2016 (8) TMI 1370 - HC - Income Tax

Deduction towards provision for arrears of salary and wages payable to the officers and staff as per the Long Term Settlement - whether, in the absence of filing a revised return, a claim for deduction for the aforesaid amount is permissible for the assessment year 2008-09? - Held that - As held by a Division Bench in Parekh Brothers (1983 (8) TMI 17 - KERALA HIGH COURT), there is no limit to exercise the jurisdiction under Section 264 of the IT Act. That was also a case in which the claim was not made by the assessee in the return or at the time of arguments when the assessment was made. In such an instance, the Division Bench held that, even assuming that the assessment order was correct, still it is open for the assessee to seek the revisional jurisdiction in respect of an item which was not made by way of a mistake. Therefore, the jurisdiction of the Commissioner to pass orders even if a revised return is not filed, is very much available. Then the only question is whether any deduction has been permitted during the assessment year 2007-08. As already indicated, the appellate order was passed as early as on 31/03/2010 dismissing the appeal as infructuous. Whether such deduction has been permitted during 2007-08 is not made clear - the matter requires consideration. The commissioner shall hear the petitioner and if deduction has not been made for the assessment year 2007-08, it has to be considered whether the deduction could be made for the assessment year 2008-09 irrespective of the fact that the petitioner has filed any revised return. Writ petition is disposed of as the 2nd respondent shall consider Ext.P4 revision petition filed by the petitioner and take a decision in the matter after hearing the petitioner, within a period of two months from the date of receipt of a copy of this judgment.

Summary

Issues:
Challenging assessment for the year 2008-09; Claiming deduction for arrears of salary and wages; Rejection of revision petition under Section 264 of the IT Act.

Analysis:
The petitioner, a Government company under re-habilitation, challenged the assessment for the year 2008-09, seeking a deduction of ?5,10,20,000 for arrears of salary and wages as per the Long Term Settlement. The Assessing Officer disallowed the claim citing technical grounds related to the approval timeline for the payment of arrears. The petitioner, having appealed the 2007-08 assessment, did not claim the deduction for 2008-09 initially. A revision petition under Section 264 of the IT Act was filed, which was rejected on the basis that a fresh claim for deduction should be through a revised return. The petitioner argued that the Commissioner has the power to allow the deduction even without a revised return, especially when the claim could have been made in the previous year. The petitioner also highlighted the dismissal of the appeal for the 2007-08 assessment, resulting in no tax demand for that year.

The petitioner relied on the judgment in Parekh Brothers v. Commissioner of Income Tax, emphasizing the discretionary power of the Commissioner under Section 264 to entertain revision petitions and grant relief even if a mistake was detected post-assessment. On the other hand, the Revenue contended that without a revised return, there is no valid claim for deduction, and the Commissioner cannot adjudicate on such claims. Reference was made to the Supreme Court judgment in Goetze (India) Ltd. v. Commissioner of Income Tax regarding the necessity of available facts for raising legal issues before the Tribunal.

Examining the provisions of Section 264 of the IT Act, the Court noted the wide powers conferred on the Commissioner to conduct inquiries and pass suitable orders. The Court opined that the absence of a revised return does not preclude the Commissioner from considering a deduction claim, especially when the petitioner could have claimed it in the previous year. Citing the Parekh Brothers case, the Court emphasized the Commissioner's jurisdiction to entertain revision petitions even without a revised return. The Court directed the Commissioner to reconsider the petitioner's revision petition, considering all relevant materials, including the appellate order for the 2007-08 assessment.

In conclusion, the Court set aside the rejection order and instructed the Commissioner to review the revision petition, allowing the petitioner an opportunity to present all necessary documents within two months for a decision on the deduction claim, irrespective of the filing of a revised return.