KESHARIMAL BAPULAL HUF Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) WE have been called on to answer three questions formulated for recording our opinion on reference. Those three questions can be enumerated as below :

(2.) SOME facts need to be stated for the purpose of acquainting with the case for catching the gist point of the controversy. The petitioners (hereinafter referred to as "the assessee" for convenience) were being assessed as "Hindu undivided family". They stated that there were some family disputes between the members and on account of that the "karta" of the family was disturbed and on account of that disturbance in the family, a "family arrangement" was effected on October 21, 1979 (on Diwali as the accounting year was commencing from the first day of Diwali-Padwa and was ending by the end of the last day of Diwali). The returns were filed for the assessment year 1980-81 (relevant period commencing from November 1, 1978 to October 20, 1979). The assessees averred that they had paid the tax in respect of the concerned assessment year treating themselves to be a "Hindu undivided family" and, therefore, there was no loss of revenue to the Income-tax Department. The Income-tax Officer accepted their contentions and passed the assessment order on October 25, 1982. In that order he accepted the contention of the assessees in respect of "family arrangement" and a consequential deed which was executed by the members of the assessee-Hindu undivided family.

(3.) SHRI Choudhary, counsel appearing for the petitioners, submitted that in view of the provisions of Section 263 of the Income-tax Act, the Commissioner of Income-tax had no jurisdiction to reopen the assessment done by the Income-tax Officer by his order dated October 25, 1982, because obviously the said deed was executed after October 20, 1979. He submitted that the petitioners had paid the tax treating themselves to be Hindu undivided family and therefore, there was no loss of revenue as contemplated by the provisions of Section 263 of the Income-tax Act. He further pointed out that being so, the Income-tax Officer was not in error at all. SHRI Choudhary submitted that for the purpose of invoking the jurisdiction and power in view of Section 263 of the Income-tax Act two ingredients should exist (i) that the order passed by the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interests of the Revenue. He submitted that if these two ingredients are present then only the Commissioner would be entitled to call for and examine the record of any proceeding under the Income-tax Act and can either confirm the order passed by the Assessing Officer or set it aside. SHRI Choudhary submitted that in the present case the petitioner had paid the tax as Hindu undivided family in respect of the concerned year and, therefore, there was no prejudice either caused or likely to be caused to the interests of the Revenue and, secondly, being it so, the Income-tax Officer was not in error at all.