1984 (8) TMI 90 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961.
2. Merits of the order passed by the Income Tax Officer (ITO) under section 132(5) of the Income-tax Act, 1961.

Detailed Analysis:

1. Jurisdiction of the Commissioner under Section 263 of the Income-tax Act, 1961:

Summary of Arguments:
- The assessee challenged the jurisdiction of the Commissioner to invoke revisional power under section 263 in relation to the ITO's order under section 132(5).
- The assessee argued that since the order under section 132(5) was passed with the prior approval of the Inspecting Assistant Commissioner (IAC), it should be considered as an order by the IAC, thus beyond the revisional jurisdiction of the Commissioner.
- The assessee relied on the Special Bench decision in East Coast Marine Products (P.) Ltd. v. ITO and the Allahabad High Court decision in Ramlal Kishore Lal v. CIT to support their argument.

Tribunal's Findings:
- The Tribunal agreed with the assessee, stating that the order under section 132(5) is essentially an order by the IAC because it requires the IAC's prior approval.
- The Tribunal emphasized that the ITO conducts inquiries under the direct supervision of the IAC, and the decision taken by the ITO, approved by the IAC, acquires finality and cannot be revised under section 263.
- The Tribunal cited the Allahabad High Court decision, which held that an order requiring the IAC's approval is effectively an order by the IAC and cannot be revised by the Commissioner.

Conclusion:
- The Tribunal concluded that the Commissioner had no jurisdiction to revise the order passed under section 132(5) because it was done with the prior approval of the IAC, making it effectively an order by the IAC.

2. Merits of the Order Passed by the ITO under Section 132(5):

Summary of Arguments:
- The assessee contended that the ITO had conducted thorough inquiries and recorded detailed reasons in a separate note, which formed part of the record.
- The assessee argued that the ITO's order was not erroneous and was not prejudicial to the interests of the revenue.
- The departmental representative argued that the order was erroneous and prejudicial to the revenue, as the release of seized materials could jeopardize future tax recovery.

Tribunal's Findings:
- The Tribunal noted that two conditions must be satisfied for invoking section 263: the order must be erroneous and prejudicial to the interests of the revenue.
- The Tribunal found that the order under section 132(5) is a summary order dealing with the release of seized assets based on estimated income, pending regular assessment.
- The Tribunal observed that there was no material on record to justify the apprehension that releasing the assets would jeopardize future tax recovery.
- The Tribunal concluded that the order was not prejudicial to the interests of the revenue and, therefore, did not warrant revision under section 263.

Additional Considerations:
- The Tribunal also noted that the Commissioner had himself instructed the IAC to release the seized materials before issuing the notice under section 263, which further undermined the basis for invoking section 263.

Conclusion:
- The Tribunal held that the order of the Commissioner under section 263 was not justified on merits and set it aside, restoring the ITO's order dated 11-3-1982.

Final Judgment:
- The Tribunal set aside the order of the Commissioner passed under section 263 and restored the ITO's order dated 11-3-1982.
- The appeal was allowed in favor of the assessee.