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Validity of order under section 263(1) of the Income-tax Act, 1961 - Correct status of the assessee - Assessment in status of HUF or individual - Application of section 64 - Enquiries made by the ITO - Prejudicial to the interest of the revenue. Analysis: The judgment revolves around the challenge to the validity of an order under section 263(1) of the Income-tax Act, 1961, concerning the assessment year 1976-77. The Commissioner held that the assessment order made by the ITO was erroneous and prejudicial to the revenue's interest. The controversy stemmed from a partial partition in the Hindu Undivided Family (HUF) of the assessee, leading to the allocation of shares in a firm among family members. The Commissioner contended that the ITO failed to assess the share income correctly, considering the applicability of section 64 and the individual status of the assessee. The Commissioner issued a show cause notice under section 263(1) to rectify the assessment. The assessee argued that the ITO's assessment as an individual was valid, given the continued status of the HUF post-partial partition. The Commissioner, however, found the ITO's failure to make necessary inquiries regarding the correct status of the assessee and the application of relevant provisions. The Commissioner directed a fresh assessment, emphasizing the individual assessment of the share income and the inclusion of the wife's share as per section 64. The assessee challenged this decision, questioning the necessity for rectification without proving the ITO's legal error and its impact on revenue interests. The dispute centered on whether the share received post-partition should be assessed in the status of HUF or individual. The assessee relied on the case of Bajrang Lal v. CIT to support the HUF status, emphasizing the family's continued existence with unmarried daughters. The department supported the Commissioner's decision, citing the relevance of the Purshottam Das Rais case and the individual assessment principle post-partition. The Tribunal analyzed the legal principles regarding partitioned property and HUF rights, referencing judicial precedents to determine the nature of the received property and the family's composition. The Tribunal concluded that the property received post-partition belonged to the assessee as the head of the family, considering the presence of unmarried daughters and the potential addition of a son. It distinguished the present case from Purshottam Das Rais, highlighting the family's existence and responsibilities towards unmarried daughters. The Tribunal quashed the Commissioner's order under section 263, allowing the appeal based on the distinct facts and legal interpretations in the case.
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