Commissioner cannot set aside entire assessment order under appeal. Tribunal decision favored assessee. Importance of distinction highlighted.

The High Court of Madhya Pradesh held that the Commissioner lacked the authority to set aside the entire assessment order when it was under appeal before the Appellate Assistant Commissioner. The Tribunal's decision was justified, favoring the assessee. The court emphasized the importance of distinguishing between revising parts of the assessment not covered in the appeal and disrupting the Appellate Assistant Commissioner's decision by setting aside the entire assessment order. The parties were directed to bear their own costs in the reference.

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Issues involved:
The issue involves the jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961 to revise the order of assessment when the order was the subject of an appeal before the Appellate Assistant Commissioner.

Judgment Summary:

The High Court of Madhya Pradesh considered a reference made by the Income-tax Appellate Tribunal regarding the jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961. The case involved an assessee who was assessed as an individual contractor and truck operator for the assessment year 1973-74. The Income-tax Officer estimated the income from P.W.D. contracts and allowed depreciation on a truck purchased on hire purchase basis. The Appellate Assistant Commissioner modified the assessment, disagreeing with the profit rate applied by the Income-tax Officer. Subsequently, the Commissioner set aside the assessment order, leading to an appeal by the assessee before the Tribunal. The Tribunal held that the Commissioner had no jurisdiction to revise the order as it had merged with the Appellate Assistant Commissioner's decision.

During the hearing, it was acknowledged that there was no conflict regarding the applicability of the doctrine of merger in the two Full Bench decisions of the court. The court affirmed that the Commissioner can revise parts of the assessment not covered in the appeal before the Appellate Assistant Commissioner. However, if the Commissioner sets aside the entire assessment order that was part of the appeal, it disrupts the Appellate Assistant Commissioner's decision, which the Commissioner cannot do. The court emphasized the importance of determining whether the Commissioner set aside the entire assessment order or only parts not considered by the Appellate Assistant Commissioner.

The court reframed the question to focus on whether the Tribunal was correct in holding that the Commissioner lacked the authority to set aside the entire assessment order when it was under appeal before the Appellate Assistant Commissioner. The court concluded that in this case, the Tribunal was justified in its decision. Therefore, the court answered the reframed question in the affirmative, favoring the assessee. The parties were directed to bear their own costs in the reference.

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