Law:

Section:

Section 4 of the Income-tax Act, 1961 - Body of Individuals - Assessable as - Assessment year 1982-83 - Whether where three individuals received donation of certain sum and invested that sum, interest income earned from said investment was rightly returned by them in status of BOI (Body of Individual) and not as AOP (Association of Persons) - Held, yes FACTS The assessees who were individuals received jointly donation of certain sum donated by donor under a declaration. The said sum was invested by the assessees and the interest income was returned by them in the status of BOI. The Assessing Officer accepted the same while framing assessment under section 143(3). The Commissioner, however, by initiating revisional proceedings under section 263 set aside the assessment order and directed the Assessing Officer to adopt the status of the assessee as that of an AOP (Association of Persons) and levy tax in accordance with the law. On appeal, the Tribunal held that the Commissioner was in error in exercising jurisdiction under section 263 and the assessee was liable to be assessed in the status of BOI. On reference : HELD The Commissioner can exercise jurisdiction under section 263 provided the two prerequisite conditions stand satisfied viz., ( i) the order of the Assessing Officer sought to be revised is erroneous, ( ii) it is prejudicial to the interests of the revenue. If one of them is absent, i.e., if the order of the Assessing Officer is erroneous but is not prejudicial to the revenue, or if it is not erroneous but is prejudicial to the revenue, recourse cannot be had to section 263. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. [Para 6] Applying the aforesaid tests, it was apparent that in the facts of the instant case it was not possible to state that the view adopted by the Assessing Officer was unsustainable in law in the light of the decision of the Apex Court in the case of Meera & Co. v. CIT [1997] 224 ITR 635 / 91 Taxman 219wherein it was held that organised activity jointly carried on to produce income must be considered as joint business venture of a few individuals and…

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