Law:

Section:

Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Whether an order which has been passed without application of mind will fall under expression 'erroneous and prejudicial to interest of revenue' under section 263 - Held, yes - Whether where there was no discussion in assessment order of ITO about question as to whether exemption claimed by assessee in respect of income from agriculture and poultry farming had actually been earned by him or not and whether entire amount of said income was exempt from tax, Commissioner had rightly initiated proceedings under section 263 as exemption had been granted to assessee without any application of mind - Held, yes FACTS The ITO assessed the total income of the assessee after granting exemption to income from agriculture and poultry farming. The Commissioner initiated proceedings under section 263 on the ground that in making the assessment, the ITO did not make any enquiry or investigation as regards the nature, source or extent of income derived from agriculture and poultry farming or investment from which those income arose nor did he take any steps to verify as to whether the income from those sources as claimed was fully exempt. Accordingly, the Commissioner set aside the assessment made by the ITO. On appeal, the Tribunal held that during the original assessment proceedings, the assessee, in support of his claim for exemption to income from agriculture and poultry farming from tax, had filed copies of certain agreements and after considering the same, the ITO allowed exemption to the assessee and, thus, it was a case of change of opinion on the part of the Commissioner which was not warranted under the provisions of section 263 and, accordingly, reversed the order of the Commissioner. On reference : HELD It was found that in the assessment order, there was no discussion regarding the question as to whether the amount of income shown by the assessee which was being claimed to be exempt, had actually been earned by him or not and, further, whether the entire amount of income from agriculture and poultry farming was exempt from tax. The…

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