Banerjee, J. - (1.) THE Tribunal has referred the following question of law to this Court under s. 256(1) of the IT Act, 1961('the Act') : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessment order passed by the ITO without taking recourse to the provisions of s. 144B of the IT Act, 1961 although erroneous was not prejudicial to the interest of revenue and consequently the CIT had no jurisdiction to revise such assessment order under s. 263 of the IT Act?"
(2.) THE facts as found by the Tribunal are as follows : The assessee is a registered firm. In respect of the asst. yr. 1978-79 the firm filed its return showing an income of Rs. 70,300. The ITO, A-Ward, Distt. Jalpaiguri completed the assessment under s. 143(3) of the Act on a total income of Rs. 1,77,104 vide his order dt. 26th Nov., 1980. The CIT, West Bengal-XIII, Calcutta, on scrutiny of the assessment records of the assessee-firm found that even though the variation between the total income returned and the income assessed came to Rs. 1,06,804 the ITO did not make a reference to the IAC in accordance with the provisions contained in s. 144B of the Act. The CIT was of the opinion that the ITO's order for the asst. yr. 1978-79 was erroneous insofar as it was prejudicial to the interest of revenue. the CIT accordingly initiated proceedings under s. 263 of the Act, by issue of a show-cause notice dt. 21st May, 1982. In response to the show-cause notice, the assessee objected to the action proposed by the CIT on the ground that an appeal filed by the assessee against the ITO's order of assessment was pending before the CIT(A) for disposal. The CIT rejected the assessee's contention and held that "the ITO has made an assessment which is erroneous insofar as it is prejudicial to the interest of revenue within the meaning of s. 263(1) of the IT Act, 1961". In this view of the matter he cancelled the assessment order and referred the case back to the ITO for making a fresh assessment.
(3.) BEING aggrieved with the CIT's order under s. 263, the assessee filed an appeal before the Tribunal. The Tribunal found that an appeal against the ITO's order of assessment was pending before the CIT(A) when the impugned order under s. 263 was made by the CIT. Before the Tribunal, on behalf of the assessee reliance was placed on the decision of the Madhya Pradesh High Court in the case of H.H. Maharaja Raja Pawer Dewas vs. CIT (1982) 138 ITR 518 (MP) for the proposition that if the assessment is framed without the service of the draft order on the assessee and inviting his objections as provided under s. 144B the assessment it may prejudice the assessee, but not the revenue. Reliance was further placed on a Full Bench decision of the Madhya Pradesh High Court in the case of CIT vs. Mandsaur Electric Supply Co. Ltd. (1982) 29 CTR (MP) 324 : (1983) 140 ITR 677 (MP) for the proposition that the CIT has no jurisdiction to set aside the order of assessment passed by the ITO when that order is the subject-matter of an appeal preferred by the assessee before the CIT(A). The Tribunal did not agree with the Departmental Representative that the assessee's case came within the ratio of the Supreme Court decision in the case of CIT vs. Amritlal Bhogilal & Co. (1958) 34 ITR 130 (SC). The Tribunal allowed the assessee's appeal by setting aside the order of the CIT passed under s. 263.;