2004 (7) TMI 27

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....individual. For the assessment year 1973-74, the relevant previous year being April 1, 1972 to March 31, 1973, the respondent filed his return of income showing an income of Rs. 10,450. Notice under section 143(2) of the Act was issued. In response the respondent appeared and after discussion, the Income-tax Officer, Circle-II (9), Kanpur, vide order dated November 27, 1976, assessed a total income of Rs. 24,750. He granted exemption of income from agriculture amounting to Rs. 30,446 and income from poultry-farming amounting to Rs. 33,849. The Commissioner of Income-tax initiated proceedings under section 263 of the Act on the ground that in making the assessment the Income-tax Officer did not make any enquiry or investigation as regards th....

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....that the order of the Income-tax Officer should be erroneous in so far as it could be prejudicial to the interests of the Revenue. The Commissioner nowhere applied his mind in respect of the order of the Income-tax Officer being erroneous or prejudicial to the interests of the Revenue. Besides the above, we have noted that during the original assessment proceedings, the assessee, in support of his claim for exemption of agricultural and poultry-farm income from tax, the assessee filed copies of certain agreements and after considering the same, the Income-tax Officer allowed exemption to the assessee. Thus, it is a case of change of opinion on the part of the Commissioner which is not warranted under the provisions of section 263 of the Act....

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....ed to be exempt has actually been earned by him or not and, further, whether the entire amount of income from agriculture and poultry-farming is exempt from tax. The Commissioner of Income-tax has rightly initiated proceedings under section 263 of the Act as exemption has been granted without any application of mind. The apex court in the case of Malabar Industrial Co. ltd. [2000] 243 ITR 83, while interpreting section 263 of the Act, held as follows: "A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be sat....