Law:

Section:

Section 263 of the income-tax act, 1961-Revision-Orders prejudicial to revenue-Though provisions of section 144B were applicable, ito did not serve draft order on assessee but directly made assessment under section 143(3)-Assesses accepted assessment and did not appeal against it-Whether failure of ito to follow procedure under section 144b made ito's order prejudicial to revenue enabling commissioner to act under section 263-Held, on facts, no Facts Against loss returned by the assessee, the ITO made the assessment under section 143(3) on an income of Rs. 2,74,200. As the variation between the income returned and assessed exceeded the amount of Rs. 1,00,000, the provisions of section 144B were applicable but the ITO, instead of passing a draft assessment order, passed an assessment order straightaway. The assessee, however, accepted the assessment and did not go up in appeal. The Commissioner, acting under section 263, revised the order of the ITO on the ground that it was prejudicial to the interests of the revenue. The Commissioner's order was set aside in appeal by the Tribunal holding that the order of the ITO was accepted by the assessee and it was not prejudicial to the interests of the revenue. On reference : Held Under section 144B, if an objection is taken to the draft order under section 144B by an assessee, the ITO has to seek the directions from the IAC by forwarding the draft order and the objections to him. The directions of the IAC for guidance of the ITO are binding on him and he has to complete the assessment in the light of the said directions. But, the question of issuing any directions can arise only when the assessee does not accept the provisional order. In the instant case, the only mistake committed by the ITO was that he did not issue a draft order and issued a final order which was accepted by the assessee. As the assessee was prepared to accept the assessment made by the ITO, even if he would have issued a draft order the same result would have followed and the matter would not have gone to the IAC for direction. In such a situation, when the assessment has been accepted by the assessee, it cannot be said that the failure to follow…

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