TMI Blog2001 (4) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... t, when there was no loss of revenue as a result of assessment for the year in question? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Commissioner of Income-tax was justified in setting aside the order of the Income-tax Officer and further interpreting the same to be setting aside for limited purpose only when the Commissioner of Income-tax had cancelled the order of the Income-tax Officer which became non est in law?" Some facts need to be stated for the purpose of acquainting with the case for catching the gist point of the controversy. The petitioners (hereinafter referred to as "the assessee" for convenience) were being assessed as "Hindu undivided family". They stated that there were some family disputes between the members and on account of that the "karta" of the family was disturbed and on account of that disturbance in the family, a "family arrangement" was effected on October 21, 1979 (on Diwali as the accounting year was commencing from the first day of Diwali-Padwa and was ending by the end of the last day of Diwali). The returns were filed for the assessment year 1980-81 (relevant period commencing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 of the Income-tax Act two ingredients should exist (i) that the order passed by the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interests of the Revenue. He submitted that if these two ingredients are present then only the Commissioner would be entitled to call for and examine the record of any proceeding under the Income-tax Act and can either confirm the order passed by the Assessing Officer or set it aside. Shri Choudhary submitted that in the present case the petitioner had paid the tax as Hindu undivided family in respect of the concerned year and, therefore, there was no prejudice either caused or likely to be caused to the interests of the Revenue and, secondly, being it so, the Income-tax Officer was not in error at all. Section 263(1) of the Income-tax Act provides that the Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstituting the Hindu undivided family, or the properties belonging to the Hindu undivided family, or both." In the present matter, the Commissioner of Income-tax concluded that the said deed cannot be treated to be conveying a family arrangement. He was right in coming to that conclusion in view of the provisions of section 171(9) of the Income-tax Act which were to come into force by December 31, 1978. He was empowered to come to a conclusion that the said document was not effecting a family arrangement as contended by the petitioners-assessees and it was to be treated as joint Hindu family by ignoring the said document indicating the family arrangement as the assessees wanted to convey. But it was necessary for him to note that the assessees had paid the tax in view of the assessment order for the concerned year because the said deed came in force and in existence from October 21, 1979. Being that, he should have come to a conclusion as a natural corollary to this, that the assessees continued their existence as Hindu undivided family inspite of execution of the said document. He could have come to a conclusion that the status of the assessees was to be treated as Hindu undiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, voluntarily and with the consent of the other members of the family effected a partial partition in respect of the share capital and rights in the profits of a firm in two groups on January 1, 1971. The two groups consisted of SKS and his minor daughters, NS, on the one hand and AKS and his minor son, HKS, on the other. The total share capital invested by the assessee family through its karta in the said firm amounting to Rs.50,000 was divided into two equal shares between the two groups. It was necessary for the Income-tax Officer acting in view of the provisions of section 171 of the Income-tax Act to issue notices to all the members for affording them the opportunity of being heard. It held that that was necessary in accordance with rules of natural justice. The Division Bench of the Allahabad High Court in that matter held that after giving notice of inquiry to all the members of the family the order in question could be reversed or cancelled by the Commissioner of Income-tax under section 263(1). It was further held that without affording the opportunity of being heard to each member of the said family, cancellation of the order was against the rules of natural justice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction and power as indicated by section 263(1) of the Income-tax Act unless these two factors are depicted by the matter. They are to be present independently and jointly. He cannot invoke the jurisdiction in view of section 263(1) of the Income-tax Act if either of these two factors is absent. The presence of these two factors independently and jointly would only confer power and jurisdiction on the Commissioner of Income-tax to call for the record of the proceeding and to examine its propriety, correctness and legality. Thus, in view of the discussions above, this court answers both the questions in the negative and in favour of the petitioners the assessees. As natural corollary to that, this court answers question No. 2 by holding that the Tribunal was not justified in holding that the Commissioner of Income-tax was justified in setting aside the order of the Income-tax Officer and further interpreting the same to be setting aside the order passed by the Income-tax Officer for limited purpose to the extent of setting aside the entire order. It should have held that the Commissioner of Income-tax was right in holding that the petitioners-assessees were Hindu undivided fam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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