JUDGMENT

Gulati, J. - This is a reference u/s 66(1) of the Indian income tax Act, 1922.

2. The assessee is a private limited company. In the previous year relevant to the assessment year 1960-61, the assessee had earned a sum of rupees one lakh which in its opinion was exempt from Income Tax. Thus, in the return filed for the assessment year 1960-61, the assessee did not include in its taxable income the sum of rupees one lakh and appended the following note in Part D of the return which is meant for showing items of income and gain in respect of which the assessee claims exemption.

"Addition to capital reserve......Rs. 1,00,000.

(i) It is a receipt of casual nature not arising from any business, profession, vocation or occupation ; and

(ii) It is also not taxable as capital gain on account of aggregate capital loss of Rs. 21,09,001 brought forward u/s 24(2B) from 1954-55 and 1956-57."

3. The Income Tax Officer passed an assessment order on March 7, 1964, but did not deal with the claim of the assessee contained in Part D of the return. Later on he issued a notice u/s 148 of the Income Tax Act, 1961, as in his opinion the sum of Rs. 1,00,000 mentioned by the assessee in Part D had escaped assessment. However, the Income Tax Officer did not pass any assessment order within one year of the service of the notice u/s 148, with the result the proceedings u/s 148 lapsed. Thereafter, the Commissioner of Income Tax issued a notice u/s 33B of the Indian Income Tax Act, 1922. The assessee objected to the notice on the ground that as the proceedings u/s 148 were still pending, the Commissioner was not competent to take any action u/s 33B. This objection of the assessee was overruled by the Commissioner saying that proceedings u/s 148 had become time-barred and could not be said to be pending. The Commissioner of Income Tax accordingly cancelled the assessment order to enable the Income Tax Officer to pass a fresh assessment after taking into consideration the claim of the assessee contained in Part D of the return. The assessee then appealed to the Income Tax Appellate Tribunal, but did not succeed. However, at the instance of the assessee, the Tribunal has referred the following question of law for our opinion :

"Whether, on the facts and in the circumstances of the case, action u/s 33B of the Indian Income Tax Act, 1922, against the assessee was maintainable ?"

4. Sri K.L. Misra, learned counsel for the assessee, has argued only one point. He says that in order that the Commissioner should have exercised his jurisdiction u/s 33B, it was necessary for him to be satisfied that the assessment order passed by the Income Tax Officer was prejudicial to the interests of the revenue, and on the material on the record the assessment order, could not be said to be prejudicial to the interests of the revenue.

5. u/s 33B of the Indian Income Tax Act, 1922, the Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. It is thus clear that u/s 33B the Commissioner can revise an order passed by the Income Tax Officer only if (i) it is erroneous and (ii) is prejudicial to the interests of the revenue. If the order sought to be revised is not prejudicial to the interests of the revenue the Commissioner has no jurisdiction to revise it. We shall, therefore, examine as to whether the assessment order dated March 7, 1964, could be said to be prejudicial to the interests of the revenue.

6. Now, the argument raised by Sri Misra does not appear to have been raised by the as