The Commissioner's revisional jurisdiction under Section 263(1) of the Income Tax Act, 1961, is limited to examining the record of the assessment proceedings and determining whether the order passed by the ITO is erroneous and prejudicial to the interests of the revenue. The Commissioner cannot take into consideration materials that were not in existence at the time the assessment order was passed.

( 1 ) THIS rule under Article 226 of the Constitution is directed against the notice dated November 23, 1974, issued by the respondent No. 4, the Commissioner of Income-tax, under Section 263 of the I. T. Act, 1961, for the assessment year 1971-72.

( 2 ) THE petitioner No. 1 is an existing company within the meaning of the Companies Act, 1956. Before the 1st January, 1954, petitioner No. 1 became the owner of the lands situated at 62/5, Ballygunge Circular Road, Calcutta.

( 3 ) DURING the previous year relevant to the assessment year, petitioner No. 1 sold a major portion of the aforesaid lands to different persons for a total sum of Rs. 7,51,512 and in its return of income declared the aforesaid amount as the full value of the consideration received by it for the purposes of computation of the capital gains.

( 4 ) IN the course of assessment proceedings respondent No. 1, the ITO, referred the valuation to the Valuation Officer under Section 55a of the I. T. Act, 1961, and thereafter in the assessment order dated March 22, 1974, he recorded, inter alia, as follows :"i have come to know that there is no possibility of getting the valuation report by 31-3-74. Since this is a time-barring assessment, I cannot wait for his report for the purpose of this assessment. I, therefore, accept the value of the consideration declared by the assessee for the present. On receipt of the report from the Valuation Officer, such action, as may be necessary, will be taken according to the provisions of the Act. "

( 5 ) AFTER the assessment was completed, petitioner No. 1 paid the tax as demanded by respondent No. 1 and, thereafter, respondent No. 4 issued the impugned notice which reads, inter alia, as follows :"2. It is seen that the Income-tax Officer computed the capital gains on sale of several plots of land at 62/5, Ballygunge Circular Road, Calcutta, by accepting the full value of the consideration declared by you at Rs. 7,51,512. It was also made clear by the Income-tax Officer in the assessment order that on receipt of the valuation report from the Government Valuation Officer, necessary action will be taken according to the provisions of law. It is seen from the valuation report of the Government Valuation Officer that he has valued the fair market value of the asset at Rs. 10,85,250 in place of Rs. 7,51,512 declared by you. It, therefore, appears that the Income-tax Officer erred in accepting the value of consideration declared by you. 3. In view of what has been stated in the foregoing para. , the said order of the Income-tax Officer dated 22-3-74 appears to be erroneous in so far as it is prejudicial to the interests of the revenue. 4. I, therefore, propose to pass such order in respect of the said assessment order as the circumstances of the case justify including an order setting aside or enhancing or modifying the assessment or cancelling the said order of assessment and directing a fresh assessment. "

( 6 ) THE petitioners have, therefore, challenged the validity of this proceeding on several grounds and their learned advocate, Mr. R. N. Bajoria, has pressed all those grounds before me, but I would like to deal only with one ground and keep the other grounds completely open.

( 7 ) AS the valuation report was not in existence at the time respondent No. 1 passed the aforesaid order, Mr. Bajoria argues that respondent No. 4 had no jurisdiction to initiate the revisional proceeding under Section 263 of the Act, on the basis of the valuation report. In support of this contention he places reliance on several cases under the Sales Tax Act, In State of Gujarat v. Chelabhai Bhanabhai Prajapati [1974] 33 STC 147, the Gujarat High Court, by following two decisions of the Supreme Court on a similar provision, held that the initiation by the Deputy Commissioner of suo motu revisional proceeding was without jurisdiction and invalid as it was based on materials which did not form part of the assessment proceedings.

( 8 ) IN Jaga