CIT vs. Jawahar Bhattacharjee (Gauhati High Court Full Bench)

S. 263 Revision: Conflict Amongst Judgements Resolved

The assessee bought shares on 21.4.2000 for Rs.19,536 and sold them on 2.5.2001 for Rs.6,36,640. A gain of more than 30 times was made in one year. The AO accepted the LTCG and allowed s. 54F relief. The CIT passed an order u/s 263 in which he held the order to be ‘erroneous and prejudicial to the interest of the revenue’ on the ground that the AO had not made any enquiry to determine the genuineness of the transaction though the circumstances warranted the same. On appeal of the assessee, the Tribunal relied on B & A Plantation 290 ITR 395 (Gau) and held that as the order of the AO was not without jurisdiction, it could not be held to be ‘erroneous’ for purposes of s. 263. On appeal by the department, the issue was referred by the Full Bench as to the supposed conflict between various judgements of the Court on the subject:

Jurisdiction under Section 263 can be exercised whenever it is found that the order of assessment was erroneous and prejudicial to the interest of the Revenue. Not holding such inquiry as is normal and not applying mind to relevant material would make the assessment ‘erroneous’ warranting exercise of revisional jurisdiction. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being ‘erroneous’. Non application of mind and omission to follow natural justice is in same category. Daga Entrade 327 ITR 467 (Gau) lays down the correct law and is not in conflict with Rajendra Singh 1979 STC 10 (Gau).