Gokal Chand Mittal, J.
1. The following question of law has been referred for our opinion by the I.T. Appellate Tribunal (Chandigarh Bench):
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the order of the Addl. Commissioner of Income-tax merely because he had failed to record an express find-ing that the order of the Income-tax Officer, admittedly erroneous, was prejudicial to the interests of the Revenue '
2. For the assessment year 1969-70, the assessee filed a return on December 31, 1969, showing an income of Rs. 5,472. The ITO was not satisfied with the return and called upon the assessee to produce accounts. While the accounts were being examined by the ITO, he found that there were cash credit accounts relating to four persons showing huge deposits by them to the assessee. Since the ITO was not satisfied with the accounts, he issued a notice under Section 143(3) of the I.T. Act, 1961 (hereinafter referred to as the Act), for producing evidence to prove that the four creditors shown in its books of account were in possession of the amounts advanced to the assessee. While it was not able to satisfy the ITO by producing cogent evidence, the assessee filed a revised return on March 29, 1972, showing an income of Rs. 12,072 instead of Rs. 5,472, as disclosed in the initial return filed on December 31, 1969. The ITO finalised the assessment on March 30, 1972, and assessed the total income of the assessee at Rs. 1,34,440.
3. The Addl. C1T issued a notice under Section 263(1) of the Act to the assessee, who, in response to that notice, appeared before him. The assessee was told by the learned Commissioner that the ITO could not take into consideration the revised return for framing the assessment without issuing a fresh notice to the assessee under Section 143(2) of the Act, and, therefore, the assessment was legally invalid and as such prejudicial to the Revenue. The stand of the assessee was that the assessment was made against the assessee as, instead of framing an assessment on the returned income of Rs. 12,072, the assessment was framed on the income of Rs. 1,34,440 and as such the order of assessment was prejudicial to the assessee and not to the Revenue, and since the assessee was not objecting to the assessment on the ground that no notice was issued under Section 143(2) of the Act, the Commissioner had no jurisdiction to take proceedings under Section 263 of the Act. The learned Commissioner did not accept the stand of the assessee and set aside the proceedings of assessment by order dated September 21, 1972, on the following reasoning, which may be quoted in the words of the learned Additional Commissioner :
'...The assessment is undoubtedly invalid and, therefore, to safeguard the Revenue it is essential that action should be taken under Section 263 so that the assessment is made afresh according to law. The assessment made by the ITO is set aside, being illegal. He is directed to make the assessment afresh on the basis of revised return after issuing notice under Section 143(2). '
4. Against the aforesaid order, the assessee went up in appeal to the Income-tax Appellate Tribunal, Chandigarh Bench. The Tribunal, by order dated September 19, 1974, allowed the appeal and set aside the order of the learned Additional Commissioner, on the ground that it was not found thatthe assessment order was prejudicial to the interests of the Revenue. The Tribunal was also of the opinion that the ITO had committed an error, in not issuing notice under Section 143(2) of the Act, but it was necessary to find out whether it was prejudicial to the interests of the Revenue, which was the condition precedent for starting proceedings under Section 263(1) of the Act. The Tribunal found that no finding was given by the learned Additional Commissioner that the assessment order was prejudicial to the interests of the Revenue. It also came to the conclusion independently that there was no material on the record to show that the order of assessment was prejudicial to the interests of the Revenue, nor the learned departmental representative was able to point out any material on the record to that effect. On the aforesaid facts, we are required to give our opinion on the referred question.
5. It is no doubt true that the Commissioner should not only record a finding that the. order of the ITO was prejudicial to the interests of the Revenue but should also mention in the order the material on the basis of which he has arrived at the conclusion. However, in a given case, if the Commissioner clearly notices the material from which it can reasonably be inferred that the order of the ITO was prejudicial to the interests of the Revenue but fails to record an express finding, then it could not be said that there was no material on the record to justify the initiation of proceedings under Section 263(1 of the Act.
6. As regards the facts of the case in hand, a plain reading thereof would show that there was no material on the record which could justify the Additional Commissioner to pass an order and, therefore, the Tribunal was right in coming to the conclusion that there was neither any finding nor any material on the record to justify the order passed under Section 263(1) of the Act. On the other hand, as against the returned income of Rs. 5,472, the income was finalised at Rs. 1,34,440. Even the revised return showed an income of Rs. 12,072 which was much less than what was finally found to be. Therefore, it was the assessee who was aggrieved against the assessment order or non-issue of the notice under Section 143(2) of the Act, and not the Revenue. It will be useful to reproduce the exact words of the Tribunal in this regard :
' We agree that the Income-tax Officer's order of assessment was erroneous by reason of the aforesaid omission, but it was necessary for the learned Additional Commissioner of Income-tax to give a finding that the assessment order was prejudicial to the interests of the Revenue. In the instant case, no such finding is available in the impugned order nor was the learned departmental representative able to point out any material on record to show that the total income of the tax to be assessed in the instant case should have been at a figure higher than the one at which the Income-tax Officer completed the assessment. In this view of the matter, we hold that the Income-tax Officer's order is not shown to be prejudicial to the interests of the Revenue.'
7. For the reasons recorded above, we am of the opinion that the Tribunal was right in setting aside the order of the Additional Commissioner on the facts of this case and the answer to the question is returned in the affirmative, i.e., in favour of the assessee and against the Revenue. However, there will be no order as to costs as the assessee is not represented before us.
Bhopinder Singh Dhillon , J.
8. I agree.