1991 (7) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Error in the Income-tax Officer's order.
2. Power of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.
3. Necessity for the Commissioner of Income-tax to point out specific errors under section 263.
4. Validity of the Tribunal's decision to quash the Commissioner of Income-tax's order under section 263.

Issue-wise Detailed Analysis:

1. Error in the Income-tax Officer's order:
The Tribunal held that no specific error was pointed out by the Commissioner of Income-tax in the Income-tax Officer's order. The Tribunal's finding was based on the evidence on record and concluded that the mere possibility of the amount flowing back to the assessee did not constitute an error. The Tribunal stated, "What the Revenue is contending is about a possibility of the amount having been received by either relatives or the partners, which is nothing but a surmise and no error can be said to have occurred in the order of the Income-tax Officer."

2. Power of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961:
The Tribunal initially held that the Commissioner of Income-tax had no jurisdiction under section 263 to revise the order of the Income-tax Officer, especially since the order was passed after obtaining the approval of the Inspecting Assistant Commissioner under section 144B. The Tribunal noted, "the assessment order dated September 26, 1984, having been made after receiving the directions under section 144B of the Income-tax Act from the Inspecting Assistant Commissioner (Assessment-II) Jaipur, the Explanation to section 263(1) will not be attracted." However, the High Court opined that this is a question of jurisdiction and a question of law, which should be referred to the court for its opinion.

3. Necessity for the Commissioner of Income-tax to point out specific errors under section 263:
The Tribunal's view was that the Commissioner must point out specific errors and not merely a possibility of an error. The Tribunal stated, "an error in the order of the lower authorities could be absence of examination of a particular fact." The High Court, however, found that the Tribunal did not consider all relevant material and reasons given by the Commissioner, which made the Tribunal's finding perverse.

4. Validity of the Tribunal's decision to quash the Commissioner of Income-tax's order under section 263:
The Tribunal quashed the Commissioner's order under section 263, citing that no specific error was pointed out and the possibility of the amount flowing back to the assessee was not sufficient. The High Court found this decision unsatisfactory, noting that the Commissioner had considered several other grounds, such as the timing of the cheques, their revalidation, and the nature of the cheques issued. The High Court stated, "the order of the Commissioner of Income-tax did not proceed only on the possibility of the amount of cheques flowing back to the assessee, but the Commissioner of Income-tax can be said to have reached that finding that the amount of cheques flowed back to the assessee."

Conclusion:
The High Court concluded that the Tribunal's findings were perverse and vitiated due to the failure to consider all relevant material and reasons provided by the Commissioner. Consequently, the High Court exercised its power under section 260(1) to direct the Tribunal to rehear the appeal and consider all relevant material on record. The High Court stated, "we exercise the powers under section 260(1) and leave the matter open to the Tribunal to consider all the relevant material on record and the reasoning of the Commissioner of Income-tax given in his order under section 263 of the Income-tax Act and to leave it open to rehear the appeal and dispose of it in accordance with law."