Commissioner of Income Tax vs Satpal Aggarwal

Rajesh Bindal, J.—The Income Tax Appellate Tribunal, Amritsar Bench, 1 Amritsar (hereinafter referred to as, "the Tribunal"), has referred, u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the following questions of law for the opinion of this Court, which emerge from its order dated 28-3-1992, in I. T. A. Nos. 797 and 798 (ASR)/1990 for the assessment years 1981-82 and 1982-83:

Whether an agreed assessment made on erroneous consideration of some facts and also non-consideration of some other facts cannot be erroneous within the meaning of Section 263 of the Income Tax Act, 1961 ?

Whether the Commissioner of Income Tax can be precluded from exercising his power u/s 263 in case where an order of assessment has been passed in agreement with the assessee especially when the agreement itself causes erroneousness and prejudice to the revenue ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the order passed u/s 263 by the Commissioner of Income Tax ?

The facts as noticed by the Tribunal in the statement of case for the assessment year 1981-82 are that a notice u/s 148 of the Act was issued to the assessee and there being no response, ex parte assessment was framed. The ex parte assessment was vacated in appeal. Thereafter, the assessee filed a return declaring loss. During the assessment proceedings, at the instance of the assessing officer, the assessee agreed to addition of Rs. 18,300 after consideration of all the entries. Finding the order passed by the assessing officer to be erroneous and prejudicial to the interests of the revenue, the Commissioner of Income Tax issued notice u/s 263 of the Act and directed the assessing officer to make fresh assessment keeping in view the discussion in the order passed u/s 263 of the Act. In appeal, the order passed by the Commissioner of Income Tax u/s 263 of the Act was set aside by the Tribunal for the reason that the assessment having been framed on agreed basis on the discrepancies pointed out by the assessing officer, there was no question of holding the order to be erroneous and prejudicial to the interests of the revenue.

During the course of hearing, learned Counsel for the revenue reiterated the submissions made before the Tribunal and tried to buttress the same with the entries in the accounts, on the basis of which the Commissioner of Income Tax sought to exercise powers u/s 263 of the Act, but he could not dispute that it was on account of those very discrepancies having been pointed out that the assessee had agreed for the addition during the course of reassessment proceedings and the invocation of jurisdiction by the Commissioner of Income Tax on those very facts was nothing else but a change of opinion, which was not permissible. He could not point out any material on record to show that the ingredients as are required to be satisfied before exercise of powers u/s 263 of the Act were existent in the present case.

Accordingly, the questions referred are answered against the revenue and in favour of the assessee.