2012 (9) TMI 803 - HC - Income Tax

Plea against failure of CIT to assume jurisdiction u/s 264 by dismissing the petitioner s revision application - petitioner on coming aware of the fact that exemption of dividend income and long term capital gains u/s 10(34) and 10(38) respectively were not claimed mistakenly at page 11 of the return of income where the computation of total income was worked out, moved the revision application on ground that it was an inadvertent error, obvious from the fact since in the return of income itself at page no. 24, the petitioner had claimed the dividend income and long term capital gains as being exempt, as income not to be included in total Income - Held that - Government is obliged to collect only that amount of tax which is legally payable by an assessee. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is clear that the CIT committed a fundamental error in proceeding on the basis that no deduction on account of dividend income and income form capital gains u/s 10 was claimed, when the same has been claimed at Page 24 of the ROI under head Details of exempt Income . Therefore there is an error on the face of the order dated 7.04.2011 and the same is not sustainable. Order of CIT(A) set aside. Since petitioner s application for rectification u/s 154 filed on 8.02.2010, has not yet been disposed of, A.O. is directed to dispose off the application - Decided in favor of assessee

Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax under Section 264 of the Income Tax Act.
2. Error in the original return of income and subsequent rectification.
3. Application of Central Board of Direct Tax Circular dated 11.04.1985.
4. Validity and processing of revised return of income.
5. Rectification application under Section 154 of the Act.

Detailed Analysis:

1. Jurisdiction of the Commissioner of Income Tax under Section 264 of the Income Tax Act:
The petitioner challenged the order dated 07.02.2011 by the Commissioner of Income Tax, dismissing the revision application under Section 264 of the Income Tax Act. The petitioner argued that the Commissioner failed to exercise the jurisdiction vested in her under Section 264 by not considering the evidence of a mistake in the return of income. The Commissioner based her decision on the premise that revisional jurisdiction is akin to an appeal and is limited to the scope of the Assessing Officer's powers under Section 143(1). The court found this approach erroneous, emphasizing that the Commissioner should exercise jurisdiction to do real justice, not be restricted by technicalities.

2. Error in the Original Return of Income and Subsequent Rectification:
The petitioner, a Private Limited Company, filed its return of income electronically for the assessment year 2007-2008, declaring a total income of Rs. 7,91,565/-, which included dividend income and long-term capital gains that were exempt under Sections 10(34) and 10(38) of the Act. The petitioner realized the mistake only upon receiving an intimation dated 16.10.2008, which raised a tax demand of Rs. 2,44,160/-. The error was due to the Chartered Accountant's office not claiming the exemptions properly. The petitioner filed a revised return on 01.02.2010, but it was not processed as it was beyond the period of limitation under Section 139(5).

3. Application of Central Board of Direct Tax Circular dated 11.04.1985:
The petitioner argued that the Commissioner acted without jurisdiction by ignoring the binding Circular of the Central Board of Direct Tax dated 11.04.1985, which directs the Assessing Officer not to take advantage of an assessee's ignorance and mistakes. The court highlighted that the government should collect only the legally payable tax and assist taxpayers in securing reliefs. The Circular emphasizes the duty of tax officers to guide taxpayers and ensure they receive all due refunds and reliefs.

4. Validity and Processing of Revised Return of Income:
The Commissioner of Income Tax dismissed the revised return filed by the petitioner as it was beyond the statutory period. The court found a fundamental error in the Commissioner's order, which incorrectly stated that the petitioner had not claimed exemptions under Sections 10(34) and 10(38). The original return did claim these exemptions, but the mistake was in the computation at page 11 of the return. The court noted that the Commissioner should have considered this mistake and the revised return's merits.

5. Rectification Application under Section 154 of the Act:
The petitioner also filed an application for rectification under Section 154, which had not been disposed of. The court directed that the Assessing Officer should consider the rectification application on its merits, without being influenced by the Commissioner's order. The court emphasized that the rectification application should be treated as a fresh application and disposed of within six weeks from the receipt of the court's order.

Conclusion:
The court set aside the order dated 07.02.2011 of the Commissioner of Income Tax and remanded the matter for fresh consideration, keeping all contentions open, including the maintainability of the revision application. The court directed the Assessing Officer to dispose of the rectification application promptly, ensuring that the petitioner receives a fair assessment in accordance with the law. The writ petition was allowed, with no order as to costs.

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