1982 (9) TMI 23 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Commissioner under section 263 of the Income Tax Act regarding an order passed under section 132(5).
2. Interpretation of the powers of the Commissioner under section 263 in relation to provisional orders like those under section 132(5).

Analysis:
The petitioner sought to challenge a notice issued by the Commissioner of Income-tax under section 263 of the Income Tax Act, along with an order passed by the Income Tax Officer (ITO) under section 132(5) of the Act. The ITO had conducted a search and seized assets, retaining a sum to cover tax liability and penalties. The petitioner objected to the Commissioner's jurisdiction under section 263, arguing that the order under section 132(5) could not be revised. However, the court found that section 263 empowers the Commissioner to examine any proceeding under the Act and modify orders if prejudicial to revenue, including those under section 132(5). The scope of revision under section 263 extends beyond assessment orders to cover various types of orders affecting revenue interests.

The court explained that section 132(5) allows the ITO to estimate undisclosed income, tax liability, and penalties provisionally to safeguard revenue interests. The order under section 132(5) is not final assessment but serves to secure assets pending regular assessment. If the ITO's order is erroneous and prejudicial to revenue, the Commissioner can intervene under section 263. The court clarified that protecting revenue interests is crucial even before final tax liabilities are determined, as provisional orders can impact revenue adversely.

Another argument raised was that the Commissioner, being the authority to address objections under section 132(11), should not have revisional powers under section 263 regarding section 132(5) orders. However, the court held that the Commissioner's notice under section 263 does not preclude addressing objections under section 132(11). The petitioner's concern about potential bias due to the notice under section 263 was dismissed, emphasizing the separate nature of these processes.

Regarding concerns about multiple proceedings and appeals arising from section 263 revisions and regular assessments, the court deemed it irrelevant to interpreting the scope of section 263. Ultimately, the court upheld the Commissioner's jurisdiction under section 263 and dismissed the petition challenging the notice, finding no grounds for interference.