Adarsh Kumar Goel, CJ

1. This appeal has been placed before this Bench in pursuance of order of the Division Bench dated 17.2.2010 to resolve conflict in two decisions of this Court in Commissioner of Income Tax vs. Daga Entrade P. Ltd. (2010) 327 ITR 467 (Gauhati) and Rajendra Singh vs. Superintendent of Taxes and others, 1979 STC 10.

2. Reference may briefly be made to the facts giving rise to the issue. The assessee was assessed for the assessment year 2002-03 by the Assessing Officer (AO) giving benefit of exemption under Section 54F of the Income Tax Act, 1961 for long term capital gains from sale of shares. The shares were purchased on 21.4.2000 for Rs. 19,536/- and sold on 2.5.2001 for Rs. 6,36,640/- i.e. on the increased price of more than 30 times in one year. The Commissioner of Income Tax (CIT) held the order to be erroneous and prejudicial to the interest of revenue and exercised suo motu revisional jurisdiction under Section 263 of the Act. It was, inter alia, observed that while accepting genuineness of the share transaction, the AO failed to make any enquiry which, in the facts and circumstances, would normally be made to ascertain the capital gain in question. The assessee was not a habitual operator of share market and had no share of any other company; share was not of a well known company; the price jumped from Rs. 6 per share to Rs. 200/- per share within a short span of thirteen months without any apparent reason. The AO could have obtained annual accounts of the company to satisfy himself whether the commercial activities of the company justified such a jump in price. He could have obtained price quotations of the shares on few dates to examine reasonableness of the jump. The alleged sellers and buyers should have been examined. Accordingly, the order was held to be erroneous and prejudicial to the interest of the Revenue. The AO was directed to re-frame the assessment after conducting necessary enquiries.

3. On appeal of the assessee to the Tribunal, the order of the CIT was set aside on the ground that in absence of the order of the AO being without jurisdiction, the same could not be held to be 'erroneous' for invoking jurisdiction under Section 263. Reliance was placed on judgment of this Court in B & A Plantation and Industries vs. CIT, 290 ITR 395.

4. Aggrieved by the order of the Tribunal, the Revenue has preferred this appeal claiming following substantial questions of law:-

1. Whether on the facts and in the circumstances of the case, the appellant was justified and correct in law in assuming jurisdiction u/s 263 of the Act and in passing the order dated 8-11-2006 u/s 263 of the Act setting aside the assessment order with the further direction to reframe the same in terms of the said order?

2. Whether on the facts and in the circumstances of the case, the tribunal was justified and correct in law in canceling the order passed by the appellant u/s 263 of the Act, 1961 ?

5. When the appeal came up for final hearing, the Revenue relied upon judgment of this Court in Commissioner of Income Tax vs. Daga Entrade P. Ltd. holding that exercise of suo motu revisional power under Section 263 of the Act was not confined to order passed in error of jurisdiction only as held in two Single Bench judgments of this Court in Bongaigaon Refinery and Petrochemicals Ltd. (2006) 287 ITR 120 (Gauhati) and Shyam Sunder Agarwal (2003) 131 STC 70; (2003) 1 GLR 448. The said power could be exercised if the order was 'erroneous' on account of relevant material being ignored. It was observed that since the said Single Bench judgments were based on Division Bench judgment in Rajendra Singh vs. Superintendent of Taxes and ors. there was conflict in two Division Bench judgments requiring the matter to be placed before larger Bench to decide as to which of the two judgments was correct. Relevant part of the order is as under:

In the course of hearing, a recent judgment of this Court dated 17.2.2009 in ITA No. 1/2005 and other c