Commissioner of Income Tax vs Gangaram Mohanlal Mittal and Sons

G.G. Sohani, Actg. C.J.

By this reference u/s 256(1) of the income tax Act, 1961 (''the Act''), the Tribunal, Indore Bench has referred the following questions of law to this Court for its opinion : 1. Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal is justified in holding that where an assessment is made after reference to the IAC u/s 144B, it could not be said to be an order fully passed by the ITO?

Whether, on the facts and in the circumstances of the case, the view of the income tax Appellate Tribunal that where an assessment order is passed by the ITO following the decision of the IAC u/s 144B of the Act, the said order of assessment could not be revised by the Commissioner of income tax u/s 263 of the income tax Act, 1961 is correct in law?

The material facts giving rise to this reference, briefly, are as follows:

While framing assessment of the assessee for the assessment year 1978-79, the ITO proposed to make additions exceeding Rs. 1 lakh to the income declared by the assessee. The ITO made a reference u/s 144B of the Act to the IAC. In accordance with the directions given by the IAC, the ITO passed an order of assessment. The Commissioner, exercising powers u/s 263 of the Act, held that the order passed by the ITO was prejudicial to the interests of the revenue inasmuch as proper enquiries were not made by the ITO while making addition of Rs. 25,000 in the utensils account. The Commissioner, therefore, set aside the order of assessment and directed the ITO to make fresh assessment after making proper enquiries. Aggrieved by the order passed by the Commissioner, the assessee preferred an appeal before the Tribunal. The Tribunal held that the order of assessment, which was passed by the ITO in accordance with the directions issued by the IAC u/s 144B was not amenable to the jurisdiction of the Commissioner u/s 263. In this view of the matter the Tribunal set aside the order passed by the Commissioner. Aggrieved by the order passed by the Tribunal, the revenue sought reference and it is at the instance of the revenue that the aforesaid questions of law have been referred to this Court for its opinion.

At the time of hearing, the learned counsel for the parties conceded that the matter arising in this case was governed by the decision of this Court in Commissioner of Income Tax Vs. Vithal Textiles, where a Division Bench of this Court has held that the Commissioner has jurisdiction u/s 263 to revise the order of assessment passed by the ITO in accordance with the directions given by the IAC u/s 144B. We see no reason to take a view different from that taken in Vithal Textiles & Wool Trader''s case (supra). Following that decision, therefore, it must be held that the Tribunal was not right in holding that the order of assessment in the instant case could not be said to be an order passed by the ITO and that the said order could not be revised by the Commissioner u/s 263. For all these reasons, our answers to the two questions referred to this Court by the Tribunal are in the negative and in favour of the revenue. In the circumstances of the case, parties shall bear their own costs of this reference.