Ajit K.Sengupta, J. - (1.) In this reference under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1982-83, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the order passed by the Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961, is not valid and legal and as such he had no jurisdiction to revise the order of assessment ?"
(2.) Shortly stated, the facts are that the Income-tax Officer, in making the assessment, allowed deduction of Rs. 4,93,198 to the assessee under Section 80M of the Income-tax Act, 1961, on the intercorporate dividend of Rs. 8,21,996 which was equal to the gross amount of Rs. 9,73,594 minus interest expenses of Rs. 1,51,172 and deduction under Section 80K of Rs. 426. On scrutiny of the records, the Commissioner of Income-tax subsequently found that the Income-tax Officer allowed an excess deduction of Rs. 1,40,148 to the assessee under Section 80M and as such the order of the Income-tax Officer was considered to be erroneous and prejudicial to the interests of the Revenue. The Commissioner of Income-tax initiated proceedings under Section 263 of the Act and, after rejecting the arguments of the assessee, passed an order under Section 263 of the Act directing the officer to allow deduction under Section 80M on the net dividend income after setting off the losses under the heads "Business" and "Property". Against the aforesaid order of the Commissioner of Income-tax passed under Section 263, the assessee preferred an appeal before the Tribunal.
(3.) The Tribunal, after considering the submissions made before it by the parties, came to the conclusion that the assessment order of the Income-tax Officer dated February 14, 1985, was not erroneous and prejudicial to the interests of the Revenue. The Tribunal held as follows : "We have considered the rival submissions. Circular No. 58, dated 15th April, 1971, squarely covers the point at issue. The assessment was completed on February 14, 1985. Thus, it has to be taken that the Income-tax Officer followed the said circular while computing the relief under Section 80M given to the assessee in the assessment order. As the Circulars of the Central Board of Direct Taxes are binding on all officers of the Income tax Department, as laid down by the Supreme Court in the case of Navnit Lal C. Javeri v. K.K. Sen, AAC of I T., the Commissioner is not justified in coming to the conclusion in his order under Section 263 that the assessment order of the Income-tax Officer dated February 14, 1985, is erroneous and prejudicial to the interests of the Revenue. In the facts and circumstances of the case, we are of the opinion that no error was committed by the Income-tax Officer in the assessment order passed by him in the matter of granting relief under Section 80M to the extent of Rs. 4,93,198.";