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Issues involved: The legality of setting aside an assessment order u/s 263(1) of the Income Tax Act on the grounds of being prejudicial to the interests of the Revenue without a clear finding of prejudice.
Summary: The High Court of Punjab and Haryana addressed the question of law referred by the Income Tax Appellate Tribunal regarding the validity of setting aside an assessment order u/s 263(1) of the Income Tax Act. The case involved an assessee who filed a revised return after the initial assessment, leading to a discrepancy in the assessed income. The Additional Commissioner set aside the assessment order, citing it as illegal and prejudicial to the Revenue. However, the Tribunal found no evidence of prejudice to the Revenue and set aside the Commissioner's order. The Court emphasized that the Commissioner must not only find the order prejudicial but also provide the basis for such a conclusion. In this case, the Court agreed with the Tribunal that there was no material to support the claim of prejudice to the Revenue. The assessed income was significantly higher than the returned income, indicating the assessee's grievance rather than harm to the Revenue. Therefore, the Court upheld the Tribunal's decision to set aside the Commissioner's order, ruling in favor of the assessee. In conclusion, the Court found that the Tribunal was correct in its decision based on the lack of evidence of prejudice to the Revenue. The judgment favored the assessee, and no costs were awarded due to the absence of representation. Judge Bhopinder Singh Dhillon concurred with the decision.
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