TMI Blog1980 (8) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment of the income of the assessee under s. 143(3) read with s. 147 of the Act on January 22, 1968, and determined his total income at Rs. 29,399. Aggrieved by this order of the ITO dated January 22, 1968, the assessee preferred an appeal to the AAC of Income-tax on the ground that an the material facts relating to the investments made in the house property were disclosed by him to the ITO at the time of the first assessment which was completed on March 30, 1967, and there was no failure on his part to make a full and true disclosure of the material particulars. The AAC carefully went through the record of the case and came to a conclusion that the ground taken by the assessee in his appeal was well founded. Accordingly, he passed an order on September 5, 1968, that the action taken by the ITO under s. 147(a) of the Act was illegal and the assessment made by him was liable to be set aside. After this order was passed by the AAC of Income-tax, the Commissioner of Income-tax exercising his powers under s. 263 of the Act, issued a notice to the assessee that the order passed by the ITO under s. 143(1) of the Act on March 30,1967, was prejudicial to the interests of the revenue inasm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvived and so the order of the Commissioner under s. 263(1) of the Act cannot be held to have revised the order of reassessment made under s. 147 of the Act. Accordingly, the Tribunal held, vide its order dated October 25, 1971, that the order of the Commissioner did not suffer from the infirmity pointed out by the assessee. The assessee, thereupon, required the Income-tax Tribunal to refer to the High Court this question of law arising out of its order and filed an application before the Tribunal to this effect. The I.T. Tribunal, therefore, has made this reference to this court on the following questions of law which, in its opinion, arise out of its order: " 1. Whether, on the facts and in the circumstances of the case, the order of the Commissioner of Income-tax under section 263 of the Incometax Act, 1961, dated March 26, 1969 had the effect, of revising an order of reassessment made under s. 147 ? 2. Whether, on the facts and in the circumstances of the case, the impugned order of the Commissioner of Income-tax was valid in law ?" Notice of this reference was issued to the assessee as well as to the I.T. authorities. Mr. S. K. Kackar appeared on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of s. 263(2) of the Act, because the order passed by the ITO in the first instance under section 143(1) of the Act had merged in the order of the AAC and so no order can be made under s. 263(1) of the Act to revise an order of reassessment made under s. 147 of the Act. In support of his above contention Mr. S. K. Kackar, appearing on behalf on the petitioner, placed reliance upon Commissioner of Commercial Taxes v. Rohtas Industries Ltd. [1979] 43 STC 484 (Pat) and CIT v. Gopal Krishna Singhania [1973] 89 ITR 27 (All) [FB]. Mr. L. R. Mehta, appearing on behalf of the revenue, contended that the proceedings under s. 147 of the Act for assessment of the escaped income are not identical with the original assessment proceedings, but they are proceedings supplementary to the original assessment proceedings and it the assessment made in the proceeding under s. 147 of the Act is set aside by the AAC the original assessment still subsists and cannot be held to have merged in the order of the AAC setting aside the proceedings for escaped income. In support of his above contention, Mr. L. R. Mehta relied upon an authority of the Full Bench of the Allahabad High Court in CIT v. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The second question referred to us is whether on the facts and in the circumstances of the case the impugned order of the Commissioner under would like to observe that under s. 263 of the Act, the Commissioner is empowered to revise an order passed by the ITO only if it is erroneous and it is prejudicial to the interests of the revenue. If the order under revision is not erroneous and prejudicial to the interests of the revenue, the Commissioner has no jurisdiction to revise it. If after calling for and examining the record the Commissioner considers that the order of the ITO is erroneous in so far as it is prejudicial to the interests of the revenue, then he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he thinks fit, pass such order thereon as the circumstances of the case justify including an order directing a fresh assessment. This clearly indicates that the revisional power conferred by s. 263 of the Act is a quasi-judicial power. In the instant case the Commissioner after calling for and examining the records came to a conclusion that there was no evidence to show that inquiries were made by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order under s. 263 of the Act as the order was neither erroneous, nor prejudicial to the interests of the revenue. In support of his contention Mr. S. K. Kackar has referred us to CIT v. R. K. Metal Works [1978] 112 ITR 445 (P H) and CIT v. Sunder Lai [1974] 96 ITR 310 (All). Mr. L. R. Mehta appearing on behalf of the revenue, on the other hand, argued that the word " erroneous " used in 263 of the Act includes failure on the part of the ITO to make an inquiry into the truth of the facts stated in the return filed by the assessee and as, in the present case, the ITO did not make such an inquiry about the investments made by the assessee in the house property in the relevant assessment year before accepting the statements made by the assessee in his return, his order became erroneous and the Commissioner was justified in recording the order as erroneous on the ground that in the circumstances of the case such an inquiry should have been made. In support of his above proposition, Mr. Mehta relied upon an authority of the Delhi High Court in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi). We have considered the above contentions. The records of the case do not reveal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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