- (1.) FOLLOWING question of law has been referred for opinion of this Court by the Tribunal, Chandigarh Bench, Chandigarh, "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in annulling the order passed by the CIT under s. 263 of the IT Act, 1961
(2.) FACTS noticed by the Tribunal in the statement of case are that : "The assessee held certain machinery and was in possession of a permit obtained from the Textile Commr. for the working of 1200 spindles for the manufacture of woollen worsted yarn. The said 1200 spindles were a part of the Annex. 'A' with the said agreement, besides also sold the permit in respect of 1200 spindles. The agreement as per which the said machinery and permit were sold, finds place in para 2 of the Tribunal's order. In the course of filing the return, the assessee worked out the profit under s. 41(2) amounting to Rs. 51,067 and capital gains amounting to Rs. 55,006 subject to statutory deduction and returned the same in its total income. Besides in Part III of the return, the assessee had shown a sum of Rs. 1 lakh on account of sale of permit from the Textile Commr. in respect of 1200 spindles and marked the same as the amount receivable on account of goodwill. The ITO accepted the return filed by the assessee with the following observations in the relevant assessment order pertaining to profit under s. 41(2) and capital gain in respect of sale of part of machinery : '....During the relevant previous year, the assessee -firm sold a part of the machinery and thereon earned profit under s. 41(2) as well as capital gains. After examining the accounts and discussion with the assessee, net income is assessed at Rs. 99,000.' The amount of Rs. 98,380 returned by the assessee included the computation of profit under s. 41(2) and capital gains on sale of machinery. The CIT on the strength of the audit note and basis of proforma for proposal under s. 263 made by the ITO, extracted and placed in para 8 of the Tribunal's order with s. 263(1) about the same, initiated proceedings. When this action of the CIT came to be disputed by the assessee before the Tribunal, the Tribunal placed in its order the agreement, the fact that the assessee had disclosed in Part III of its return sale of spindles and amount of goodwill earned thereon and s. 63(1) (sic) and also the proforma and held that the CIT was in error while assuming jurisdiction under s. 263 on the type of objection made by the audit and, therefore, annulled the said order under s. 263 in the light of the detailed discussion available in the Tribunal's order."
(3.) WE have heard learned counsel for the parties and perused the record. Learned counsel for the Revenue submitted that invocation of jurisdiction under s. 263 of the IT Act, 1961 (for short, 'the Act') was justified as consideration for the machinery sold was Rs. 3,50,000 and not Rs. 2,50,000. It was submitted that in the agreement, it was nowhere specified that a sum of Rs. 1 lac was consideration for the permit for 1200 spindles.;