1991 (2) TMI 20 - HC - Income Tax

Summary

Issues Involved:
1. Interpretation of the Tribunal's remand order dated January 29, 1983.
2. Justification of capital gain assessment for the relevant year.
3. Conditions for exercise of power under section 263 by the Commissioner of Income-tax.

Issue-Wise Detailed Analysis:

1. Interpretation of the Tribunal's Remand Order Dated January 29, 1983:
The primary issue was whether the Commissioner of Income-tax (CIT) was bound to act strictly within the directions provided by the Tribunal in its remand order dated January 29, 1983. The Tribunal had directed the CIT to pass a fresh order considering the points raised by the assessee, particularly regarding the validity of the return and other connected issues. The Tribunal emphasized that the CIT should dispose of the matter afresh in accordance with law and after giving the assessee sufficient opportunity to be heard. The High Court interpreted this to mean that the CIT was not restricted to only the issues raised before the Tribunal but could consider all relevant points of law and facts in the fresh proceedings.

2. Justification of Capital Gain Assessment for the Relevant Year:
The second issue was whether the capital gain had escaped assessment during the relevant assessment year and whether the CIT was justified in upholding the order under section 263 of the Income-tax Act, 1961. The assessee argued that the transfer of property took place on January 6, 1970, with the Gazette notification, thus falling in the assessment year 1970-71 and not 1971-72. The CIT, however, maintained that the receipt of compensation on August 7, 1970, was the relevant date, making the capital gain taxable in the assessment year 1971-72. The Tribunal supported the CIT's view, stating that the transfer took place before the end of the previous year ending on March 31, 1970, and thus, the capital gain was assessable in the relevant year.

3. Conditions for Exercise of Power under Section 263 by the Commissioner of Income-tax:
The third issue was whether the conditions for the exercise of power under section 263 were satisfied. The Tribunal held that the CIT had jurisdiction to invoke section 263 as the original assessment was erroneous and prejudicial to the interests of the Revenue. The High Court noted that the Tribunal should have entertained the legal contention regarding the accrual of capital gains, as it went to the root of the CIT's jurisdiction to revise the assessment. The High Court emphasized that the CIT should have considered the legal issue raised by the assessee, as it pertained to the jurisdiction of the CIT to invoke section 263.

Conclusion:
The High Court declined to answer the questions referred and remanded the case to the Tribunal for fresh disposal in light of the observations made. The Tribunal was directed to consider whether the capital gain, if any, was exigible to tax for the relevant assessment year, and it was suggested that the Tribunal could remand the matter to the CIT for further consideration if deemed appropriate. The judgment highlighted the importance of considering all relevant legal issues and facts in determining the jurisdiction and correctness of the assessment under section 263.