Prejudicial revision orders can trigger a reference right when the Commissioner dismisses revision of an already adverse tax order.

An order by the Commissioner dismissing or refusing revision of an already prejudicial income-tax order is itself prejudicial for the purposes of Section 66(2) of the Indian Income-tax Act, 1922. The governing test is the substance of the Commissioner's order, not whether it is more prejudicial than the original assessment or whether it expressly restates the legal question. A reference may still arise on a question of law from the Commissioner's order itself, and the absence of reasons cannot defeat the assessee's statutory right to seek a reference.

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Issues: Whether an order dismissing an application for revision of a prejudicial income-tax order is itself a prejudicial order within Section 66(2) of the Indian Income-tax Act, 1922, so as to entitle the assessee to seek a reference to the High Court.

Analysis: The reference turned on the meaning of the word "prejudicial" in Section 66(2). The expression was held not to require that the Commissioner's order should be more prejudicial than the order originally complained of. Where the underlying order of the Income-tax Officer is prejudicial, an order of the Commissioner confirming it or refusing to revise it equally affects the assessee's position and is therefore prejudicial. The proviso to Section 66(2) did not alter that position, because a reference may lie on a question of law arising out of the Commissioner's order itself, and the absence of an express statement of the question of law in the order does not prevent such a question from arising. The Commissioner cannot avoid the statutory right of reference by dismissing the revision petition without reasons.

Conclusion: An order dismissing an application for revision of a prejudicial order is itself prejudicial within Section 66(2), and the assessee is entitled to seek a reference.

Ratio Decidendi: For the purpose of Section 66(2) of the Indian Income-tax Act, 1922, a Commissioner's order refusing or dismissing revision of an order already prejudicial to the assessee is itself a prejudicial order, and the right to reference is determined by the substance of the order, not by whether it expressly restates the legal question.

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