Law:

Section:

Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 1982-83 - Whether for exercising power under section 263, it is a prerequisite that Commissioner must give reasons to justify exercise of suo motu revisional powers by him to reopen a concluded assessment and exercise of power being quasi-judicial in nature, reasons must be such as to show that enhancement or modification of assessment or cancellation of assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to conclusion that order of Assessing Officer was not only erroneous but was also prejudicial to interest of revenue - Held, yes - Whether before exercising revisional powers, assessee must be called, his explanation sought for and examined by Commissioner, and thereafter, if Commissioner still feels that order is erroneous and prejudicial to interest of revenue, Commissioner may pass revisional orders - Held, yes - Whether if a query was raised during course of scrutiny by Assessing Officer, which was answered to satisfaction of Assessing Officer, but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that order of Assessing Officer called for interference and revision - Held, yes FACTS The assessment of the assessee for the relevant assessment year had been completed by the Assessing Officer. Thereafter, the Commissioner served a notice on it under section 263, stating therein that while completing the assessment, the Assessing Officer did not inquire into the genuineness of the capital investments of the two partners, and unsecured loans taken from a chit fund company. The assessee replied that both the partners were income-tax assessees and amounts were invested by them after withdrawal from their bank accounts. Regarding the loan from the chit fund company, the assessee submitted that it had subscribed to the chit of the said company and the amount was received on account of bid in the auction. The Commissioner did not consider the reply of the assessee and held that the assessment order passed by the Assessing Officer was erroneous and…

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