2014 (11) TMI 951 - HC - Income Tax

Scope and jurisdiction of CIT Exercise of power u/s 264 Held that - In normal circumstances, the Commissioner, after condoning the delay in filing the revision petition, should take up the revision petition on merits and consider the claim of the assessee, in terms of Section 264 - the Commissioner did not examine, as to whether the claim of the petitioner that it has been taxed twice for the amount was bonafide, but the Commissioner proceeded with the aspect, as to whether the revised return for the AY 2002-03 filed by the petitioner on 24.3.2005 was valid - the Commissioner relied on Section 139(5) of the Act and observed that the revised return was filed beyond the time limit and the AO did not take any action on the revised return and the same was in confirmity with the law - the Commissioner should have gone into the factual aspect as to whether the assesssee was taxed twice for the amount - the Commissioner has wide power u/s 264 and in exercise of such power, the Commissioner ought to have considered the claim of the petitioner, as to whether it has been taxed twice for the amount of ₹ 11,41,607/- under the head installation charges relating to KG Hospital thus, the matter is remitted back to the CIT for fresh consideration in exercise of power u/s 264 Decided in favour of assessee.

Summary

Issues Involved:
1. Double taxation of installation charges.
2. Validity of the revised return filed beyond the statutory period.
3. Scope and jurisdiction of the Commissioner under Section 264 of the Income Tax Act.
4. Applicability of Circular No.14 (XL-35) dated 11.4.1955.
5. Whether the petitioner should approach the Board under Section 119(2) for relief.

Detailed Analysis:

1. Double Taxation of Installation Charges:
The petitioner, a firm supplying hospital equipment, filed returns for the assessment years 2001-02 and 2002-03. During the assessment for 2001-02, an additional income of Rs. 11,41,607/- under installation charges was added. This amount was also included in the return for 2002-03, leading to double taxation. The petitioner sought to exclude this amount in a revised return for 2002-03, but the Assessing Officer did not act on it.

2. Validity of the Revised Return Filed Beyond the Statutory Period:
The petitioner filed a revised return for 2002-03 on 24.3.2005, beyond the time limit stipulated under Section 139(5) of the Act. The respondent Commissioner rejected this revised return as it was filed beyond the statutory period, stating that the Assessing Officer's inaction on the revised return was lawful.

3. Scope and Jurisdiction of the Commissioner under Section 264:
The core issue was the scope and jurisdiction of the Commissioner under Section 264. Section 264 grants the Commissioner wide powers to revise orders, either suo motu or on an application by the assessee, provided the order is not prejudicial to the assessee. Despite these wide powers, the Commissioner focused only on the validity of the revised return rather than addressing the substantive issue of double taxation.

4. Applicability of Circular No.14 (XL-35) dated 11.4.1955:
The petitioner argued that the respondent failed to consider Circular No.14, which instructs officers to assist taxpayers in securing reliefs and not to take advantage of their ignorance. This circular emphasizes the duty of officers to guide taxpayers in claiming refunds or reliefs, which was not adhered to in this case.

5. Whether the Petitioner Should Approach the Board under Section 119(2) for Relief:
The respondent suggested that the petitioner could approach the Board under Section 119(2) for relief. However, given the wide powers under Section 264, the Commissioner should have addressed the issue of double taxation directly.

Judgment:
The court concluded that the Commissioner has wide powers under Section 264 and should have considered whether the petitioner was taxed twice for the amount of Rs. 11,41,607/-. The Commissioner should have conducted an inquiry into the factual claims rather than focusing solely on the procedural aspect of the revised return's timeliness. The court quashed the impugned order and remanded the case back to the respondent for fresh consideration, directing the Commissioner to conduct an inquiry and pass orders on merits, after affording the petitioner an opportunity for a personal hearing. The court left open the issue of whether the petitioner should approach the Board under Section 119(2).

Conclusion:
The writ petition was allowed, and the impugned order was quashed. The case was remanded for fresh consideration, emphasizing the need for a substantive inquiry into the double taxation claim under the wide powers conferred by Section 264.