Can an assessment be revised where the officer taxed income that was never yours?
Yes. An assessment made merely because the assessee wanted the amount taxed in her hands, to help someone else escape a larger assessment, can be erroneous and prejudicial to the revenue — and may be cancelled in revision.
Decided by the Supreme Court (K.S. Hegde, P. Jaganmohan Reddy and H.R. Khanna, JJ (judgment delivered by Jaganmohan Reddy J)) on 1972-11-27, reported as (1973) 88 ITR 323 (SC); (1973) 3 SCC 482; Civil Appeal No. 2387 of 1969. It bears on section 263 of the Income Tax Act 1961, in Revision & Rectification matters.
It is one of the two authorities Malabar Industrial approved for the proposition that a no-enquiry assessment is revisable. Expect it wherever the department says the officer accepted something without asking any questions.
Binding on every court and authority in India.
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For assessment year 1960-61 the assessee, who had filed voluntary returns for 1955-56 to 1959-60 from a Calcutta address and had then had her file transferred to Howrah on the strength of a letter saying her place of business had moved, was assessed on a total income of Rs 9,037. The Income-tax Officer recorded that she could produce neither vouchers for her speculative transactions nor evidence of the interest said to have been received on her investments, but made the assessment without investigating the sources. The Commissioner issued a notice under s.33B of the 1922 Act. Departmental enquiries had shown that she had neither resided nor carried on business at either address and had been living with her husband at Raniganj since her marriage in 1946; that her claimed initial capital of Rs 13,500, the sale of ornaments for some Rs 68,000 and the two investments of Rs 50,000 each with a firm in which her husband was a partner had all been accepted without evidence; and that the firm through which the ornaments were said to have been sold was not genuine. The earlier years being time-barred, the Commissioner cancelled the 1960-61 assessment and directed a fresh assessment after enquiry. The Tribunal set that aside; on a reference the Calcutta High Court answered against the assessee, holding that the Income-tax Officer's want of jurisdiction was itself enough to justify the Commissioner. She appealed by certificate.
The appeal was dismissed with costs and the High Court's answer left undisturbed. Section 33B of the 1922 Act (the predecessor of s.263) is not confined to cases where an assessable income has been under-assessed. Even where an income has not been earned and is not assessable, an assessment made merely because the assessee wants it assessed in her hands in order to assist someone else who would otherwise have been assessed to a larger amount can be erroneous and prejudicial to the interests of the revenue. The Commissioner therefore had ample jurisdiction to cancel the assessment and to initiate proceedings against whoever the authorities considered liable for the income. On the facts the Commissioner's order cancelling the 1960-61 assessment and directing a fresh assessment after enquiry stood.
The assessee argued that where an assessee has been assessed on income she herself returned, the order cannot be prejudicial to the revenue. The Court held that argument unwarranted by the language of s.33B, which lets the Commissioner examine the record of any proceeding and pass such orders as the circumstances justify once he considers the order erroneous in so far as it is prejudicial to the revenue: the provision is not limited to cases where an assessable income was disclosed and under-assessed. It followed that an assessment of income in the wrong hands is within the section, and that the Commissioner could both cancel it and set the department on the person actually liable. The Court found direct support in Rampyari Devi Saraogi v. CIT, where on closely similar facts — a fictitious address used to confer jurisdiction on a particular officer, and initial capital, gifts and jewellery sales accepted without enquiry — the Commissioner's jurisdiction under s.33B was upheld. It distinguished CIT v. Rao Thakur Narayan Singh, relied on for the proposition that concluded past assessments cannot be reopened, as a case about an Income-tax Officer initiating reassessment in the teeth of a final Tribunal order, and therefore of little assistance.
Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue.
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Handle my notice → Ask a CA on WhatsAppYes. An assessment made merely because the assessee wanted the amount taxed in her hands, to help someone else escape a larger assessment, can be erroneous and prejudicial to the revenue — and may be cancelled in revision. This was decided by the Supreme Court (K.S. Hegde, P. Jaganmohan Reddy and H.R. Khanna, JJ (judgment delivered by Jaganmohan Reddy J)) and bears on section 263 of the Income Tax Act 1961. It is reported as (1973) 88 ITR 323 (SC); (1973) 3 SCC 482; Civil Appeal No. 2387 of 1969. It is one of the two authorities Malabar Industrial approved for the proposition that a no-enquiry assessment is revisable. Expect it wherever the department says the officer accepted something without asking any questions. If it applies to you, the first step is this: Show what enquiry the officer actually made — questionnaires, replies, notings — because the absence of enquiry is the trigger.
For assessment year 1960-61 the assessee, who had filed voluntary returns for 1955-56 to 1959-60 from a Calcutta address and had then had her file transferred to Howrah on the strength of a letter saying her place of business had moved, was assessed on a total income of Rs 9,037. The Income-tax Officer recorded that she could produce neither vouchers for her speculative transactions nor evidence of the interest said to have been received on her investments, but made the assessment without investigating the sources. The Commissioner issued a notice under s.33B of the 1922 Act. Departmental enquiries had shown that she had neither resided nor carried on business at either address and had been living with her husband at Raniganj since her marriage in 1946; that her claimed initial capital of Rs 13,500, the sale of ornaments for some Rs 68,000 and the two investments of Rs 50,000 each with a firm in which her husband was a partner had all been accepted without evidence; and that the firm through which the ornaments were said to have been sold was not genuine. The earlier years being time-barred, the Commissioner cancelled the 1960-61 assessment and directed a fresh assessment after enquiry. The Tribunal set that aside; on a reference the Calcutta High Court answered against the assessee, holding that the Income-tax Officer's want of jurisdiction was itself enough to justify the Commissioner. She appealed by certificate. The matter was decided on 1972-11-27 by the Supreme Court (K.S. Hegde, P. Jaganmohan Reddy and H.R. Khanna, JJ (judgment delivered by Jaganmohan Reddy J)). On those facts the Supreme Court held as follows. The appeal was dismissed with costs and the High Court's answer left undisturbed. Section 33B of the 1922 Act (the predecessor of s.263) is not confined to cases where an assessable income has been under-assessed. Even where an income has not been earned and is not assessable, an assessment made merely because the assessee wants it assessed in her hands in order to assist someone else who would otherwise have been assessed to a larger amount can be erroneous and prejudicial to the interests of the revenue. The Commissioner therefore had ample jurisdiction to cancel the assessment and to initiate proceedings against whoever the authorities considered liable for the income. On the facts the Commissioner's order cancelling the 1960-61 assessment and directing a fresh assessment after enquiry stood.
The assessee argued that where an assessee has been assessed on income she herself returned, the order cannot be prejudicial to the revenue. The Court held that argument unwarranted by the language of s.33B, which lets the Commissioner examine the record of any proceeding and pass such orders as the circumstances justify once he considers the order erroneous in so far as it is prejudicial to the revenue: the provision is not limited to cases where an assessable income was disclosed and under-assessed. It followed that an assessment of income in the wrong hands is within the section, and that the Commissioner could both cancel it and set the department on the person actually liable. The Court found direct support in Rampyari Devi Saraogi v. CIT, where on closely similar facts — a fictitious address used to confer jurisdiction on a particular officer, and initial capital, gifts and jewellery sales accepted without enquiry — the Commissioner's jurisdiction under s.33B was upheld. It distinguished CIT v. Rao Thakur Narayan Singh, relied on for the proposition that concluded past assessments cannot be reopened, as a case about an Income-tax Officer initiating reassessment in the teeth of a final Tribunal order, and therefore of little assistance. In the words reproduced by the source cited on this page: "Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue." The decision followed or applied Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) — followed and relied upon; Distinguishes CIT v. Rao Thakur Narayan Singh [1965] 56 ITR 234 (SC).
It was decided by the Supreme Court on 1972-11-27 and is reported as (1973) 88 ITR 323 (SC); (1973) 3 SCC 482; Civil Appeal No. 2387 of 1969. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 263, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was dismissed with costs and the High Court's answer left undisturbed. Section 33B of the 1922 Act (the predecessor of s.263) is not confined to cases where an assessable income has been under-assessed. Even where an income has not been earned and is not assessable, an assessment made merely because the assessee wants it assessed in her hands in order to assist someone else who would otherwise have been assessed to a larger amount can be erroneous and prejudicial to the interests of the revenue. The Commissioner therefore had ample jurisdiction to cancel the assessment and to initiate proceedings against whoever the authorities considered liable for the income. On the facts the Commissioner's order cancelling the 1960-61 assessment and directing a fresh assessment after enquiry stood. It arises in Revision & Rectification matters, on section 263 of the Income Tax Act 1961, and was decided by K.S. Hegde, P. Jaganmohan Reddy and H.R. Khanna, JJ (judgment delivered by Jaganmohan Reddy J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where income was offered in the wrong hands, expect the department to use this; deal with the true ownership squarely. Read it with Malabar Industrial, which expressly approved it, and with Torrent Pharmaceuticals on Explanation 2.
Still good law. Approved by the Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66 (SC), decided 10 February 2000, which cited it together with Rampyari Devi Saraogi for the proposition that where a sum not earned by a person is assessed as his income on his so offering, the order accepting it is erroneous and prejudicial to the interests of the revenue. Reinforced statutorily by Explanation 2 to s.263. That finding was checked against a published source, which is linked on this page, on 2026-08-25. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Decided under s.33B of the Indian Income-tax Act, 1922, the predecessor of s.263. Read the ratio and the facts separately. The proposition the case is cited for — that an assessment of income the assessee never earned, offered to shield someone who would be taxed more heavily, is erroneous and prejudicial to the revenue — was the Court's answer to an argument of law. What the Commissioner had actually found here was that the assessee neither lived nor traded at the addresses she gave, that jurisdiction had been procured by a fictitious address, and that the Income-tax Officer had accepted her capital, her ornament sales and her investments without any enquiry. What he ordered was a fresh assessment after enquiry, not a final determination. The report prints the judgment as continuous text without numbered paragraphs, so quotations from it cannot be given a paragraph number. The parallel citation (1973) 3 SCC 482 was not confirmed against the report read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed with costs and the High Court's answer left undisturbed. Section 33B of the 1922 Act (the predecessor of s.263) is not confined to cases where an assessable income has been under-assessed. Even where an income has not been earned and is not assessable, an assessment made merely because the assessee wants it assessed in her hands in order to assist someone else who would otherwise have been assessed to a larger amount can be erroneous and prejudicial to the interests of the revenue. The Commissioner therefore had ample jurisdiction to cancel the assessment and to initiate proceedings against whoever the authorities considered liable for the income. On the facts the Commissioner's order cancelling the 1960-61 assessment and directing a fresh assessment after enquiry stood.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
A reassessment was done in between. Does the two-year clock for s.263 restart from it?
Can the Commissioner revise on a ground that was not in the show cause notice?
What if the law itself was unsettled when the officer decided?
An amendment adds a new levy. Does it reach back to earlier years?