Express Newspapers Private Ltd. vs Commissioner of Income Tax

R. Jayasimha Babu, J.—The question referred to us is whether the Tribunal was right in law in upholding the order of the Commissioner

dated March 25, 1987, made by him in exercise of his revisional power u/s 263, the assessment year being 1982-83. The Commissioner having

found that the assessee had suppressed the true value of the property which it had sold, that fact of suppression having come to light when the

premises of the purchaser were raided, the Commissioner held that the assessment order was prejudicial to the Revenue and, therefore, set aside

that order with a direction that the assessment be done afresh. He directed the Assessing Officer to redo the same in accordance with law after

giving proper opportunity to the asses-see to let in evidence or to rebut conclusions. That order of the Commissioner has been upheld by the

Tribunal.

We see no error in that order of the Tribunal. The conduct of the assessee clearly was such that the assessment order which had been made on

the basis of the return which, records obtained from a raid on the premises of the purchaser disclosed, was incorrect, had certainly caused

prejudice to the Revenue. Section 263 of the Income Tax Act confers a wide power on the Commissioner, while exercising powers of revision.

The Commissioner, when acting u/s 263 of the Act, when he finds that the order sought to be revised is one prejudicial to the interests of the

Revenue, he may, after giving an opportunity to the assessee of being heard and after making such further inquiry, as he may deem necessary, pass

such orders 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.

In the case before the Commissioner, the extent of the prejudice that had been caused to the Revenue was quite substantial as the value of the

property which the assessee had sold and from which it had reported capital gain to a limited extent was found to be much more than what it had

reported a fact which came to light when the premises of the purchaser were searched. In the circumstances, therefore, the assessment that had

been made certainly required to be redone. It was open to the Commissioner to set aside the assessment as a whole so that all the aspects of the

matter would be dealt with by the Assessing Officer. The Commissioner had the discretion to set aside the assessment in whole or in part. The

exercise of that discretion is not to be ordinarily interfered with unless the facts show that, that exercise of the discretion itself is required to be

characterised as arbitrary. The facts before us do not justify any such inference of arbitrariness on the part of the Commissioner.

We also do not see any prejudice having been caused to the assessee. The assessee has all the appellate and other remedies available to it

against the assessment order made, subsequent to the order passed u/s 263 of the Income Tax Act.

Learned counsel for the assessee, relying upon certain observations contained in the decision of the High Court at Delhi in the case of Addl

Commissioner of Income Tax, Delhi-I Vs. J.K. D''costa, , submitted that minor errors in the assessment order would not warrant setting aside the

whole of the order. The error here cannot be regarded as minor. It is in fact a substantial one of incorrect return and failure to report the true extent

of the capital gain. The difference between what the assessee had reported and what according to the Commissioner would be payable if the

material gathered at the time of the search of the premises of the purchaser is considered, is several lakhs of rupees.

We also do not see any justification for curtailing the discretion vested in the Commissioner while acting u/s 263 of the Income Tax Act and

further limiting the nature of the order which he is empowered to make. The orders which he may make are those which are referred to in the

Section itself. If the observations made in the case relied upon by counsel are to be regarded as limiting the power of the Commissioner, with

respect we are unable to subscribe to that view. We answer the question referred to us in favour of the Revenue and against the assessee.