S.K. Chander, Accountant Member - (1.)THIS appeal by the assessee is directed against the order of the Commissioner of Income-lax (Central), Ludhiana, made Under Section 263 of the Income-tax Act, 1961 on 7-11-1986 relating to the assessment year 1982-83.
(2.)We have heard the parties and carefully considered their rival submissions. For the reasons that we record below, after bringing into focus the relevant facts of the case, which have a bearing on determination of the issue before us, we have no hesitation in cancelling the impugned order by holding that the Commissioner of Income-tax had no jurisdictional facts to assume lawful jurisdiction Under Section 263 to make the impugned order.
The assessee, Shri Vinod Kumar Gupta, is an individual having income from house property, share of profits from M/s. New Idea Farm Equipment Co., interest on deposits etc. The assessee was travelling with a couple, who were family friends, in a car driven by a driver on 29th Dec. 1979 when, unfortunately, the car met with a serious accident. The friend of the assessee died on the spot. His friend's wife, however, survived with injuries. The assessee was grievously injured. The accident took place in the jurisdiction of Motor Accident Claim Tribunal, Gurdaspur. He was admitted to CMC, Ludhiana. From a medical certificate issued on 18-10-1980, it appears that he had fractures and was "still under treatment" on the date of certificate, i.e. 18-10-80. The assessee was apparently insured against such accident with National Insurance Co. Ltd. under Policy No. 882/8100368. The period of disablement extended from 30-12-79 to 19-8-80. For the period 30-12-79 to 29-4-80, there was total disablement. For the period from 30-4-80 to 19-8-80, there was partial disablement. The insurance company paid him Rs. 34,142.86 on this account by cheque No. 683671 dated 31-12-1981 drawn on Punjab & Sindh Bank, Miller Ganj, Ludhiana. The claim of the assessee for medical expenses was still pending before the Motor Accident Claim Tribunal, Gurdaspur, on 31st Dec., 1981 when the above amount was paid to the assessee by the said insurance company.

(3.)THE assessee filed his return of income for the assessment year under appeal on 30th August, 1982. THE assessee also attached details of his income for the year under appeal and in the computation so made as annexure to the return filed on 30th August, 1982, he left a note as under:
NOTE: Claim from Insurance Co. amounting to Rs. 34,143 is not taxable as income.

When the process of assessment started the Income-tax Officer observed this note and wrote a letter to the assessee that a note has been appended to the computation sheet attached with the return that claim from insurance company amounting to Rs. 34,143 is not taxable as income. You are requested to explain the nature of the insurance claim received and as to why it is not taxable. In order to enforce compliance, the Income-tax Officer added in hand to this typed letter that a notice Under Section 143(2) is enclosed. By letter dated 23-1-85, the assessee explained to the officer that he had taken out accident policy on his life and as a result of the accident, he suffered grievous injuries and was admitted to the local hospital. THE amount of compensation amounting to Rs. 34,143 on this account, it was claimed, was a capital receipt and not liable to income-tax. In support of this claim, letter from insurance company had already been filed before the Income-tax Officer to which his attention was invited.