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Issues involved:
The issue involved in this case is whether the Commissioner of Income-tax could pass an order u/s 263 of the Income-tax Act, 1961, setting aside the Income-tax Officer's order when an appeal was pending before the Appellate Assistant Commissioner. Comprehensive Details: The assessment year in question was 1964-65, with corresponding accounting period being the financial year 1963-64. The Income-tax Officer accepted the explanation of the assessee regarding certain credit entries in the accounts totaling Rs. 75,000 but not for Rs. 20,000. The Income-tax Officer fixed the income of the assessee at Rs. 1,68,920, as opposed to the Rs. 25,880 returned by the assessee. The Commissioner of Income-tax, after examining the records, found the Income-tax Officer's order prejudicial to revenue due to lack of proper investigation into hundi banker's loans. The Commissioner issued a notice u/s 263, setting aside the assessment order and directing the Income-tax Officer to investigate the loans. The Appellate Assistant Commissioner dismissed the appeal as infructuous, as the assessment order was set aside. The assessee appealed to the Tribunal, challenging the Commissioner's order on grounds of lack of material and jurisdiction during the pendency of the appeal. The Tribunal found sufficient material before the Commissioner and upheld the validity of the order u/s 263 during the appeal's pendency. The assessee argued that the Commissioner should have instructed the department to seek relief from the appellate authority instead of passing the order u/s 263. The court noted the difference between sections 263 and 264 of the Income-tax Act, 1961. While section 264 imposes restrictions on the Commissioner's revisional powers, section 263 does not have such limitations. The court emphasized the legislative intent behind the sections, indicating that the power u/s 263 is not inhibited by pending appeals before the Appellate Assistant Commissioner. The court referenced a Supreme Court decision highlighting the distinction between orders and subject matters in similar cases. The court also cited precedents from other High Courts to support the interpretation of the powers conferred by section 263. Ultimately, the court answered the question in favor of the department, stating that the Commissioner's power u/s 263 is not restricted by pending appeals before the Appellate Assistant Commissioner. The parties were directed to bear their respective costs, and a copy of the judgment would be sent to the Appellate Tribunal, Cochin Bench.
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