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Issues: Whether proceedings under section 263 of the Income-tax Act, 1961 initiated by the Principal Commissioner of Income Tax on the basis of a proposal sent by the Assessing Officer (without the Principal Commissioner himself calling for and examining the record) are valid.
Analysis: The statutory scheme requires that the Commissioner call for and examine the record of proceedings and then, upon being satisfied that an order of the Assessing Officer is erroneous and prejudicial to the interests of revenue, exercise revisional power under section 263. A proposal or communication from the Assessing Officer does not substitute for the Commissioner's act of calling for and examining the record. Where revision proceedings are initiated merely on the basis of a proposal from the Assessing Officer and the Commissioner has not independently called for and examined the record leading to his own satisfaction, the twin conditions for exercise of section 263 jurisdiction are not satisfied. Prior Tribunal decisions applying this statutory interpretation have quashed section 263 actions commenced at the behest of the Assessing Officer for lack of jurisdiction. The present proceedings were instituted on the basis of a proposal sent by the Assessing Officer and, following the cited precedents, such initiation is treated as jurisdictionally infirm.
Conclusion: The notice and revisionary proceedings under section 263 initiated on the basis of the Assessing Officer's proposal are not in accordance with law and are quashed. The grounds raised by the assessee are allowed and the appeal is allowed in favour of the assessee.
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