1995 (11) TMI 88 - HC - Income Tax

Summary

Issues Involved:
The issue involves the cancellation of an order passed by the Commissioner of Income-tax u/s 263 of the Income-tax Act, 1961, and the subsequent appeal by the assessee against this order, leading to a reference to the High Court by the Tribunal.

Jurisdiction of Commissioner u/s 263:
The Commissioner has the revisional jurisdiction u/s 263 to examine any record of proceedings under the Act and pass orders enhancing, modifying, or cancelling assessments if deemed prejudicial to the Revenue's interests. The scope of the Commissioner's power has been clarified to include all records under the Act, allowing retrospective examination for prejudicial impact.

Principles of Natural Justice:
While the Commissioner has the authority to revise orders, adherence to principles of natural justice is crucial. In this case, the Tribunal found a serious breach of natural justice as the assessee was not provided with a report from a handwriting expert, crucial to the case. The Tribunal emphasized the necessity of affording the assessee a fair opportunity to respond to allegations before revising orders.

Observations by the Tribunal:
The Tribunal noted that the Commissioner's reliance on a handwriting expert's report without providing it to the assessee was a violation of natural justice. The failure to specify which partner's signature was suspected to be forged and the lack of proper opportunity for the assessee to respond further undermined the validity of the Commissioner's actions.

Conclusion:
The High Court ruled in favor of the assessee, highlighting the Commissioner's failure to adhere to principles of natural justice in revising the order u/s 263. The Court emphasized the importance of providing the assessee with necessary information and opportunities to respond, ultimately invalidating the Commissioner's order and upholding the Tribunal's decision.