1988 (4) TMI 33 - HC - Income Tax

Summary

Issues Involved:
1. Validity of assessment orders u/s 263(1) of the Income-tax Act, 1961.
2. Legitimacy of the Commissioner's order based on surmises and conjectures.
3. Applicability of section 143(1) versus section 143(3) for assessments under a government scheme.
4. Mechanical setting aside of the assessment order for the year 1973-74.
5. Validity of the consolidated order passed by the Commissioner for the assessment years 1972-73 and 1973-74.

Summary:

Issue 1: Validity of assessment orders u/s 263(1)
The Tribunal held that the assessment orders, passed by the Income-tax Officer after necessary inquiries under the scheme "to help the new taxpayers in the small income groups," were not erroneous to enable the Commissioner of Income-tax to assume jurisdiction u/s 263(1) of the Income-tax Act, 1961. However, the High Court disagreed, stating that assessments of ladies and minors should have been done under section 143(3) with proper inquiries, not under section 143(1).

Issue 2: Legitimacy of the Commissioner's order
The Tribunal found the Commissioner's order to be based on mere surmises and conjectures, thus invalid. The High Court, however, upheld the Commissioner's view that the assessment orders were irregular, erroneous, and prejudicial to the Revenue, necessitating detailed inquiries.

Issue 3: Applicability of section 143(1) vs. section 143(3)
The Tribunal held that the Commissioner could not legally set aside an order of assessment made under section 143(1) in pursuance of the scheme. The High Court emphasized that the scheme did not apply to ladies and minors, and their assessments should be done under section 143(3) with detailed inquiries to avoid accommodating someone else's income.

Issue 4: Mechanical setting aside of the assessment order
The Tribunal held that the Commissioner acted mechanically in setting aside the assessment order for 1973-74. The High Court found that the Income-tax Officer's acceptance of returns without proper inquiries was erroneous and prejudicial to the Revenue, justifying the Commissioner's order.

Issue 5: Validity of the consolidated order
The Tribunal canceled the consolidated order passed by the Commissioner for the assessment years 1972-73 and 1973-74. The High Court disagreed, stating that the assessments were erroneous and prejudicial to the Revenue, and the Commissioner was justified in setting them aside.

Conclusion:
The High Court answered all questions in favor of the Revenue and against the assessee, emphasizing the necessity of proper inquiries for assessments of ladies and minors under section 143(3). The references were thus answered with consolidated costs of Rs. 250 payable by the assessee to the Revenue.