COMMISSIONER OF INCOME-TAX VS SESHASAYEE PAPER & BOARDS LTD.
2002 P T D 1736
[242 I T R 690]
[Madras High Court (India)]
Before R.Jayasimha Babu and N.V. Balasubramanian, JJ
COMMISSIONER OF INCOME-TAX
versus
SESHASAYEE PAPER & BOARDS LTD.
Tax Cases Nos.642 and 643 of 1985 (References Nos.342 and 343 of 1985), decided on 30/04/1998.
(a) Income-tax---
----Revision---Powers of CIT---Powers are very wide ---CIT can direct fresh assessment ---CIT need not record final conclusions on points of controversy ---ITO not considering certain aspects while completing assessment---Commissioner examining and finding that items claimed and allowed were erroneous and prejudicial to Revenue---Commissioner justified in setting aside assessment order and directing fresh assessment---Indian Income Tax Act, 1961, S. 263.
(b) Income-tax---
----Revision---Powers of CIT---Assessment under S.143(3) as per directions-of JAC under S.144B---Commissioner has jurisdiction under S.263 to interfere with such assessment order---Indian Income Tax Act, 1961, Ss. 143, 144B & 263.
The powers of the Commissioner are very wide in exercising the powers of revision under section 263 of the Income Tax Act, 1961. The Commissioner is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he. may modify the assessment. He is also empowered to cancel .the .assessment and direct a fresh assessment. The Commissioner is fully empowered to adopt any one of, the three courses indicated by the provisions of section 263 of the Act and the Commissioner's power cannot be faulted because he cancelled the assessment and directed a fresh assessment. There is nothing in section 263 of the Act to show that the Commissioner of Income-tax should in all cases record his final conclusion on the points in controversy before him. It would all depend upon the facts of each case to decide whether the Commissioner had exercised the powers properly or not.
The assessments for the assessment years 1975-76 and 1976-77 were completed by the Income-tax Officer under section 143(3) read with section 144E of the Act. The Commissioner on a perusal of the records found that the Income-tax Officer while completing the assessment allowed some items which were erroneous. The Commissioner, therefore, exercising his powers under section 263 set aside the assessment orders for the two years and remitted the matter to the Assessing Officer to examine the issues. The Tribunal, on appeal, held that the Commissioner had no jurisdiction to revise the assessment order made in pursuance of the directions of the Inspecting Assistant Commissioner on the ground that there was a statutory merger of the order of the Income-tax Officer with that of the Inspecting Assistant Commissioner. The Tribunal also recorded a finding that the order of the Commissioner was not a speaking order. On a reference:
Held, (i) that the Commissioner has the jurisdiction under section 263 of the Act to interfere with the order passed by the Income-tax Officer as per the directions given by the Inspecting Assistant Commissioner under section 14413 of the Act.
CIT v. V.V.A. Shanmugam (1999) 236 ITR 878 (Mad.) fol.
(ii) That the Commissioner found that the Income-tax Officer was not correct in granting relief with respect to some of the items considered in the original assessment proceedings and from the instances or specimens of some of the cases examined by him, he came to the conclusion that the Income-tax Officer had not completed the assessment by following the procedure expected of him. It was not necessary for the Commissioner to examine each item in detail and record a clear finding that the order passed-by the Income-tax Officer was erroneous.
(iii) That the report of the internal audit party does not have any binding effect on the Commissioner and the order passed by the Commissioner showed that he had applied his mind independently to the errors pointed out by the internal audit party and then come to the conclusion that the orders passed by the Income-tax Officer were erroneous and prejudicial to the interests of the Revenue. Therefore, this was not a case of the action initiated by the Commissioner on a binding circular issued by higher authorities, nor was it a case of surrender of jurisdiction in favour of any other authority, but it was a case where the Commissioner had exercised the powers of revision after applying his mind in considering the question whether the orders were erroneous and prejudicial to the interest of the Revenue. The order passed by the Commissioner of Income-tax was valid.
CIT v. Gabriel India Ltd. (1993) 203 ITR 108 (Bom.); CIT (Addl.) v.. Mukur Corporation (1978) 111 ITR 312 (Guj.); CIT v. Narayana Pai (T.) (1975) 98 ITR 422 (Kar.); CIT v. Shree Manjuaathesware Packing Products and Camphor Works (1998) 231 ITR 53 (SC), CIT v. Valliammal (D.) (Mrs.) (1998) 230 ITR 695 (Mad.); Indian Textiles v. CIT (1986) 157 ITR 112 (Mad.); Jeewanlal (1929) Ltd. v. Addl. CIT (1977) 108 ITR 407 (Cal.); Ramaswamy Chettiar (K.A.) v. CIT (1996) 220 In 657 (Mad.); Sirpur Paper Mill Ltd. v. CWT (1970) 77 ITR 6 (SC) and Venkatakrishna Rice Co. v. CIT (1987) 163 1TR 129 (Mad.) ref.
C.V. Rajan for the Commissioner.
S.A. Balasubramanian for the Assessee.
JUDGMENT
N.V. BALASUBRAMANIAN, J.---There are certain common questions of law which .have been referred to us by the Income-tax Appellate Tribunal, at the instance of the Revenue, arising out of ate assessment of the assessee for the two assessment years 1975-76 and 1976-77, and the questions of law referred read as under:
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the Commissioner had not validly assumed jurisdiction under section 263 of the Income Tax Act, 1961, and accordingly in cancelling the order made for the assessment year 1975-76 and 1976-77?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that inasmuch as the assessment was made under section 143(3) read with section 144B on the basis of the directions given by the Inspecting Assistant Commissioner, the order made cannot be the subject-matter of revision by the Commissioner under section 263?
(3) Whether; the Appellate Tribunal's view that there was no clear finding in the order passed by the Commissioner of Income-tax under section 263 regarding the items allowed by the Income-tax Officer which could be termed as prejudicial to the interests of the Revenue is sustainable in law and is reasonable on the facts obtaining in this case?"
The questions relate to the jurisdiction of the Commissioner of income-tax under section 263 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The assessee is a public limited company. The assessment for the assessment years 1975-76 and 1976-77 were completed by the Income-tax Officer under section 143(3) read with section 144B of the Act. The Commissioner of income-tax, on a perusal of the records of the assessee for the two assessment years noticed that the orders were erroneous and prejudicial to the interests of the Revenue and accordingly show-cause notices were issued to the assessee requiring to show cause as to why the orders of the assessment made by the Assessing Officer should not be set aside with a direction to the Assessing Officer to consider the points contained in the show-cause notices. In the show-cause notices as many as 15 items have been considered to be erroneous and prejudicial to the interests of the Revenue in so far as assessment year 1975-76 is concerned and nearly 24 items were considered to be erroneous and prejudicial to the interests of the Revenue as far as the assessment year 1976-77 is concerned. The assessee sent a detailed reply and stated that the proposal to revise the orders of assessment is based an assumptions and not any material. The assessee has also dealt with each individual item and submitted that all the points have been considered by the Inspecting Assistant Commissioner of Income-tax (Range Salem) at the time of finalisation of the draft assessment and, therefore, the revision proceedings initiated by the Commissioner should be dropped. The Commissioner of Income-tax found that the Income-tax Officer had not considered the points while completing the assessment and, therefore, overruled the objections raised by the assessee. He found certain instances wherein the assessment orders showed that they were erroneous and prejudicial to the interests of the Revenue. After noticing some of those items, he came to the conclusion that those items represented various issues covered in the shoe-cause notices and many of them could be considered after the examination of the books of the assessee. He, therefore, held that the orders of assessment were erroneous and prejudicial to the interests of the Revenue and in -that view of the matter set aside the orders of assessment for the two assessment years 1975-76 and 1976-77 and remitted the matter to the Assessing Officer to examine other issues also contained in the show-cause notices and take appropriate action.
The assessee challenged the order of the Commissioner of Income-tax before the Income-tax Appellate Tribunal. The Appellate Tribunal held that the Commissioner had no jurisdiction to revise the orders of assessment made in pursuance of the directions, of the Inspecting Assistant Commissioner on the ground that, there was a statutory merger of the order of the Income-tax Officer with that of the Inspecting Assistant Commissioner. The Tribunal recorded a finding that the order of the Commissioner was not a speaking order and the Commissioner has not given any clear finding that any of the items listed in the order was erroneous and prejudicial to the interest of the Revenue. According to the Tribunal, the Commissioner has not considered the objections of the assessee. The Tribunal also held that, there is no material to show the assessments were made in a hurry especially when the procedure prescribed under section 144B had been followed, and the higher authority had been associated in-making the orders of assessment. The Tribunal also held that the Commissioner of Income-tax had surrendered his judgment to the audit party and delegated his discretion to the Assessing Officer. The Tribunal, therefore, held that the procedure adopted by the Commissioner would vitiate the order of the Commissioner of Income-tax and cancelled the order passed by the Commissioner and allowed the appeal preferred by the assessee. The Appellate Tribunal, on the basis of the directions of this Court, has stated a case and referred the questions of lave set out earlier for the two assessment years in question.
Learned counsel for the Revenue submitted that the order of the Tribunal is erroneous in law as the Tribunal proceeded on the assumption that the order of the Commissioner was not a speaking order. He submitted that under the provisions of section 263 of the Act, the Commissioner has wide power to remit the matter to the Assessing Officer and it is for the Commissioner to pass such orders thereon as the circumstances of the case would justify. He also submitted that the Tribunal was not correct in holding that the Commissioner had surrendered his jurisdiction in favour of the audit party and the report of the audit party would constitute a material for the Commissioner to exercise his revisional jurisdiction under section 263 of the Act. The submission of learned counsel for the Revenue was that the circumstances relied on by the Commissioner would clearly show that the order of assessment were erroneous and they were not in accordance with law and the Commissioner has jurisdiction to exercise the powers conferred under section 263 of the Act. Learned counsel for the assessee, on the other hand, submitted that it is the duty of the Commissioner to record his final conclusion on the matters raised in the show-cause notices, especially when the assessee in his reply has pointed out that there were no mistakes or errors in the orders of the assessment passed by the Assessing Officer. Learned counsel for the assessee further submitted that the Commissioner had not exercised the jurisdiction conferred upon him properly, as the Commissioner after setting out the objections raised by the audit party and the reply submitted by the assessee set aside the orders of the assessment with a direction to the Assessing Officer to complete the assessment. According to learned counsel, the Commissioner should have determined the question whether the orders of assessment were erroneous and prejudicial to the interest of the Revenue and it is not open to the Commissioner to remit the matter for the purpose of further investigation. Learned counsel for the assessee relied upon the decision of the Supreme Court in the case of Sirpur Paper Mill Ltd. v. CIT (1970) 77 ITR 6 and the decision of the Calcutta High Court in the case of Jeewanlal (1929) Ltd. v. Addl. CIT (1977) 108 ITR 407 in support of his submission that the Commissioner cannot exercise the power on the basis of the report of the audit party. Learned counsel for the assessee also placed reliance on the decision of this Court in the case of Venkatakrishna Rice Company v. CIT (1987) 163 ITR 129 and submitted that the prejudice contemplated in section 263 is prejudice to the income-tax administration as a whole. Reliance was placed by learned counsel for the assessee on the decision of the Bombay High Court in the case of CIT v. Gabriel India Ltd. (1993) 203 ITR 108 wherein the Bombay High Court held that the Commissioner could not direct the Income-tax Officer to re-examine the question, where the Commissioner after initiating the revision proceedings did not decide that the claim of the assessee was erroneous and the expenditure claimed was not of revenue in nature, but capital in nature. He, therefore, submitted that on the same analogy the Commissioner had not exercised powers of revision conferred upon him. Learned counsel for the assessee also submitted that the orders of the Income-tax Officer should not only be erroneous but the order should have resulted in prejudice to the interests of the Revenue and unless the two conditions prescribed in section 263 of the Act, are satisfied, the Commissioner has no power to revise the orders of the Income-tax Officer. Learned counsel placed reliance on the decision of the Karnataka High Court in the case of CIT v. T. Narayana Pai (1975) 98 ITR 422 in support of his above submission.
In so far as the second question of law that has been referred to us for our consideration is concerned, there is no dispute that the issue raised in the second question is covered against the assessee in view of the decision of this Court in T.C. No. 1090 of 1980, dated January 7, 1997 (CIT v. V.V.A. Shanmugam (1999) 236 ITR 878, wherein this Court held that the Commissioner has the jurisdiction under section 263 of .the Act to interfere with the order passed by the Income Tax Officer as per the directions, given by the Inspecting Assistant Commissioner under section 144B of the Act. We are in respectful agreement with the reasoning and the view expressed by the Bench of this Court and, accordingly, the second question referred to us is answered in the negative and in favour of the Revenue. The remaining questions, viz., questions Nos. l and 3 are considered together.
Section 263 of the Income-tax Act empowers the Commissioner of Income-tax to call for and examine the record of any proceeding under the Income-tax Act and if he considers that any order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the. Revenue, he may, after complying with the principles of natural justice pass such orders thereon as the circumstances of the case require including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The Supreme Court in the case of CIT v. Shree Manjunathesware Packing Products and Camphor Works (1998) 1231 ITR 53, held that the revisional powers conferred on the Commissioner of Income-tax under section 263 of the Act are of wide amplitude and they enable the Commissioner to call for and examine the record of any proceedings under the Act. The Supreme Court held that section 263 empowers the Commissioner to make or cause to be made such enquiry as he deems necessary in order to find out if any order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. The decision of the Supreme Court makes it clear that the powers of the Commissioner are very wide in exercising the powers of revision under section 263 of the Act. The only limitation on his power is that he must have some materials which would enable him to form a prima facie opinion that the order passed by the Income-tax Officer was erroneous in so far as it was prejudicial to the interests of the Revenue. Once he comes to the conclusion on the basis of material that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue, the Commissioner is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct a fresh assessment. The Commissioner is fully empowered to adopt any one of the three courses indicated by the provisions of section 263 of the Act and the Commissioner's power cannot be faulted because he cancelled the assessment and directed a fresh assessment. In the instant case, the order of the Commissioner shows that he has gone through the records of the Income-tax Officer and he considered the order to be erroneous and prejudicial to the interests of the Revenue on several matters for both the assessment years. The Commissioner also found that the records do not show that the Income -tax Officer has considered the points on which the revision was made while completing the assessment. He also gave` detailed reasons with reference to some of the items for both the assessment years and he held they were representative of the various issues covered in the show-cause notices. On the above basis, the Commissioner came to the conclusion that the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue and set aside the orders of the Income-tax Officer with the direction to the Income-tax Officer to consider the points in detail. It is not a case where he simply set aside the assessment order to verify the correctness of the accounts seeking clarification from the assessee as was done in the case of CIT v. D. Valliammal (1998) 230 ITR 695, (Mad.), wherein it was held that the Commissioner cannot simply set aside the order unless he finds the order was erroneous. On the other hand, in the instant case, the Commissioner has found that the records do not show that the Income-tax Officer had considered the points on which revision proceedings were initiated, which indicated that there was a lack of proper enquiry. Not content with the above conclusion, the Commissioner examined the matter and found that some of the items claimed an disallowed were erroneous which shows that the order was erroneous. The Appellate Tribunal, in our opinion, was not correct in holding that the order passed by the Commissioner of Income tax was not a speaking order.
The contention of learned counsel for the assessee that the Commissioner should have examined the issue and recorded a clear finding that the findings of the Income-tax Officer on all the points were erroneous and, therefore, the Commissioner had lacked jurisdiction is bereft of any force. It is no doubt true that for making a valid order under section 263 of the Act, is essential for the Commissioner to record an express finding that the order sought to be revised was erroneous as well as prejudicial to the interest of the Revenue. In the instant case; the Commissioner had recorded such a finding and with reference to some of the items he positively found that the orders were erroneous and prejudicial to the interests of the Revenue. But, in our opinion, there is nothing in section .263 of the Act to show that the Commissioner of Income-tax should in all cases record his final conclusion on the points in controversy before him the above position of law is well-settled by the decision of the Gujarat High Court in the case of Addl. CIT v. Mukur Corporation (1978) 111 ITR- 312, wherein the Gujarat High Court held as under (page 325):
"Now, even on this question, we find that there is nothing in section 263(1) to show that before passing the final order under that section, the Commissioner must necessarily and in all cases record final conclusions about the points in controversy before him. As already noted by us above, we would have expected him to record final conclusions, which he thought proper if he was to settle the assessment finally but since he has not settled the assessment finally, and has preferred to direct the Income-tax Officer to make an order for fresh assessment, it was proper that he did not express any final conclusions and recorded only prima facie conclusions at which he had arrived with reference to .the facts of the case. Here it should be noted that, as the assessment was to be freshly made by the Income-tax Officer, the only proper course for the Commissioner was not to express any final opinion as regards the controversial points."
The further question that arises is whether in the absence of the final conclusion of the Commissioner on all the points raised in the show-cause notices, can it be said that the Commissioner has not exercised the jurisdiction properly? We are of the opinion that it would all depend upon the facts of each case to decide whether the Commissioner had exercised the powers properly or not. In the instant case, the Commissioner found that the Income-tax Officer was not correct in granting relief to some of the items considered in the original assessment proceedings and from the instances or specimen of some of the cases examined by him, he-came to the conclusion that the Income-tax Officer had not completed the assessment by following the procedure expected of him. In our opinion, it is not necessary for the Commissioner to examine each item in detail and record a clear finding that the order passed by the Income-tax Officer was erroneous and not in accordance with law. Some of the typical illustrations were noticed by the Commissioner to find out how the assessment proceedings were proceeded with by the officer and how the orders were erroneous and prejudicial to the interests of the Revenue. Therefore, it is not a case of the Commissioner directing fresh assessment without any material. The order of the Commissioner clearly shows that he had enough material and on that basis, he exercised the powers of revision under section 263 of the Act, set aside the order and ordered to make fresh assessment. The decision of this Court in the case of K.A. Ramaswamy Chettiar v. CIT (1996) 220 ITR 657, makes it clear that the Income-tax Officer is expected to make an enquiry before taxing the particular item of income or before granting deduction of a particular item of expenditure and if he does not make such an enquiry as expected, that would be a ground for the Commissioner of Income-tax to interfere under section 263 of the Act. In our opinion, the decision of this Court in the above case is applicable to the facts of the present case as the order of the Commissioner indicates that the Income-tax Officer had not called for the details at least with reference to some of the items and has granted deduction without verification of the claim. The Commissioner has pointed out in the orders of revision that there were certain glaring mistakes in the orders of assessment made by the Assessing Officer and the Commissioner after examining the records held that the Income-tax Officer had not considered the points raised in the show-cause notice and we are of the opinion that the Commissioner had properly exercised the jurisdiction under section 263 of the Act.
In the case of Indian Textiles v. CIT (1986) 157 ITR 112, this Court held that the Commissioner had jurisdiction under section 263 of the Act where the Income-tax Officer had granted certain relief without verifying the facts and the orders passed by the Officer was held to be prejudicial to the interest of the Revenue. This Court also held that the Commissioner has the power to set aside a portion of the order of the assessing authority which is against the Revenue or he may remit the matter to the Income-tax Officer for further enquiry after setting aside the relief given by the Assessing Officer. Therefore, the Commissioner in our opinion had set aside the orders of the Income-tax Officer in so far they related to the matters which were the subject-matters of revision. Learned counsel for the assessee strongly placed reliance on the decision of this Court in the case of Venkatakrishna Rice Company v. CIT (1997) 163 ITR 129,wherein this Court held that the prejudice contemplated under section 263 of the Act must be prejudice to the Income-tax Administration as a whole and section 263 cannot be invoked as a jurisdictional corrective or as a review of a subordinate's order in exercise of the supervisory power. We are of the opinion that the above decision has no application as the words "prejudicial to the interest of the Revenue" as held by the Supreme Court in CIT v. Shree Manjunathesware packing Products and Camphor Works (1998) 231 ITR 53, have wide impact and where it was found that the Assessing Officer failed to apply his mind in the proper perspective and where the officer had completed the assessment without conducting or making the enquiry that is necessary for the purpose of deciding the issue before him, the order passed in such circumstances can be said to be erroneous and prejudicial to the interests of the Revenue in the sense that the order is not in accordance with law, and once such a conclusion is reached by the Commissioner, the Commissioner would have necessary power to invoke his jurisdiction under section 263 of the Act. We have already held that the mere fact that a higher authority like the Inspecting Assistant Commissioner was associated in the draft assessment proceedings, would not render the orders of assessment immune from the revisional proceedings. The Commissioner is expected to examine the orders of assessment to' find out whether there is any error resulting in prejudice to the interest of the Revenue and in that process the question who participated, in the assessment proceedings or made the order of assessment is an immaterial consideration.
Learned counsel also placed reliance on the decision of the Bombay High Court in the case of CIT v. Gabriel India Ltd. (1993) 203 ITR 108. The decision of the Bombay High Court has no application to the facts of the case. In the decision before the Bombay High Court it was found that the Commissioner noticed that the order of the Income-tax Officer did not contain discussion with regard to the allowability of the claim for deduction. The Commissioner, therefore, came to the conclusion that the claim of the assessee required examination as to whether the expenditure in question was allowable as a Revenue expenditure or not allowable as a capital expenditure. In the factual situation, the Court held that it is not open to the Commissioner to re examine the matter and he has no power to set aside the orders of assessment and direct the Income-tax Officer to re-examine the issue. On the other hand, on the facts of the case it was found by the Commissioner that the Income-tax Officer had not conducted the enquiry which was expected of him and also that some of the items allowed by the Income-tax Office were not allowable and warranted by the provisions of the Act. The commissioner here has recorded a finding that the orders of the Income-tax Officer were erroneous and prejudicial to the interests of Revenue. Therefore, the decision of the Bombay High Court cited supra has no application to the facts of-the case.
There is no quarrel over the proposition of law laid down by the Karnataka High Court in the case of CIT v. T. Narayana Pai (1975) 98 ITR 422, wherein the Karnataka High Court held that the twin conditions prescribed in section 263, viz., the order must be erroneous and prejudicial to the interest of the Revenue should be satisfied.
Learned counsel also relied upon the decision of the Supreme Court in the case of Sirpur Paper Mill Ltd. v. CWT (1970) 77 ITR 6 and the decision of the Calcutta High Court in Jeewanlal (1929) Ltd-. v. Addl. CIT (1977) 108 ITR 407, and submitted that the Commissioner in the instant case had exercised the powers of revision on the basis of the report of the audit party and, therefore, the Commissioner had no jurisdiction to invoke the jurisdiction under section 263 of the Act. The decision of the Supreme Court in Sirpur Paper Mill Ltd. v. CWT (1970) 77 ITR 6 has no application as the Commissioner there had surrendered his jurisdiction and authority to the Board of Revenue in deciding the questions which were sought to be raised by the company in the revision application. On the other hand, the Commissioner of Income-tax occupies an unique position in the administrative set up of the Department. He is the head of the Department in the administrative side and he is also given the power of quasi-judicial nature under section 263 of the Act to exercise the powers of revision. There is no dispute that there is no right of appeal to the Department against the orders of the assessing authority, to the first appellate authority and the jurisdiction to reopen or to rectify the mistake is subject to the fulfilment of the statutory conditions to reopen the assessment or to rectify the mistake in the order, The internal audit party on going through the records of the assessment of the assessee had pointed out certain mistakes in the orders passed by the Income-tax Officer. The report of the audit does not in any way, bind the Commissioner of Income-tax, but none the less, the Commissioner is empowered under section 263 of the Act to make such enquiry and to find out whether the order of the Income-tax Officer is erroneous and prejudicial to the interests of the Revenue. If after such investigation, the Commissioner comes to the conclusion that the order is erroneous and prejudicial to the interests of the Revenue, he can pass any order as he thinks fit, but where the materials are already available on record, there is nothing which precludes the Commissioner of Income-tax from taking into consideration materials already available on record. The apex Court in the case of CIT v. Shree Manunathesware Packing Products and Camphor Works (1998) 231 ITR 53, has laid down the above proposition that it is open to the Commissioner to take into account the materials which come into existence subsequent to the completion of the orders of assessment made by the Income-tax Officer. The report of the internal audit party does not have any binding effect on the Commissioner and the order passed by the Commissioner shows that he has applied his mind independently to the errors pointed out by the internal audit party and then came to the conclusion that the orders passed by the Income-tax Office were erroneous and prejudicial to the interests of the Revenue. Therefore, it is not a case of the action initiated by the Commissioner on the binding circular issued by the higher authorities, nor is it a case of surrender of jurisdiction in favour of any other authority, but it is a case where the Commissioner had exercised the powers of revision after applying his mind in considering .the question whether the orders were erroneous and prejudicial to the interest of the Revenue, in the revisional proceedings. Consequently, we hold that the Commissioner had exercised the powers and assumed the jurisdiction properly and the Tribunal was not correct in holding that the Commissioner lacked the jurisdiction under section 263 of the Act.
In the result, we answer Questions Nos. l and 3 also in the negative, and in favour of the Revenue. The Revenue will be entitled to costs of Rs.1,000 one set.
M.B.A./714/FCorder accordingly.