Law:

Section:

Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - In 1972, the Board (CBDT) envisaged a scheme to help taxpayers in small income group - Under the scheme no penalty was to be levied under sec- tion 271 or 273 in certain cases but returns submitted in names of minors and ladies were not to be accepted without proper enquiries - Whether failure of ITO to make proper enquiry regarding initial source of capital and real nature and extent of income of assessee, a lady, before completing assessment under scheme of 1972 was erroneous and prejudicial to interests of revenue so as to entitle Commissioner to assume jurisdiction under section 263 - Held, yes Facts In 1972 the Board [CBDT] envisaged a scheme to help new taxpayers in small income group. In terms of this scheme no penalty under section 271 or section 273 was to be levied in the case of a person, who had not been assessed, if the return of income was filed voluntarily prior to 1-1-1973 and the income as declared or as assessed did not exceed Rs. 15,000. However, under this scheme returns of income filed in the names of minors and ladies were not, however, to be accepted without proper enquiries. In terms of the said scheme, the assessee, a married lady, filed her returns of income for the assessment years 1968-69 to 1973-74. Income of Rs. 4,100 was returned for the years 1968-69 to 1970-1971. For the years 1971-72 and 1972-73, she returned taxable income of Rs. 5,100 and in the year 1973-74 filed return of income at Rs. 5,100. She declared her initial capital at Rs. 25,000 stating that she derived income from pawn-broking and oil-seeds business. As regards the initial capital of Rs. 25,000 she stated that this was the money she had received on her marriage as gift 20 years ago. She also accepted that her husband was a businessman. An Inspector of the Income-tax Department was deputed by the ITO to make necessary enquiries into the affairs of the assessee. He reported that the assessee did carry on pawn-broking and oil-seeds business and that she derived income from the business. He estimated her annual income at Rs. 5,100. The ITO assessed the assessee at Rs.…

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