COMMISSIONER OF INCOME-TAX VS DES RAJ KUL BHUSHAN
1991 P T D 140
[Punjab and Haryana High Court (India)]
Before Gokal Chand Mital and S.S. Sodhi, JJ
COMMISSIONER OF INCOME-TAX
versus
DES RAJ KUL BHUSHAN
Income-tax Reference No. 4 of 1980, decided on 22/11/1988.
Income-tax---
---Revision---Jurisdiction of C.I.T.---I.T.O. making assessment by adding more than Rs. 1 lakh---Assessment order erroneous and therefore prejudicial to revenue ---C.I.T. has jurisdiction to cancel order and direct fresh assessment.
The Income-tax Officer forwarded to the assessee his order, dated March 29, 1976, under section 143(3) read with section 185(4) of the Indian Income-tax Act, 161. This order was marked "draft order" and in this he had made addition of more than Rs. 1 lakh. The assessee did not file any objections as he could have done under section 144-B and, consequently, the Income-tax Officer made an order on April 7, 1976, to the effect that the draft assessment order served on March 30, 1976, should be treated as final and that the demand notice, etc., had already been served. The Commissioner of Income-tax, under section 263 of the Act, cancelled the assessment order and directed the Income tax Officer to make assessment afresh according to law. The Tribunal cancelled the order of the Commissioner. On a reference:
Held, that there-was, undoubtedly an order passed by the Income-tax Officer and there was also' no dispute that the order passed by this authority on April 7, 1976, was indeed erroneous. The only controversy sought to be raised was with regard to this erroneous order being prejudicial to the interests of the Revenue. Prejudice is clearly writ large by the unenforceability of the said erroneous order. In the circumstances, therefore, all the prerequisites for a valid order by the Commissioner under section 263 of the Act were present in this case. This being so, the Tribunal erred in holding that the Commissioner had wrongly assumed jurisdiction under section 263 of the Act.
L.K. Sood for the Commissioner.
Sanjiv Walia for the Assessee.
JUDGMENT
S.S. SODHI, J.---The matter here pertains to the assessment year 1973 74.
The Income-tax Officer forwarded to the assessee, Des Raj Kul Bhushan, a registered firm, his order of March 29, 1976, under section 143(3) read with section 185(4) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). This order was marked as "draft order". As per this order, as against the returned income of Rs. 2,77,264 the income of the assessee was determined at Rs. 5,24,510. The assessee did not file any objections as he could have done in terms of section 144-B(2) of the Act and, consequently, the Income-tax Officer made an order on April 7, 1976, which reads as under:--
"The draft assessment order served on March 30, 1976, on you should be treated as final as the statutory period of one week has already lapsed and no objection has been filed. Demand notice, challan and penalty notices have already been issued and served. However, copies of the same are again enclosed for necessary action."
On receipt of this order of April 7, 1976, the assessee filed an appeal before the Appellate Assistant Commissioner.
The Commissioner of Income-tax, Jullundur, issued notice under section 263 of the Act on August 19, 1976, calling upon the assessee to appear before him on August 31, 1976. On September 8, 1976, however, the Commissioner of Income-tax wrote to the assessee to inform that the proceedings initiated to cancel the order the Income-tax Officer of March 29, 1976. had been dropped as this order was only a draft order and not a final order.
Later, on November 1, 1976, the Commissioner once again issued notice to the assessee under section 263 of the Act.
The assessee, in his reply, stated that the order passed by the Income-tax Officer under section 144-B of the Act on April 7, 1976, was not a valid order and this being so, there was no order which could said to be erroneous and prejudicial to the interests of the Revenue. The Commissioner was accordingly requested not to cancel this order of April 7, 1976. The Commissioner, however, by his order of December 18, 1976, cancelled the order in question and directed the Income-tax Officer to make fresh assessment in accordance with law.
The Tribunal, on appeal, however, held that the Commissioner had assumed jurisdiction under section 263 of the Act without showing the existence of jurisdictional facts and his order was consequently cancelled.
This is the factual background on the basis of which the following questions of law have now been referred to this Court for its opinion:--
"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the Commissioner of Income-tax wrongly assumed jurisdiction under section 263 of the Income-tax Act, without showing in his order under section 263 of the Act the existence of jurisdictional facts?
(2) Whether the Tribunal was right in law in holding that the order under section 263 passed by the Commissioner could not be sustained under law on the facts and circumstances as being in the focus of the Commissioner?"
The answer to these questions has clearly to be in the affirmative, against the assessee and in favour of the Revenue. It will be seen that there was undoubtedly an order passed by the Income-tax Officer and there is also no dispute that the order passed by this authority on April 7, 1976, was indeed erroneous. The only controversy sought to be raised was with regard to this erroneous order being prejudicial to the interests of the Revenue. The argument sought to be put forth being that as this order was erroneous, how could it be said to be prejudicial to the interests of the Revenue. Prejudice is clearly writ large by the unenforceability of the said erroneous order. In the circumstances, therefore, all the prerequisites for a valid order by the Commissioner under section 263 of the Act were present in this case. This being so, the Tribunal erred in holding that the Commissioner had wrongly assumed jurisdiction under section 263 of the Act.
This reference is thus answered accordingly. There will be no order as to costs.
Z.S./805/TOrder accordingly.