2017 (9) TMI 584 - HC - Income Tax

Revision petition u/s 264 - no business activity relatable to the expenses/income claimed - Held that - The Revisional Authority considering the scope of his power under Section 264 of the Act went a step ahead to examine as to the bonafides of the stand taken by the petitioner alleging that it was an inadvertent keying error. On a comparative analysis of the returns filed for the assessment year 2011-12, with that of the returns filed for the assessment year 2012-13, the first respondent noted that for repairs to machinery, telephone expenses, salary and other expenses, depreciation have been incurred and debited to P&L account, which is a clear indicator that business activity is being carried out by the assessee. When that being the factual position, the assessee would not have debited the expenses in its P&L account. Thus, on facts, the first respondent found that a company, which is claiming no business activity with no other income other than rental income and interest income claiming expenditure on repairs to plant and machinery that too in an increasing in manner, clearly indicates a position otherwise. Further, on facts, the first respondent found that the assessee has not been able to prove with evidence that there has been no business activity during the impugned assessment year. Thus, the first respondent having done a factual exercise, in exercise of his power under Section 264 and on facts, found that the theory as propounded by the petitioner as a keying error to be not proved conclusively. In such fact situation, the order passed by the first respondent calls for no interference.

Issues Involved:
1. Rejection of Revision Petition under Section 264 of the Income Tax Act.
2. Reliance on M/s. Goetze India Ltd. vs. CIT for rejecting rectification request.
3. Powers of the Commissioner under Section 264 of the Income Tax Act.
4. Validity of the impugned order passed by the Commissioner under Section 264.

Issue-wise Detailed Analysis:

1. Rejection of Revision Petition under Section 264 of the Income Tax Act:
The petitioner challenged the order passed by the first respondent under Section 264 of the Income Tax Act, 1961, relating to the assessment year 2012-13. The petitioner argued that their main source of income was rental income and claimed that a mistake occurred while filing the return, which was an inadvertent keying error. The petitioner requested the second respondent to rectify this mistake during the assessment proceedings, but the second respondent completed the scrutiny assessment without making any alterations, citing the lack of a revised return under Section 139(4). The first respondent dismissed the revision petition, leading to the present writ petition.

2. Reliance on M/s. Goetze India Ltd. vs. CIT for rejecting rectification request:
The second respondent relied on the Supreme Court decision in M/s. Goetze India Ltd. vs. CIT, which held that an Assessing Officer cannot entertain a claim for deduction without a revised return. The petitioner argued that this decision did not apply to appellate or revisional authorities. The court noted that the Supreme Court decision was limited to the power of the Assessing Authority and did not affect the powers of the Income Tax Appellate Tribunal under Section 254 of the Act.

3. Powers of the Commissioner under Section 264 of the Income Tax Act:
The court discussed the wide powers of the Commissioner under Section 264, intended to prevent miscarriage of justice. The Commissioner can make or cause inquiries and consider materials not available during the original assessment. The court cited various decisions affirming the Commissioner's broad authority to provide relief where the law permits and to consider new material evidence.

4. Validity of the impugned order passed by the Commissioner under Section 264:
The court examined the factual matrix and found that the petitioner had not provided conclusive evidence to prove that there was no business activity during the assessment year. The first respondent conducted a comparative analysis of returns from previous years and noted expenses indicative of business activity, such as repairs to plant and machinery. The court concluded that the first respondent's decision was based on a thorough examination of facts and did not warrant interference.

Conclusion:
The court upheld the first respondent's decision, dismissing the writ petition and concluding that the petitioner failed to prove the alleged keying error. The order passed by the first respondent was found to be justified based on the factual analysis and the legal principles governing the powers under Section 264 of the Income Tax Act. The writ petition was dismissed with no costs, and the connected miscellaneous petition was also closed.

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