Revisionary jurisdiction affirmed where a cryptic assessment lacked enquiry; trust receipts remitted for fresh tax examination.

Principal issue: whether revisionary jurisdiction could be validly exercised where the assessment order was a one paragraph, cryptic record omitting inquiry on material issues. The Tribunal found the assessment erroneous and prejudicial to revenue because it lacked application of mind and necessary enquiries, and upheld setting aside the assessment under revisionary power, remitting the matter for fresh assessment. On whether receipts to the trust fall outside the exclusion for trusts created solely for relatives, the trust deed permitted addition of non relatives, so the proviso was not attracted on its terms and the receipt is prima facie taxable under the gift receipt provision unless examined and decided afresh.

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Issues: (i) Whether the Principal Commissioner could validly invoke revisionary jurisdiction under section 263 of the Income-tax Act, 1961 by setting aside the assessment order dated 07.04.2021 as erroneous and prejudicial to the interests of revenue; (ii) Whether amount of Rs. 669,27,63,437 received by the trust is taxable under section 56(2)(x) of the Income-tax Act, 1961 because the trust was not created or established solely for the benefit of relatives of the settlor.

Issue (i): Validity of invoking section 263 by the Principal Commissioner in relation to the assessment order dated 07.04.2021.

Analysis: The assessment order is a one paragraph, cryptic order recording merely that assessment was completed "after taking into account all relevant material" without any reasoning. Record of notices and proceedings shows that key issues (share capital/other capital and investments and the source/nature of the large receipt) were the subjects of scrutiny selection but were not addressed in the assessment order. Explanation 2 to section 263 permits revision where the order is passed without making inquiries or verification which should have been made; established authorities require satisfaction of both that an order is erroneous and prejudicial to revenue. The tribunal confined its review to whether the Commissioner's assumption of jurisdiction and satisfaction on erroneousness and prejudice were sustainable, giving weight to the AO's recorded enquiries but recognizing that a mechanically cryptic order lacking application of mind can render section 263 exercisable.

Conclusion: The exercise of revisionary jurisdiction under section 263 was valid because the assessment order was cryptic, lacked necessary inquiry on material issues, and was therefore erroneous in a manner prejudicial to the interests of revenue.

Issue (ii): Taxability under section 56(2)(x) - whether the trust was "created or established solely for the benefit of relative of the individual" so as to attract the proviso excluding the receipt from tax.

Analysis: The operative trust deed defines beneficiaries to include the settlor, spouse, children and ''such other objects or persons as are added under clause 6'' and clause 6 empowers the trustee to add any person or class of persons or charity. On the plain wording, the deed permits addition of non relatives and therefore the trust cannot be treated as created or established solely for the benefit of relatives. Whether receipts are without consideration or otherwise and whether trust should be treated as a distinct "person" were contested, but the Commissioner's concern focused on absence of enquiry by the AO into these aspects. Admission of a subsequently executed supplementary deed was allowed as additional evidence but does not cure the AO's failure to make inquiries at the assessment stage.

Conclusion: On the trust deed's terms for the assessment year in question, the proviso to section 56(2)(x) excluding receipts by a trust created solely for benefit of relatives is not attracted; consequently the amount is prima facie exigible to tax under section 56(2)(x) unless properly examined and decided on merits in fresh assessment proceedings.

Final Conclusion: The Tribunal upholds the Principal Commissioner's setting aside of the assessment under section 263 as the assessment order was cryptic and passed without requisite inquiry on material issues; the matter is remitted for fresh assessment and enquiries in accordance with law while preserving the assessee's opportunity to place evidence and submissions.

Ratio Decidendi: Where an assessing officer's order is cryptic and does not record necessary inquiries or application of mind on material issues, the Commissioner may validly invoke section 263 if the order is both erroneous and prejudicial to the interests of revenue; the proviso to section 56(2)(x) is not attracted if the trust deed permits addition of beneficiaries beyond relatives, and such questions require fresh enquiry in assessment proceedings.

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