K.C. Luckose vs Income Tax Officer, B-Ward and Another

Isaac, J.—This petition has been filed by an assessee under the Income Tax Act, 1961, to quash an order, exhibit P-5, dated February 5, 1970, of the second respondent, the Commissioner of Income Tax, Kerala, in so far as he has included a sum of Rs. 13,607 in the total income of the assessee under the head capital gains while giving substantial reduction to him under other heads.

The petitioner was assessed by the first respondent, the Income Tax Officer, Kottayam, for the year 1964-65, fixing his total income at Rs. 80,550. It consists of Rs. 15,470 under the head business and Rs. 65,007 u/s 41(2) of the Act, namely, difference between sale price and written down value of machinery. The assessee filed a revision before the Commissioner, objecting to the above computation; He allowed the petitioner''s objection regarding the computation of income under business to a large extent and reduced the same to Rs. 6,850. Regarding the income u/s 41(2) of the Act, the second respondent upheld the petitioner''s contention to a large extent; and he fixed it at Rs. 50,702. But the Commissioner found an obvious omission on the part of the Income Tax Officer in not taking into account the capital gains accrued to the petitioner by sale of the machineries. This he fixed at Rs. 13,607, with the result the total income of the petitioner was fixed at Rs. 70,160 as against Rs. 80,550 fixed by the Income Tax Officer.

Counsel for the petitioner contends that the Commissioner acted without jurisdiction in including in the total income of the assessee the sum of Rs. 13,607 as capital gains, since the question of omission to include any income in the total income of the assessee did not fall within the ambit of the revision petition filed by the petitioner. Counsel submits that the Commissioner can revise an assessment in favour of the revenue only u/s 263, and that it should be done within the period provided therein.

I am unable to accept the above contention. The sole question for decision is whether the impugned order is beyond the jurisdiction of the Commissioner under Sub-section (1) of Section 264 of the Act, which reads;

"264. Revision of other orders.--(1) In the case of any order other than an order to which Section 263 applies passed by an authority subordinate to him, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit."

The power of the Commissioner under the above provision is wide. It is subject only to one limitation, viz., that the order should not be prejudicial to the assessee. Subject to this limitation, the Commissioner can correct any error appearing in the order of the subordinate authority. An order can be prejudicial to an assessee only if its net result is detrimental to him. Supposing there are two errors in an order sought to be revised, one in favour of the assessee and another against him; and the assessee raises in revision only the error against him. When a revision against an order of a subordinate authority is filed, the Commissioner is seized of the whole case; and he is entitled to correct the errors therein, and pass an order which should have been passed by the subordinate authority, subject to the aforesaid limitation. In the instant case, the net result of the order of the Commissioner is in favour of the petitioner. There is authority for the above position in the decision of the Privy Council in Commissioner of Income Tax v. Tribune Trust, Lahore [1946] 16 ITR 214 Dealing with Section 33 of the Indian Income Tax Act, 1922, which contains the same provision as Section 264(1) of the present Act, the Privy Council stated that an order u/s 33 of the Act can be said to be prejudicial to the assessee, only when he is, as a result of it, in a different or worse position than that in which he was placed by the order. The contention raised by the petitioner cannot, therefore, succeed. This original petition is accordingly dismissed. No costs.