability of section 263.
4. Merger of the Income-tax Officer's order with the Inspecting Assistant Commissioner's order.
5. Nature and validity of the order dated September 11, 1979.
6. Legality of the order directing the assessment of income u/s 45.
7. Assessment of sale proceeds of trees as "Capital gains".
8. Revisability of the Inspecting Assistant Commissioner's direction by the Commissioner u/s 263.
9. Legality of the Commissioner's order u/s 263 and the Tribunal's sustenance of the same.

Summary:

Issue 1: Validity of Show-Cause Notice
The show-cause notice dated June 22, 1981, was scrutinized for its legality and factual basis.

Issue 2: Nature of the Order Dated March 19, 1979
The original order dated March 19, 1979, by the Income-tax Officer was a draft order and not a final assessment order. The Income-tax Officer followed the procedure u/s 144B(1) by preparing a draft order and forwarding it to the assessee, who objected, leading to a direction from the Inspecting Assistant Commissioner.

Issue 3: Inclusion of Capital Gains and Applicability of Section 263
The final assessment order excluding Rs. 2.98 lakhs was an order of the Income-tax Officer, not the Inspecting Assistant Commissioner. The Commissioner's revisional jurisdiction u/s 263 extended to this order as it was erroneous and prejudicial to the Revenue.

Issue 4: Merger of Orders
The doctrine of merger did not apply. The order of the Income-tax Officer did not merge with the Inspecting Assistant Commissioner's direction. The final assessment was the Income-tax Officer's order, making it amenable to revision u/s 263.

Issue 5: Nature and Validity of the Order Dated September 11, 1979
The order dated September 11, 1979, was an order of the Income-tax Officer. The non-inclusion of income from the sale of trees was erroneous and prejudicial to the interests of the Revenue, thus attracting section 263.

Issue 6: Legality of the Order Directing Assessment u/s 45
The Commissioner acted within jurisdiction directing the Income-tax Officer to reassess the income u/s 45. The Tribunal's direction for a thorough enquiry was justified.

Issue 7: Assessment of Sale Proceeds as "Capital Gains"
The sale proceeds of trees of spontaneous growth were assessable under "Capital gains". The Tribunal did not err in not recording specific findings, as it directed the Income-tax Officer to conduct a proper enquiry.

Issue 8: Revisability of Inspecting Assistant Commissioner's Direction
The Commissioner had the authority to revise the direction issued by the Inspecting Assistant Commissioner u/s 263. The final assessment order was subject to the Commissioner's revisional jurisdiction.

Issue 9: Legality of Commissioner's Order and Tribunal's Sustenance
The Commissioner's order u/s 263 and the Tribunal's sustenance were legally valid. The Commissioner's direction for a fresh assessment was justified given the erroneous exclusion of income.

Conclusion:
Questions Nos. 1, 2, 3, 5, 6, 7, 8, and 9 were answered in the affirmative, in favor of the Revenue and against the assessee. Question No. 4 was answered in the negative, also in favor of the Revenue and against the assessee. The judgment directed the transmission of a copy to the Appellate Tribunal without any order as to costs.