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Issues involved: Jurisdiction of Commissioner of Income-tax u/s 263 after reopening assessment u/s 147 and 148 of the Income-tax Act, 1961.
Summary: The High Court of Delhi considered the jurisdiction of the Commissioner of Income-tax to pass an order u/s 263 of the Income-tax Act, 1961 after the Income-tax Officer had reopened the assessment of the assessee for the year 1962-63 u/s 147 and 148. The assessee, a sole proprietrix, had filed a return of income which the ITO found to be fictitious. The Commissioner later cancelled the assessment order and directed a fresh assessment. The assessee appealed, arguing that the Commissioner had no jurisdiction to issue notice u/s 263 while proceedings under s. 147/148 were pending. The Tribunal upheld the Commissioner's order, citing precedents where revision orders were allowed during pending appeals. The main argument was based on the scope of reopening an assessment under s. 147, contending that once valid proceedings are initiated, the entire assessment is set aside. The Court analyzed the provisions of s. 263 and concluded that the Commissioner can revise an assessment order as long as it stands, even during pending reassessment proceedings. Reopening an assessment does not automatically cancel the original assessment order. The Court clarified that the ITO has the power to reassess income that escaped assessment, but reopening the assessment does not nullify the original order. The reassessment process involves determining the tax liability for all escaped income during that year. The Court emphasized that the mere reopening of assessment does not cancel the original assessment order. It was argued that allowing simultaneous proceedings could lead to conflicting opinions, but the Court found no such conflict. The jurisdiction of the Commissioner u/s 263 allows for enhancing, modifying, or cancelling an assessment, which would replace the original order. Once the Commissioner revises an assessment, reassessment proceedings initiated u/s 147 would end, as the original order ceases to exist. The Court ruled in favor of the Department, stating that the original assessment sought to be revised becomes non est after reassessment, which is not open to revision u/s 263. In conclusion, the Court answered the question against the assessee and in favor of the Department, with no order as to costs.
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