1983 (2) TMI 45 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer (ITO).
2. Exercise of power u/s 263(1) of the Income-tax Act, 1961.
3. Prejudice to the interests of the Revenue.

Summary:

1. Jurisdiction of the Income-tax Officer (ITO):
The primary issue was whether the ITO, Ward-D, had jurisdiction over the assessee for the assessment years 1966-67, 1967-68, 1968-69, and 1969-70. The Tribunal found that the ITO, Ward-D, did not have jurisdiction and that the assessment should have been conducted by the ITO, Ward-B. The Addl. Commissioner issued a notice u/s 263(1) of the Act, stating that the assessment order was prejudicial to the interests of the Revenue due to the lack of jurisdiction.

2. Exercise of power u/s 263(1) of the Income-tax Act, 1961:
The Tribunal held that the power u/s 263(1) could only be exercised if the Addl. Commissioner demonstrated that the assessment order was prejudicial to the interests of the Revenue. The Tribunal noted that the Addl. Commissioner failed to provide specific details on how the assessment was prejudicial. The Tribunal emphasized that the Commissioner must be satisfied on the materials that the order was erroneous and prejudicial to the interests of the Revenue.

3. Prejudice to the interests of the Revenue:
The Tribunal pointed out that the Addl. Commissioner did not show how the assessment order caused under-assessment or wrong computation of income. The Tribunal referenced several cases, including CIT v. R. K. Metal Works and Russell Properties Pvt. Ltd. v. A. Chowdhury, to support the requirement that the Commissioner must provide material evidence indicating the prejudicial nature of the assessment order. The court concluded that merely lacking jurisdiction does not automatically make an assessment order prejudicial to the interests of the Revenue.

Conclusion:
The High Court affirmed the Tribunal's decision, stating that the Addl. Commissioner did not satisfy the conditions u/s 263(1) to prove that the assessment order was prejudicial to the interests of the Revenue. The court answered the questions in the affirmative and against the Department for all four assessment years. There was no order as to costs, and the judgment was agreed upon by both judges.