2016 (3) TMI 977 - HC - Income Tax

Revision u/s 264 in favor of assessee - Commissioner has rejected the revision petition u/s 264 on the ground of that the Petitioner did not comply with the mandatory requirement of payment of prescribed fees - Held that - It is an admitted position that the requisite fee was paid during the pendency of the revision petition. The rejection of the application on the technical ground of non payment of would be taking a hyper technical view. The condition requiring the payment of fees prior to the filing of the revision application would be directory in nature. From a reading of the provisions of Section 264 of the Act, it cannot be gathered that the non payment of the prescribed fee prior to the institution of the application for revision would be fatal. The non payment of the requisite fee would be a mere irregularity which could be cured at a later stage. The applicant can always be called upon to pay the requisite fee and make good the deficiency. If the deficiency is cured, the irregularity would be rectified. In the present case, the petitioner paid the requisite fee, though belatedly and thus cured the irregularity. The finding returned by the commissioner that the application was not maintainable on this account cannot be sustained and is accordingly set aside The other ground for rejection was that the assessing officer was not at fault as there was no material on the basis of which period of holding shares by the petitioner could be calculated, by taking the date of acquisition as the year 1987 or 2005 and no fault could be found with the action of the Assessing Officer in the processing/rectification under section 143(1)/154 of the Act. Tax gains arising on sale of shares - STCG OR LTCG - Held that - In the present case, as per the Petitioner, in his return of income, he has erroneously offered to tax gains arising on sale of shares as short term capital gains instead of same being long term capital gains exempt from tax. Subsequently, the petitioner on 14.01.2011 filed the application under section 154 of the Act. The assessing officer on 21.02.2011 partly rectified the intimation and computed the tax on capital gains @ 10% as against 30% computed in the intimation issued under section 143(1) of the Act. The assessing officer, however refused to accept the application under section 154 filed by the petitioner. When the assessing officer could rectify the intimation on 21.02.2011, he could also consider the prayer of the petitioner made in the rectification application under section 154 of the Act, which was already pending before him on that date. When the commissioner was called upon to examine the revision application under section 264 of the Act, all the relevant material was already available on the record of the assessing officer. The commissioner instead of merely examining whether the intimation was correct based on the material then available should have examined the material in the light of the Circular No. 14(XL-35) of 1955, dated 11.4.1955 and Article 265 of the Constitution of India. The commissioner has erred in not doing so and in failing to exercise the jurisdiction vested in him on mere technical grounds. - Decided in favour of assessee

Issues Involved:
1. Validity of the order dated 20.11.2012 under section 264 of the Income Tax Act, 1962.
2. Correctness of tax treatment of gains from the sale of shares as short-term capital gains.
3. Entitlement to refund of income tax paid for the assessment year 2008-09.
4. Scope of revisionary jurisdiction under section 264 of the Act.
5. Application of Article 265 of the Constitution of India regarding unlawful tax collection.

Detailed Analysis:

1. Validity of the Order Dated 20.11.2012 under Section 264 of the Income Tax Act, 1962:
The petitioner sought to quash the order dated 20.11.2012 issued by the Commissioner under section 264, which rejected the revision petition on two grounds: non-payment of the prescribed fee and the notion that the intimation under section 143(1) does not qualify as an order. The court found that the requisite fee was paid during the pendency of the revision petition and that the condition requiring fee payment is directory, not mandatory. Therefore, the rejection on this ground was hyper-technical and unsustainable. The Commissioner’s failure to recognize the intimation under section 143(1) as an order amenable to revisionary jurisdiction was also incorrect, as judicial precedents have established that such intimations qualify as orders for the purposes of section 264.

2. Correctness of Tax Treatment of Gains from the Sale of Shares as Short-Term Capital Gains:
The petitioner initially treated the gains from the sale of shares as short-term capital gains based on the acquisition date from his mother. However, according to section 2(42A) and section 49, the period for which the previous owner (mother) held the shares should be included in calculating the holding period. This would classify the gains as long-term capital gains, exempt from tax under section 10(38). The court emphasized that the Commissioner must consider whether the petitioner was taxable on the income in question and that the powers under section 264 are wide enough to correct such errors.

3. Entitlement to Refund of Income Tax Paid for the Assessment Year 2008-09:
The petitioner claimed a refund of income tax paid, arguing that the gains were long-term capital gains and thus exempt. The court referenced Article 265 of the Constitution, which prohibits the levy or collection of tax without authority of law, and cited several judicial precedents affirming that tax authorities must refund any tax collected unlawfully. The court concluded that the Commissioner should have considered the petitioner’s claim for a refund under section 264, given the wide scope of the provision.

4. Scope of Revisionary Jurisdiction under Section 264 of the Act:
The court reiterated that section 264 grants the Commissioner broad powers to correct errors, including those committed by the assessee. The provision allows for the revision of any order, not limited to errors by subordinate authorities. The court cited multiple cases affirming that the Commissioner can grant relief even if the assessee failed to claim it initially due to an error or oversight. The Commissioner’s discretion must be exercised judicially, considering the substantive law and the principles of fairness.

5. Application of Article 265 of the Constitution of India Regarding Unlawful Tax Collection:
The court emphasized that any tax collected without proper legal authority is unconstitutional, referencing Article 265. The court cited several judgments supporting the principle that tax authorities must not retain tax collected unlawfully and must assist taxpayers in securing rightful refunds. The Commissioner’s failure to exercise jurisdiction under section 264 on mere technical grounds was deemed erroneous.

Conclusion:
The court set aside the impugned order dated 20.11.2012 and restored the revision application under section 264 to the Commissioner for reconsideration on merits. The Commissioner was directed to dispose of the application within eight weeks, ensuring that the petitioner’s legitimate claims are duly considered. The writ petition was disposed of, with parties bearing their own costs.

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