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Issues involved:
1. Jurisdiction of Commissioner under Section 263(1) of the Income Tax Act. 2. Taxability of the amount of Rs. 3,66,649 under the head 'income from other sources'. Analysis: Issue 1: Jurisdiction of Commissioner under Section 263(1) of the Income Tax Act: The case involved a dispute regarding the jurisdiction of the Commissioner under Section 263(1) of the Income Tax Act. The appellant contended that the exercise of jurisdiction by the Commissioner was unwarranted and illegal, arguing that mere loss of tax could not be considered prejudicial to the interests of the revenue. On the other hand, the respondent asserted that the Income-tax Officer's order resulted in a loss of tax and was therefore prejudicial to the revenue, justifying the Commissioner's intervention. The Supreme Court analyzed the provision of Section 263(1) which requires the Commissioner to be satisfied that the order of the Assessing Officer is both erroneous and prejudicial to the revenue for the section to be invoked. It was clarified that the provision is not meant to correct every mistake but only erroneous orders affecting the revenue. The Court referenced various judgments to establish that loss of tax can be considered prejudicial to the revenue. Ultimately, the Court upheld the High Court's decision that the exercise of jurisdiction by the Commissioner was justified in this case. Issue 2: Taxability of the amount under 'income from other sources': The second issue revolved around the taxability of the amount of Rs. 3,66,649 under the head 'income from other sources'. The appellant argued that the amount was agricultural income and should not be taxed. However, the respondent contended that the amount was rightly assessed as taxable income as the Income-tax Officer's order was erroneous. The Supreme Court examined the facts and found that the High Court's findings were not challenged before it. The Court determined that the amount was not quantified as loss of agricultural income and was paid in modification of the contract terms, making it a taxable receipt under 'income from other sources'. Despite disagreeing with the characterization of the payment as a breach of contract, the Court upheld the High Court's decision on the taxability of the amount. In conclusion, the Supreme Court dismissed the appeal, affirming the High Court's judgment and ordering costs to be paid by the appellant.
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