1987 (4) TMI 119 - AT - Income Tax

Summary

Issues:
1. Validity of the order passed under sec. 263 of the Income-tax Act, 1961.
2. Reopening of assessment under sec. 147(a) based on possession of jewellery by the appellant's wife.
3. Jurisdiction of the Commissioner to revise orders under sec. 263.
4. Compliance with limitations for revision of orders under sec. 263.
5. Consideration of the IAC (Asst.) order dated 27th February, 1984 as a reassessment.
6. Legality of directing fresh assessment after cancellation of previous order.

Analysis:

1. The appellant contested the order passed by the Commissioner of Income-tax under sec. 263, seeking to strike it down as illegal and erroneous. The primary contention was that the order was against the facts and should be invalidated.

2. The assessment for the appellant's income was completed by the ITO under sec. 143(3) based on a return filed by the appellant. Subsequently, the department sought to reopen the assessment under sec. 147(a) due to the possession of jewellery by the appellant's wife, which was declared in her wealth-tax returns.

3. The Commissioner proceeded to take action under sec. 263, opining that the dropping of proceedings by the IAC (Asst.) was erroneous and prejudicial to the Revenue. The appellant raised objections, citing the prohibition under sec. 263 against revising orders made under sec. 147.

4. The judgment analyzed the provisions of sec. 263 before and after its amendment in 1984, emphasizing the limitations for revising orders and the jurisdiction of the Commissioner to pass such orders. The order under scrutiny was found to lack the necessary elements of being both erroneous and prejudicial to the Revenue.

5. The IAC (Asst.) order of 27th February, 1984 was evaluated in terms of whether it could be considered a reassessment. The judgment highlighted that even if it were a reassessment, the Commissioner's direction for fresh assessment exceeded the scope of sec. 263, especially considering the limitations imposed.

6. The judgment concluded that the order passed by the IAC (Asst.) was not erroneous and, therefore, the Commissioner's order under sec. 263 was cancelled. The appeal was allowed on multiple grounds due to legal deficiencies in the Commissioner's order, ultimately leading to the decision in favor of the appellant.