2002 (7) TMI 48 - HC - Income Tax

Whether the Tribunal is right in law in setting aside the order made by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961? - we are of the view that there is nothing in the provisions of the Income-tax Act, 1961, particularly section 263 of the Act, or in the aforesaid pronouncement of the apex court which would require us to accept the narrow view which appealed to the Tribunal that the record must be of the assessee concerned and that the Commissioner had no power, jurisdiction and authority to take action under section 263 of the Act, in the case of the assessee on the basis of the records in the cases of other persons. - Our answer to the question is, accordingly, in the negative, i.e., in favour of the Revenue and against the assessee.

Issues:
1. Interpretation of section 263 of the Income-tax Act, 1961 regarding the Commissioner's power to set aside assessment orders.
2. Whether the Commissioner can rely on records of other persons related to the assessee to take action under section 263.

Issue 1: Interpretation of section 263 of the Income-tax Act, 1961 regarding the Commissioner's power to set aside assessment orders:
The case involved a reference from the Revenue regarding the correctness of setting aside an assessment order made by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961 for the assessment year 1983-84. The Commissioner set aside the assessment as he found the Income-tax Officer had not conducted an inquiry into the source of acquisition of gold ornaments by the assessee, which was shown in her wealth-tax return. The Commissioner considered the assessment order as erroneous and prejudicial to the Revenue's interests. The Tribunal, however, held that the Commissioner could not rely on the records of other persons related to the assessee to invoke section 263. The High Court analyzed the legislative amendment to section 263, emphasizing the wide amplitude of the revisional power conferred on the Commissioner. Referring to a Supreme Court decision, the High Court concluded that the Commissioner had the authority to consider new material even if it was not available to the Income-tax Officer during the assessment. The High Court rejected the narrow interpretation adopted by the Tribunal and ruled in favor of the Revenue, upholding the Commissioner's power to set aside the assessment order under section 263.

Issue 2: Whether the Commissioner can rely on records of other persons related to the assessee to take action under section 263:
The Tribunal had set aside the Commissioner's order under section 263, stating that the Commissioner could not base his actions on records of other persons related to the assessee, irrespective of the closeness of their relationship. The High Court, however, disagreed with the Tribunal's interpretation. Citing a Supreme Court decision, the High Court highlighted the broad scope of the Commissioner's power under section 263 to call for and examine the record of any proceeding under the Act. The High Court emphasized that the Commissioner could make necessary inquiries to determine if the assessment order was erroneous and prejudicial to the Revenue's interests. The High Court clarified that the Commissioner had the authority to consider records related to the proceeding available to him at the time of examination, even if they were not part of the assessee's records. Consequently, the High Court ruled against the assessee, affirming the Commissioner's jurisdiction to take action under section 263 based on records related to the proceeding, even if they involved other persons connected to the assessee.

This detailed analysis of the judgment showcases the High Court's interpretation of the Commissioner's powers under section 263 of the Income-tax Act, 1961 and the relevance of considering records of other persons related to the assessee in setting aside assessment orders.

← Previous Next →