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TMI Blog1990 (3) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 1978-79 was completed under section 143(3) on 10-9-1981. In the course of assessment it was given out by the assessee that there was profit to the tune of ₹ 16,237 on the sale of some silver. This was claimed as exempt on the ground that the profit was on the sale of silver utensils which constituted 'personal effects' of the assessee. Perusal of records, however, showed that no enquiry was made in the course of assessment on the following vital points before accepting the contention that the profit was exempt from tax : (i)There is nothing to show that silver sold constituted items of silver utensils. No details and description of the various articles were furnished. It was not even enquired as to whom the sale was made. (ii)Presuming that the articles sold constituted silver utensils, no enquiry was made before giving the finding that those alleged silver utensils were articles which were intimately, normally, commonly or ordinarily intended for household use so as to justify them to be included within the expression 'personal effects' as held by the Supreme Court in the case of H.H. Maharaja Rana Hemant Singhji v . CIT [1976] 103 ITR 61 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IAC applied their minds on the various aspects of the case and did not make enquiry on vital points as indicated above. The order passed in this case is an order made by the ITO and not by the IAC. Even if it is taken for assessment to be an order of the IAC, proceedings can be initiated under section 263 in view of the 125A(4) of the Income-tax Act, 1961. The next point taken before the Commissioner was that IAC gave the direction under section 144B, relying upon an order passed by the Tribunal in the case of the assessee for the preceding assessment year in which the capital gain on the sale of silver utensils was held not to be taxable. The Commissioner, however, held as follows: The basic point is that this examination has not been done for this year and therefore, section 263 is attracted. The Commissioner observed that in this case it was absolutely essential to have the facts examined before deciding whether the profit on sale of silver was exempt from tax or not. On appeal, the Tribunal held as follows : ... it is seen that the ITO completed the assessment on the point after considering and following the directions given by the IAC. This very same point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or obvious mistake. The assessment could be reopened by the ITO under section 147 of the Act. In the relevant accounting year it does not appear that the scheme of the Act was to treat the assessment order passed by the ITO pursuant to a direction given by the IAC under section 144B as anything but an order under section 143 which was amenable to various provisions relating to appeal, rectification and reassessment. There is no reason why the Commissioner could not revise such an order. 6. Mr. Pal has strongly relied on the amendment that was made to section 263 and the Explanation that was inserted. He has drawn our attention to the amendment to section 246 by which the Commissioner (Appeals) was empowered to hear appeals in a case where an assessment order was passed under section 144B. But, in our view, the amendment of section 263 was clarificatory. Clause 47 of Taxation Laws (Amendment) Bill, 1984 makes the position quite clear. It provides : Sub-clause (a) seeks to insert an Explanation to sub-section (1) of section 263. Under the existing provisions, the Commissioner is empowered to revise any order passed by the Income-tax Officer under the Income-tax Act if h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 144B to the IAC was only to enable the ITO to make the proper assessment In accordance with the directions of the IAC. That did not have the effect of converting the order passed by the ITO into an order made by the IAC. The order continued to be the one passed by the ITO. Remedy by way of appeal was provided by the Act against such order treating them as an order passed by the ITO. All other consequences under the Act which were associated with the ITO passing the order himself were also associated which such order passed by the ITO under instructions and directions of the IAC. Therefore, the Commissioner had jurisdiction to revise the order passed by the ITO under section 144B in accordance with the directions of the IAC. 10. The second decision is of the Madhya Pradesh High Court in the case of CIT v. Vithal Textiles [1989] 175 ITR 6292. The Madhya Pradesh High Court went into the controversy raised in the instant reference at length and held that Explanation (a ) to section 263(1) made it clear that it was enacted to remove doubts. Though the Explanation came into force from 1-10-1984, the amending Act being declaratory, must be held to be retrospective. A perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 cannot be Invoked on the facts of the present case before us. 14. This finding has not been challenged by the Commissioner as perverse in this case. There is no allegation of any misdirection of law. In other words, the finding of the Tribunal was that the ITO had actually made an enquiry into the sale of silver utensils. Therefore, the Commissioner was not right in his conclusion that the case of the assessee had been accepted by the ITO without any enquiry. Since this finding of fact of the Tribunal has not been challenged, it will be academic to give any answer to the question of law posed by the revenue. The Tribunal might have wrongly decided the question of the Commissioner's jurisdiction under section 263 and the nature of the assessment order made by the ITO pursuant to a direction given by the IAC. But the Tribunal has come to a conclusion that the ITO had made enquiries about the sale of the silver utensils. Therefore, the Commissioner was not right in coming to the conclusion that the order passed by the ITO was prejudicial to the interest of the revenue because he had not made the necessary enquiry in this regard. So long as this finding of fact stands, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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