1992 (10) TMI 123 - AT - Income Tax

Issues Involved:
1. Whether the assessment order dated 19-3-1986 by the Income-tax Officer was erroneous or prejudicial to the interest of the Revenue.
2. Whether the revisionary order of the Commissioner of Income-tax dated 22-3-1988 was just, legal, and valid.
3. The period of accumulation of income under section 11(2)(a) of the Income-tax Act.
4. The utilization of accumulated income within the prescribed period under section 11(3) of the Income-tax Act.
5. The validity of the Commissioner's rejection of the assessee's application for condonation of delay for the assessment year 1983-84.

Detailed Analysis:

1. Erroneous or Prejudicial Assessment Order:
The central issue was whether the assessment order dated 19-3-1986 by the Income-tax Officer was erroneous or prejudicial to the interest of the Revenue. The Income-tax Officer determined the income of the assessee at Rs. 3,07,151 and held it exempt under section 11 of the Income-tax Act. The Commissioner of Income-tax, however, sought to revise this order under section 263, arguing that the Income-tax Officer's failure to tax Rs. 5,66,735 resulted in under-assessment.

2. Validity of the Revisionary Order:
The Commissioner of Income-tax argued that the accumulated income of Rs. 5,66,735 for the financial years 1972-73 to 1982-83 should be taxed in the assessment year 1983-84, as the period of accumulation ended on 31-3-1982. The Commissioner also rejected the assessee's application for condonation of delay for the assessment year 1983-84. The Tribunal found that the Commissioner's interpretation of the accumulation period was incorrect and that the Income-tax Officer's order was not erroneous or prejudicial to the interest of the Revenue.

3. Period of Accumulation:
The Tribunal examined the period of accumulation under section 11(2)(a). The Commissioner had erroneously concluded that the period of accumulation ended on 31-3-1982. The Tribunal held that the 10-year period of accumulation commenced on 1-4-1973, ending on 31-3-1983. Thus, the accumulated income could be utilized up to 31-3-1984, and the assessee had utilized the funds by purchasing land on 5-1-1984, thereby complying with the provisions of section 11(3).

4. Utilization of Accumulated Income:
Under section 11(3)(c), the accumulated income must be utilized within the 10-year period or in the year immediately following. The Tribunal found that the assessee had utilized the accumulated income within the prescribed period, and therefore, there was no contravention of section 11(3). Consequently, the accumulated income could not be deemed as taxable income for the assessment year 1983-84.

5. Condonation of Delay:
The Commissioner had rejected the assessee's application for condonation of delay for the assessment year 1983-84, arguing that the period of accumulation had already ended. The Tribunal disagreed, stating that the application for accumulation filed by the assessee for the assessment year 1983-84 was within the allowable period. The Tribunal also noted that the Commissioner did not have the authority to restrict the period of accumulation under section 11(2)(a).

Conclusion:
The Tribunal held that the revisionary order of the Commissioner of Income-tax was invalid under law and set it aside. The appeal was allowed, affirming that the Income-tax Officer's assessment order was neither erroneous nor prejudicial to the interest of the Revenue.

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