1982 (10) TMI 71 - AT - Income Tax

Summary

Issues:
1. Jurisdiction of CIT under section 263 of the IT Act.
2. Validity of assessment order by the ITO for the assessment year 1974-75.
3. Application of mind by the ITO in making the assessment.
4. Comparison with a similar case involving CIT's order under section 263.

Analysis:

1. The appeal was against the order of the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act, 1961. The Tribunal found that the CIT's order was without jurisdiction and not in accordance with the law. The assessee, a registered firm, had filed a return declaring a loss for the assessment year 1974-75, which was later revised. The Income Tax Officer (ITO) raised an ex parte assessment but later granted registration to the assessee.

2. During the assessment proceedings, the ITO found discrepancies in the building account of the assessee and made an addition of Rs. 50,000 towards the cost of the building. The total income was determined at a positive figure of Rs. 7,210. Subsequently, the CIT called for the records and concluded that the assessment was prejudicial to the revenue's interest. The CIT issued a notice under section 263 to the assessee, who argued against the CIT's decision based on valuation differences.

3. The Tribunal noted that the ITO had applied his mind and considered all relevant aspects before making the addition of Rs. 50,000. The ITO had complied with the necessary details and exercised judicial discretion in arriving at the decision. The Tribunal emphasized that the ITO was not bound to accept the Valuation Officer's report as conclusive, unlike provisions in the Wealth Tax Act.

4. The Tribunal referred to a similar case involving M/s Gaba Cold Storage, where the CIT's order under section 263 was canceled due to similar circumstances. In that case, the Tribunal found that the ITO had carefully considered the facts and made a reasoned decision, which was not erroneous or prejudicial to revenue. The Tribunal allowed the appeal, concluding that the CIT's order was without jurisdiction and canceled it.

In conclusion, the Tribunal found that the CIT's order under section 263 was not justified as the ITO had properly applied his mind and made a reasoned decision regarding the assessment. The Tribunal emphasized the importance of judicial discretion exercised by the assessing officer and overturned the CIT's decision, allowing the appeal.