Commissioner of Income Tax vs M.A. Unneerikutty and Kalpaka Tourist Home P. Ltd.

K.P. Radhakrishna Menon, J.—The common question that is referred to us for our opinion reads :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the Commissioner of Income Tax was not justified in invoking his powers u/s 263 of the Income Tax Act, 1961, with reference to the material which came on record very much later than the making of the assessment for the assessment year 1975-76 in either case, that is, the declarations in the mortgage deed, records of the Corporation, etc.?"

Facts relevant and requisite to dispose of the dispute lie in a narrow compass. The year of assessment is 1975-76. As the order of assessment, according to the Commissioner, was erroneous in so far as it was prejudicial to the interests of the Revenue, the same was sought to be revised by invoking Section 263 of the Income Tax Act. The Commissioner, it could be seen from the records, has had with him materials which the assessing authority had no occasion to consider but at the same time would show that the order of the assessing authority is erroneous, took into account and revised the order. That order was challenged by the assessees (the company as also the individual) before the Appellate Tribunal. The Appellate Tribunal went into the question elaborately and found that the Commissioner was not justified in relying on materials which were not there before the assessing authority at the time when the assessment was made. The said view of the Appellate Tribunal is supported by the ruling of the Calcutta High Court in Ganga Properties Vs. Income Tax Officer, .

The said finding as such has not been challenged by the Revenue which is before us, but, according to the learned counsel for the Revenue, the Commissioner has ample jurisdiction to rely on materials which were not available at the time when the assessment was made in view of the Explanation to Sub-section (1) of Section 263 of the Income Tax Act. This Explanation admittedly was inserted only with effect from June 1, 1988.

A reference in this connection to Section 23 of the Finance Bill, 1989, is profitable, vide [1989] 176 ITR 45. There was no occasion for the Tribunal to consider the scope of the Section because it came into force only in 1988, much later than the order disposing of the revision. The question was referred in the year 1983 and the above provision came into force only during the pendency of the I. T. Rs.

It can be seen from the discussion above that the Tribunal had no occasion to consider the scope of this provision and, therefore, it cannot be said that the above argument, touching upon this question, does arise out of the order of the Tribunal. The only aspect that is required to be considered is as to whether the Tribunal was justified in holding that the Commissioner has no power to look into the materials which were not available at the time when the assessing authority passed the order.

The question, therefore, is answered in the affirmative and in favour of the assessees.

A copy of this judgment under the signature of the Registrar and the seal of this court will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.