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TMI Blog2006 (3) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 44AC in the matter of computation of income was available on the statute book at the relevant time. It was the usual practice at that time, both for the assessee and the Revenue, to take 40 per cent, of the purchase price of alcoholic liquor for human consumption other than IMFL as the profit. The petitioner also adopted the same method and returned an income of Rs. 5,25,645 from arrack business (40 per cent, of the purchase cost). After setting off the loss in the toddy business the net income was computed as Rs. 2,17,217. But the Assessing Officer reduced the loss on toddy business from Rs. 3,08,428 to Rs. 1,54,215 and added a sum of Rs. 7,00,000 as credits and the assessment was completed on February 7, 1995 (exhibit P1). The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that section 44AC read with section 206C is only a machinery provision and not a charging section and that those provisions do not dispense with the regular assessment as provided under sections 28 to 43C of the Income-tax Act. Sri P. Balakrishnan, learned counsel appearing for the petitioner, contends that the computation of income as per section 44AC had attained finality as per exhibit P1 order of assessment dated February 7, 1995, as confirmed in exhibit P2 appellate order dated December 13, 1995. Therefore, the same issue was not liable to be reopened in exercise of the powers under section 263 of the Act. It is also barred by limitation since exhibit P-10 order is passed only on March 30, 2000, whereas the issue had otherwise b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation. - For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988, by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." Three conditions must be satisfied for the Commissioner to exercise the power: (1) There must be an order by the assessing authority; (2) It is erroneous; (3) The error has caused prejudice to the interests of the Revenue. It is fairly clear that power under section 263 is in the nature of a supervisory jurisdiction. When the Commissioner considers that an order passed by the assessing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken any steps in that regard at that time, the assessing authority is justified in passing exhibit P3 order dated March 6,1998, maintaining the income as 40 per cent, of the profit and loss account. The contention cannot be appreciated. On the facts it has to be seen that what has been done in exhibit P-2 order of the appellate authority is to set aside the assessment order dated February 7, 1995. It has also to be seen that the appellate authority in the order dated December 13, 1995, sustained the income at 40 per cent, since the appellate order was prior to Sanyasi Rao's case [1996] 219 ITR 330. After the decision in A. Sanyasi Rao's case [1996] 219 ITR 330 rendered by the Supreme Court on February 13, 1996, the assessing authority has n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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