1. This is an application by the Commissioner of Income-tax, Madhya Pradesh, Bhopal, under Section 256(2) of the I.T. Act, 1961, prayingthat the Income-tax Appellate Tribunal should be directed to state the case and refer it to this court for its opinion on the following questions :
' 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in setting aside the order passed by the Commissioner of Income-tax Under Section 263 of the I.T. Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the order of the ITO, though erroneous, was not prejudicial to the interests of the Revenue?'
Brief facts are as follows : Assessee-respondent is a trust. For assessment year 1973-74, it returned an income of Rs. 4,65,470. The ITO assessed the trust on an income of Rs. 7,70,810. The difference between the returned and assessed income exceeded Rs. 1,00,000. The ITO, however, did not follow the procedure laid down by Section 144B of the I.T. Act, 1961. The Commissioner therefore, acting Under Section 263 of the I.T. Act, sent for the record and setting aside the assessment directed the ITO to make a fresh assessment after complying with Section 144B of the I.T. Act. The Commissioner was of the view that the order of the ITO was erroneous and prejudicial to the interests of the Revenue due to non-compliance with the procedure laid down under Section 144B of the Act.
2. The assessee preferred an appeal against the Commissioner's order to the Income-tax Appellate Tribunal. The Appellate Tribunal allowed the appeal and set aside the order of the CIT holding that the ITO's order, though erroneous, was not prejudicial to the interests of the Revenue.
3. The Commissioner made an application under Section 256(1) of the I.T. Act for stating the case and referring it to the High Court for answering the aforesaid questions of law. The Appellate Tribunal rejected the application.
4. The Revenue has, therefore, filed this application under Section 256(2) of the I.T. Act.
5. On the facts, we are satisfied that the aforesaid questions of law arise out of the Tribunal's order and, therefore, we direct the Appellate Tribunal to state the case and refer it to the High Court for answering the above-mentioned questions of law for decision.