2017 (2) TMI 987 - HC - Income Tax

Remedy under section 264 - Held that - the relief provided in terms of section 139(5) is specific to the correction of a wrong statement or an omission in the original return by way of a revised return. The power under section 264 of the Act extends to passing any order as the Principal Commissioner or Commissioner may think fit after making an inquiry and subject to the provisions of the Act, either suo-moto or on an application by the assessee. Though the remedies over lap, power under section 264 is significantly wider and the wisdom of choosing one over the other would really depend on the facts and legal position of each case. The facts in the present case are to the effect that the petition under section 264 was filed on 12.03.2009 once it became clear that the 144A directions issued in the case of SASTRA were in fact being accepted and applied by the Revenue in the re-assessments of the appellant dated 21.10.2008, 24.12.2008 and 14.12.2009 (AY 2003-04, 2004-05 and 2005-06), by which time, limitation under Section 139(5) for filing a revised return, being 31.3.2008, had lapsed. Suffice it to say that, on the facts of this case, the remedy under section 264 is appropriate and ought to have been exercised in favour of the appellant by the Commissioner of Income tax.

Summary

Issues:
1. Interpretation of powers under section 264 of the Income Tax Act regarding revision of orders.
2. Relevance of order under section 144A in the assessment of the appellant.
3. Scope of inquiry under section 264 and consideration of relevant material.
4. Distinction between sections 263 and 264 in terms of the inquiry scope.
5. Availability of remedies under section 139(5) for filing revised returns and under section 264 for seeking revisions.

Detailed Analysis:
1. The judgment deals with the interpretation of powers under section 264 of the Income Tax Act concerning the revision of orders. The appellant sought to claim deduction for lease rentals paid over four years based on an order under section 144A. However, the Commissioner rejected the revision request citing lack of relevance of the 144A order to the appellant's case and the specific grounds for revision under section 264.

2. The issue of the relevance of the order under section 144A in the assessment of the appellant was crucial. The court found that the transaction involved in the 144A order between SASTRA and the appellant should have consistent treatment throughout the assessment years. The order under section 144A was considered part of the record and should have been taken into account in deciding the revision petition under section 264.

3. The scope of inquiry under section 264 was analyzed, emphasizing the consideration of relevant material. The court highlighted that the Commissioner has the power to make inquiries and consider all material that impacts the issue under consideration, including the order under section 144A dated 31.12.2007.

4. A distinction between sections 263 and 264 was drawn regarding the scope of inquiry. While section 263 allows for the consideration of material obtained subsequently, section 264 is intended to prevent miscarriage of justice and provide relief to the assessee. The court referred to various judgments supporting a broader interpretation of the term 'record' under section 264.

5. The availability of remedies under section 139(5) for filing revised returns and under section 264 for seeking revisions was discussed. The court clarified that while both remedies overlap, the power under section 264 is wider and can be chosen based on the facts and legal position of each case. In this specific case, the court found the remedy under section 264 appropriate and allowed the Writ Appeal.

By considering the above issues and detailed analysis, the court's decision in the judgment was to allow the Writ Appeal, emphasizing the importance of considering the order under section 144A in the appellant's assessment and the wider scope of powers under section 264 for providing relief to the assessee.