Madhya Pradesh High Court
Commissioner Of Income-Tax vs Ratlam Coal Ash Company on 17 August, 1987
JUDGMENT G.G. Sohani, J.
1. As directed by this court, the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in reversing the order of the Commissioner of Income-tax made under Section 263 and restoring that of the Income-tax Officer on the ground that the Commissioner of Income-tax had not made out a case that the assessment order framed by the Income-tax Officer was erroneous in so far as it was prejudicial to the interests of the Revenue ?"
2. The material facts giving rise to this reference, briefly, are as follows:
3. On an examination of the income-tax record of the assessee, the Commissioner of Income-tax found that in the return filed by the assessee for the assessment year 1976-77, the assessee had shown a total income of Rs. 26,324. The Commissioner of Income-tax noted that as against the income shown in the return, the Income-tax Officer framed an assessment on a total income of Rs. 35,000 just two days after the return was filed, without ascertaining as to how the amount of total income was arrived at. The Commissioner of Income-tax considered that as the Income-tax Officer failed to make proper enquiry both as regards the receipt of Rs. 73,500 and the expenses of Rs. 44,873 shown by the assessee, the order passed by the Income-tax Officer was prejudicial to the interests of the Revenue. The Commissioner of Income-tax accordingly issued a notice to the assessee under Section 263 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The assessee appeared before the Commissioner of Income-tax and contended that the order of the Income-tax Officer could not be held to be erroneous and prejudicial to the interests of the Revenue as to confer jurisdiction on the Commissioner of Income-tax to pass an order under Section 263 of the Act. It was contended that all the details were furnished and the relevant documents were produced by the assessee at the time of assessment, that the books of account were also produced and that the Income-tax Officer had passed the order of assessment after proper enquiry and after application of his mind. The Commissioner of Income-tax, after taking into consideration the explanation of the assessee, held that the Income-tax Officer had framed the assessment in a hurry, without any proper enquiry and as such it was prejudicial to the interests of the Revenue. The Commissioner of Income-tax, therefore, set aside the order passed by the Income-tax Officer and directed the Income-tax Officer to make a fresh assessment according to law. Aggrieved by the order passed by the Commissioner of Income-tax, the assessee preferred an appeal before the Tribunal. The Tribunal held that the Commissioner of Income-tax, in his order, had failed to specify as to how the order passed by the Income-tax Officer could be held to be prejudicial to the interests of the Revenue. The Tribunal further held that the proceedings under Section 263 of the Act could not be held to have been rightly initiated. The Tribunal, therefore, allowed the appeal preferred by the assessee. Aggrieved by the order passed by the Tribunal, the Revenue submitted an application for making a reference but that application was rejected. The Revenue thereupon submitted an application under Section 256(2) of the Act before this court which was allowed. That is how the aforesaid question of law has been referred to this court for its opinion.
4. Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in the affirmative and in favour of the assessee. It is well settled that where the Income-tax Officer made the assessment in undue hurry, accepting what the assessee stated in the return without making any enquiries, in the circumstances of the case, the Commissioner would be justified in holding the order of the Income-tax Officer to be erroneous. In the instant case, however, the Tribunal has found that the assessee had furnished all the requisite information and that the Income-tax Officer, considering, all the facts, had completed the assessment. The Tribunal further held that in the circumstances of the case, it could not be held that the Income-tax Officer had made the assessment without making proper enquiries. In view of these findings, the Tribunal, in our opinion, was justified in law in reversing the order passed by the Commissioner of Income-tax.
5. Our answer to the question referred to this court is, therefore, in the affirmative and in favour of the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.