2005 (4) TMI 42 - HC - Income Tax

Whether the Commissioner exercised jurisdiction judiciously while rejecting revision application - Commissioner declined to entertain the application for revision made under section 264 on ground that from the perusal of the assessment records and the report of the Assessing Officer it appears that despite opportunity being given the assessee failed to produce evidence regarding investment. The assessee-petitioner was also asked to produce personal drawings but no particulars were produced Commissioner in this case on receipt of the application instead of relying solely on the reports or the records of the case, should have made enquiry considering the documents placed before him by the petitioner.- Held that the Commissioner has unjustly refused to entertain the petitioner s application.

Issues Involved:
1. Lawful exercise of jurisdiction under section 264 of the Income-tax Act, 1961.
2. Scope and purview of sections 263 and 264 of the Income-tax Act, 1961.
3. Principles of natural justice and their applicability.
4. Commissioner's duty to make an enquiry and consider evidence.

Issue-wise Detailed Analysis:

1. Lawful Exercise of Jurisdiction under Section 264 of the Income-tax Act, 1961:
The petitioner challenged the order of the Commissioner of Income-tax dated March 17, 1997, which declined to entertain the application for revision under section 264 of the Income-tax Act. The Commissioner reasoned that the assessee failed to produce evidence regarding investments despite opportunities. The court analyzed whether the Commissioner exercised his jurisdiction lawfully under section 264, which allows the Commissioner to revise any order not prejudicial to the assessee, either on his own motion or on an application by the assessee.

2. Scope and Purview of Sections 263 and 264 of the Income-tax Act, 1961:
The court compared sections 263 and 264, highlighting that section 263 allows the Commissioner to revise orders prejudicial to the interests of the Revenue suo motu, whereas section 264 can be invoked by the assessee or the Commissioner and is intended to benefit the assessee. The court emphasized that section 264 is broader and allows the Commissioner to make inquiries and pass orders not prejudicial to the assessee.

3. Principles of Natural Justice and Their Applicability:
The Revenue argued that the principles of natural justice were not violated as the petitioner was a defaulter and had ample opportunity to produce evidence. The court noted that the non-supply of the report did not infringe on the petitioner's natural justice rights since the petitioner failed to establish any lawful right taken away by the non-supply.

4. Commissioner's Duty to Make an Enquiry and Consider Evidence:
The court held that the Commissioner should have made an enquiry considering the documents placed before him by the petitioner. The Commissioner's failure to consider these documents and make an enquiry was seen as a failure to exercise jurisdiction judiciously. The court emphasized that the Commissioner's power under section 264 is to ensure justice and prevent miscarriage of justice by considering all relevant evidence, even if not produced at the time of assessment.

Conclusion:
The court set aside the impugned order, remitting the matter back to the Commissioner for a fresh decision on the merits, considering all materials or documents within the provision of section 264. The application was allowed to this extent.

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