1972 (11) TMI 2 - SC - Income Tax

Scope of s.33B: Commissioner's power to cancel erroneous, revenue-prejudicial tax assessments based on voluntary but false returns upheld; appeal dismissed

Dominant issue: Whether the Commissioner under s.33B has jurisdiction to cancel an assessment found erroneous and prejudicial to the revenue. Reasoning: ... Exercising Jurisdiction to cancel the assessment u/s 33B - prejudicial to the interests of revenue on the ground that no assessment could have been made in respect of the income of which she made a voluntary return - HELDTHAT:- The words of the section enable the Commissioner to call for and examine the record of any proceeding under the Act and to pass such orders as he deems necessary as the circumstances of the case justify when he considers that the order passed was erroneous in so far as it is prejudicial to the interests of the revenue. It is not, as submitted by the learned advocate, prejudicial to the interests of the revenue only if it is found that the assessment for the year was disclosed on the basis that an income had been earned which is assessable. Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue. If so-and we think it is so-the Commissioner under section 33B has ample jurisdiction to cancel the assessment and may initiate proceedings for assessment under the provisions of the Act against some other assessee who according to the income-tax authorities is liable for the income thereof. In these circumstances it was held that where the order of the Appellate Tribunal became final the Income-tax Officer could not initiate reassessment proceedings even in respect of interest income which was binding on him and he could not, therefore, reopen the assessment to include that income. This case, therefore, is of little assistance In the view we have taken, the answer given by the High Court cannot be disturbed and the appeal is accordingly dismissed with costs. Appeal dismissed. Issues: (i) Whether there were materials to justify the Commissioner under section 33B of the Indian Income-tax Act, 1922 finding that the assessment order for 1960-61 was erroneous in so far as it was prejudicial to the interests of the revenue; (ii) Whether the Commissioner had jurisdiction under section 33B to cancel an assessment founded on a voluntary return when the order was alleged to be erroneous and prejudicial to the interests of the revenue.Issue (i): Whether there were materials to justify the Commissioner under section 33B of the Indian Income-tax Act, 1922 finding that the assessment order for 1960-61 was erroneous in so far as it was prejudicial to the interests of the revenue.Analysis: The material relied upon included departmental enquiries indicating the assessee did not reside or carry on business at the addresses in the returns, acceptance by the Income-tax Officer of initial capital and sales of ornaments without enquiry, inconsistencies about investments and involvement of related firms, and indications that assessments were made hurriedly on voluntary returns. The cumulative effect of these facts was treated as sufficient supporting material to conclude that the assessment might be erroneous and prejudicial to revenue.Conclusion: The available materials were sufficient to justify the Commissioners finding under section 33B that the assessment order for 1960-61 was erroneous in so far as it was prejudicial to the interests of the revenue; this conclusion is against the assessee.Issue (ii): Whether the Commissioner had jurisdiction under section 33B to cancel an assessment founded on a voluntary return when the order was alleged to be erroneous and prejudicial to the interests of the revenue.Analysis: Section 33B empowers the Commissioner to call for and examine records of proceedings under the Act and to pass such orders as he deems necessary when he considers an order was erroneous and prejudicial to revenue. The statutory language permits cancellation of an assessment even where a voluntary return was filed, where the assessment is shown to be erroneous and prejudicial; supportive material indicating procedural or jurisdictional defects may justify exercise of that power.Conclusion: The Commissioner had jurisdiction under section 33B to cancel the assessment made on the basis of a voluntary return where the assessment was shown to be erroneous and prejudicial to the interests of the revenue; this conclusion is against the assessee.Final Conclusion: The appeal is dismissed and the decision upholding the Commissioners power to set aside the 1960-61 assessment under section 33B, on the basis of the materials before him, is affirmed.Ratio Decidendi: Section 33B of the Indian Income-tax Act, 1922 authorises the Commissioner to call for and examine assessment records and to cancel an assessment where he is satisfied that the order was erroneous in so far as it was prejudicial to the interests of the revenue; supportive or corroborative departmental enquiries showing jurisdictional or evidentiary defects can constitute sufficient grounds for such action.