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Issues Involved:
The judgment addresses the following Issues: 1. Whether the original assessment ceases to exist once a reassessment proceeding is initiated. 2. Whether the Tribunal was justified in cancelling the order under section 263 passed by the Commissioner. Issue 1: Original Assessment vs. Reassessment: The case pertains to the assessment year 1983-84, where an original assessment order was completed on November 18, 1985, followed by a reassessment under section 147 read with section 148 of the Income-tax Act. The Commissioner found the original assessment order erroneous as interest under section 215 was not charged by the Income-tax Officer. The assessee argued that the original assessment merges with the reassessment order, making the original assessment non-existent when the notice under section 263 was issued. However, the Commissioner disagreed, asserting that the issue of not charging interest under section 215 belonged to the original assessment and directed the Assessing Officer to modify the tax liability accordingly. The Tribunal, citing decisions of various High Courts, held that on reassessment, the original assessment is set aside, rendering it non est, and thus the Commissioner lacks jurisdiction to revise a non-existent assessment. Issue 2: Jurisdiction of Commissioner under Section 263: The Commissioner revised the order under section 263 on March 8, 1988, which was challenged before the Tribunal. The Tribunal's decision was based on the premise that the original assessment remains intact even after reassessment under section 147 read with section 148. Referring to the Supreme Court's decision in CIT v. Sun Engineering Works P. Ltd., it was clarified that the Income-tax Officer's jurisdiction is limited to income that has escaped assessment and does not extend to revising the entire assessment. Therefore, the Commissioner can revise the original assessment if it is found to be erroneous and prejudicial to the Revenue's interests. In conclusion, the High Court ruled in favor of the Revenue, stating that the original assessment does not become non est due to reassessment, allowing the Commissioner to revise the original assessment if necessary. The Tribunal's decision was upheld, and the reference application was disposed of accordingly.
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