Revisional orders and best judgment assessment: confirmation of a harmful assessment can be prejudicial, but concealment needs legally sufficient evidence.

An order in revision confirming a prejudicial assessment was treated as "otherwise prejudicial" to the assessee within Section 66(2) of the Indian Income-tax Act, 1922, because the phrase was given a wider scope than mere enhancement and covered orders with the same practical effect as an adverse appellate order. Lack of notice under Section 33 did not make the revisional order without jurisdiction; it was treated as a procedural irregularity, while the legality of that order remained a question of law under the first proviso to Section 66(2). A best judgment assessment could not rest on suspicion alone, and the existence of an Amanat Khata without supporting material was insufficient to infer concealment or suppression.

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Issues: (i) Whether an order of the Commissioner confirming a revision application is an order "otherwise prejudicial" to the assessee within Section 66(2) of the Indian Income-tax Act, 1922. (ii) Whether an order passed under Section 33 without notice to the assessee is without jurisdiction and whether the legality of such order raises a question of law under the first proviso to Section 66(2). (iii) Whether there was evidence before the Income-tax Officer to justify an inference of suppression or concealment and a best judgment assessment.

Issue (i): Whether an order of the Commissioner confirming a revision application is an order "otherwise prejudicial" to the assessee within Section 66(2) of the Indian Income-tax Act, 1922.

Analysis: The expression "otherwise prejudicial" was held to have a wider scope than an order merely enhancing an assessment. The context of Section 66(2) showed that the Legislature intended to cover prejudicial orders of the Commissioner even where the original assessment was only confirmed. The Court accepted the view that an order passed in revision, once it confirms a prejudicial assessment, affects the assessee in the same practical manner as an appellate order.

Conclusion: The question was answered in the affirmative and in favour of the assessee.

Issue (ii): Whether an order passed under Section 33 without notice to the assessee is without jurisdiction and whether the legality of such order raises a question of law under the first proviso to Section 66(2).

Analysis: Section 33 was held not to confer any right as such on an assessee to demand revision, but where the Commissioner exercises revisional power, the absence of notice does not make the order without jurisdiction; at most, it is an irregularity of procedure. The Court further held that the legality of the order itself is a question of law arising out of that order.

Conclusion: The first limb was answered against the assessee, while the second limb was answered in the affirmative and in favour of the assessee.

Issue (iii): Whether there was evidence before the Income-tax Officer to justify an inference of suppression or concealment and a best judgment assessment.

Analysis: The Court held that suspicion could not take the place of evidence. The existence of the Amanat Khata, without more, did not furnish material from which it was permissible to infer concealment of income or withheld accounts. The explanation offered by the assessee was found not inherently improbable, and the assessment proceeded on inadequate material.

Conclusion: The issue was answered in the negative and in favour of the assessee.

Final Conclusion: The reference was answered for the assessee on the principal questions of law, and the assessment-based inference of concealment was rejected, with costs awarded to the assessee.

Ratio Decidendi: An order in revision may be "otherwise prejudicial" within Section 66(2) if it confirms a harmful assessment, and a best judgment assessment cannot stand unless there is legally sufficient evidence from which concealment may reasonably be inferred.

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