1984 (5) TMI 82 - AT - Income Tax

Tribunal upholds Commissioner's order on assessment dispute under Income-tax Act

Chotanagpur Builders. Versus Income-Tax Officer

The Tribunal upheld the Commissioner's order under section 263 of the Income-tax Act, 1961, directing the Income Tax Officer to reframe the assessment of ... Revision Of Order Issues:1. Jurisdiction of the Commissioner under section 263 regarding discrepancy in closing stock value.2. Objections raised by the assessee's counsel against the Commissioner's order.3. Departmental representative's arguments regarding the prejudicial effect of the ITO's order on revenue.4. Point of merger and its applicability in this case.Analysis:1. The judgment revolves around the jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961, concerning a discrepancy in the closing stock value of an assessee-firm engaged in contract business for the assessment year 1976-77. The Commissioner initiated proceedings under section 263 due to a discrepancy of Rs. 22,000 in the value of closing stock as shown in the trading account and balance sheet. The Commissioner set aside the assessment, directing the ITO to reframe it to reconcile the discrepancy, which was contested by the assessee in the appeal.2. The assessee's counsel raised objections on two main grounds. Firstly, questioning the jurisdiction of the Commissioner to exercise powers under section 263 after the assessment was merged with the Commissioner (Appeals). Secondly, arguing that the Commissioner's decision to set aside the entire assessment was unjustified, leading to a significant increase in the subsequent reassessment under section 144. The counsel cited relevant case laws to support the objections and contended that the Commissioner should have enhanced the assessment instead of setting it aside completely.3. The departmental representative countered the objections by highlighting that the discrepancy in the closing stock value led to an actual profit higher than the assessed income, indicating a prejudicial effect on revenue. The representative emphasized that the Commissioner's jurisdiction under section 263 was valid, especially since the assessee's counsel admitted the mistake. The representative also referred to legal precedents to support the argument that the appeal before the Tribunal was incompetent due to the nature of the Commissioner's order.4. The issue of merger was extensively discussed, with reference to conflicting High Court decisions regarding the applicability of the doctrine in this case. The Tribunal analyzed the merger doctrine in the context of the appellate order and the scope of revisional jurisdiction under section 263. The Tribunal concluded that the Commissioner's decision to set aside the assessment and direct a reframe by the ITO was lawful, dismissing the appeal of the assessee. The Tribunal upheld the Commissioner's order, emphasizing the availability of remedial measures under the Act for subsequent assessments completed by the ITO under section 144.