“(i) The foundation for the exercise of the power being the
formation of an opinion or conclusion, there is no escape from the view that
the Commissioner must record his conclusion in the matter before setting aside
an order of assessment in exercise of the powers conferred u/s.263. It will
again be futile to embark upon any discussion as to the ‘intensity’ or
‘strength’ of the conclusion that must be reached by the Commissioner before
setting aside an assessment u/s.263, as the answer to the said question would
really depend upon the facts that may be confronting the Commissioner in any
given case. The position can be best resolved by saying that, in certain
situations, the opinion or conclusion recorded would be the final opinion,
while in other situation, it may be ‘less than final’. What would be necessary
is to take note of the fact that there has to be an opinion that the
assessment which has been set aside is, indeed, erroneous and prejudicial to
the interest of the Revenue. Furthermore, the power u/s.263 being
quasi-judicial, such conclusion must be reached after hearing the assessee,
which is mandated by the statute itself and after recording the reasons for
the conclusions reached, a requirement, imposition of which would be
consistent with the well-settled principles for exercise of quasi-judicial
powers.
(ii) It could be noticed from the impugned order of the
Commissioner that the Commissioner had not recorded any opinion that the order
of assessment of the assessee for the A.Y. 1992-93 was erroneous and
prejudicial to the interest of the Revenue. The said opinion was recorded in
the show-cause notice issued to the assessee and the same must be understood
to be a highly rebuttable view. Such view/opinion was required to be recorded
after hearing the assessee and after holding the necessary enquiry.
(iii) On receipt of the show-cause notice the assessee
submitted an elaborate reply laying material before the Commissioner to show
that sufficient proof of her income was laid before the Assessing Officer to
enable the said authority to come to the conclusion that the investments in
the house property were made from the known sources of income of the assessee.
The said materials were in the form of balance sheets and details of the funds
available to the assessee from time to time. In the above facts, the assessee
contended that the assessment order in question was not erroneous and
prejudicial to the interest of the Revenue.
(iv) The Commissioner, on receipt of the reply of the
assessee, could not have ignored the same. Rather, it was incumbent on the
Commissioner to consider the explanations offered and on that basis to record
his opinion/conclusion as to whether he still considered the assessment order
in question to be erroneous and prejudicial to the interest of the Revenue
and, if so, reasons therefor. The Commissioner did not do so. Instead, in its
order, the Commissioner had recorded that the assessee had filed a written
submission giving an exhaustive explanation and enclosing copies of various
deeds, certificates, etc., which were required to be verified in detail. The
Commissioner, in the above facts, set aside the assessment order and directed
the Assessing Officer to make a fresh assessment after examining the
submissions and contentions advanced by the assessee and after due scrutiny of
the documents adduced.
(v) The course of action adopted by the Commissioner was
clearly impermissible in law in the absence of a finding that on consideration
of the explanation submitted and for reasons shown, the assessment had to be
treated to be erroneous and prejudicial to the interest of the Revenue.
Unfortunately, the Commissioner did not do so, which omission would have the
effect of rendering the impugned order legally fragile.
(vi) In view of the above, the instant writ petition was to
be allowed.”
