1986 Supreme(Pat) 194

PATNA HIGH COURT
Uday Sinha and Ashwini Kumar Sinha JJ.
Commissioner Of Income Tax
Versus
Pushpa Devi
Taxation Case No. 93 of 1978 ; 98 of 1978 ;
Decided On : JUNE 13, 1986

The Commissioner of Income-tax has the jurisdiction to act under Sec.263(1) of the Income-tax Act, 1961, even if the assessment was made in pursuance of a scheme to help new taxpayers in the small income group, if the assessment is erroneous and prejudicial to the interests of the Revenue.

Headnote:

INCOME TAX - Assessment - Scheme for new taxpayers in small income group - Jurisdiction of Commissioner of Income-tax to act under Sec.263(1) of the Act - Whether ousted by the scheme - Whether the Tribunal had rightly held that the Commissioner of Income-tax had not followed the rules of natural justice and whether on that score his order was invalid.

Fact of the Case:

The assessee, a married lady, filed her returns of income for the assessment years 1968-69 to 1973-74. Income of Rs. 4,100 was returned for the assessment years 1968-69, 1969-70 and 1970-71. For the assessment years 1971-72 and 1972-73 she returned taxable income of Rs. 5,100 and for the assessment year 1973-74, filed return of income at Rs. 5,100. She declared her initial capital as Rs. 25,000 stating that she derived income from pawn broking and oil seeds business.

Finding of the Court:

The Commissioner of Income-tax, being of the view that the assessments were prejudicial to the Revenue and since they were erroneous, set aside the assessments and remanded the case to the Income-tax Officer "with a direction to frame assessments after making a close scrutiny as to the extent of initial capital" and the actual income earned by the assessee for the years in question.

Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal has rightly held that the assessment orders, having been passed by the Income-tax Officer after necessary enquiries in pursuance of the scheme to help the new taxpayers in the small income groups launched by the Government, were not erroneous as to enable the Commissioner of Income-tax to assume jurisdiction under Sec.263(1) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal has rightly held that the Commissioner of Income-tax did not follow the principles of natural justice before passing the impugned order and so his order is not valid ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal has rightly held that the impugned order of the Commissioner of Income-tax is based upon mere surmises and conjectures and is, therefore, not valid ? 4. Whether, in view of the decision of the Income-tax Appellate Tribunal, Patna, in the case of Smt. Rambha Devi V/s. ITO (ITA Nos. 1713 to 1715 of 1974-75), the Tribunal has rightly held that the Commissioner of Income-tax, acting under Sec.263(1) of the Income-tax Act, 1961, could not legally set aside an order of assessment made under Sec.143(1) in pursuance of the scheme to help the new taxpayers in the small income groups evolved by the Government ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal has rightly held that the Commissioner of Income-tax acted in a mechanical manner in setting aside the assessment order for the assessment year 1973-74 and so his order for that year is invalid ? and 6. Whether, on the facts and in the circumstances of the case, the Tribunal has rightly cancelled the consolidated order passed by the Commissioner of Income-tax under Sec.263(1) of the Income-tax Act, 1961, for the assessment years 1968-69 to 1973-74 ?

Ratio Decidendi: 1. The scheme of mass contact was given wide publicity by the Revenue Department. The income-tax officials visited different places as a follow-up under instructions of the superior officers like the Inspecting Assistant Commissioners and the Commissioners. Assessees who had taxable income were requested and persuaded to file their returns under the scheme which were accepted by the Income-tax Officers under the directions of the superiors under Sec.143(1) of the Act. 2. The Tribunal was not right in holding that the assessment orders had been passed by the Income-tax Officer after necessary enquiries in pursuance of the scheme. It was not right in, holding that the order of the Income-tax Officer was not erroneous so as to enable the Commissioner of Income-tax to assume jurisdiction under Sec.263(1) of the Act. 3. The Tribunal was not right in holding that the Commissioner of Income-tax did not follow the principles of natural justice before passing the impugned order. 4. The Tribunal was not right in holding that the impugned order of the Commissioner of Income-tax was based upon mere surmises and conjectures and, therefore, not valid. 5. The Tribunal did not decide the case of Rambha Devi V/s. ITO (ITA Nos. 1713 to 1715 of 1974-75) correctly. The Tribunal was not right in holding that the Commissioner of Income-tax could not legally set aside the order of assessment made under Sec.143(1) in pursuance of the scheme "to help the new-taxpayers in the small income groups" evolved by the Government. 6. The Tribunal was not right in holding that the Commissioner of Income-tax acted in a mechanical manner in setting aside the assessment order for the assessment year 1973-74. His order for this assessment year was not invalid. 7. The Tribunal was not right in cancelling the consolidated order passed by the Commissioner of Income-tax under Sec.263(1) of the Income-tax Act, 1961, for the assessment years 1968-69 to 1973-74.

Final Decision: All the questions referred to us are thus answered in favour of the Revenue and against the assessee. The references are thus answered against the assessee and in favour of the Revenue with costs. Hearing fee Rs. 250 (Rupees two hundred and fifty) payable by the assessee to the Revenue.