2023 (10) TMI 1142 - HC - Income Tax

Revision u/s 264 - delay in filing the application as alleged - Computation of long term capital gain arising from sale of flat in Mumbai - deduction of renovation expenses after indexing not claimed - petitioner consulted another Chartered Accountant, who advised petitioner that the other co-owner of the property had claimed a deduction of entire renovation expenses incurred in September 1990 in respect of the flat after indexing the same and petitioner should have also done the same while computing his share of capital gains - Petitioner advised to file an application u/s 154 which was rejected on the ground that such claim was made first time in the application under Section 154 of the Act and it was never brought to the notice of respondent no. 3 earlier or CIT(A) - HELD THAT - As agreeable there was no delay in filing the application u/s 264 because the application u/s 264 of the Act was against the order passed u/s 154 of the Act and not Section 143(3) - The order under Section 154 of the Act was passed on 8th December 2015 and the application under Section 264 of the Act was filed on 18th January 2016, within one year. The proceedings under Section 264 of the Act are intended to meet a situation faced by an aggrieved assessee, who is unable to approach the Appellate Authorities for relief and has no other alternate remedy available under the Act. The Commissioner is bound to apply his mind to the question whether petitioner was taxable on that income and his powers are not limited to correct the error committed by the subordinate authorities but could even be exercised where errors are committed by assessee. It would even cover situation where assessee because of an error has not put forth legitimate claim at the time of filing the return and the error is subsequently discovered and is raised for the first time in an application under Section 264. In Asmita Damle 2014 (5) TMI 1230 - BOMBAY HIGH COURT also held that the Commissioner while exercising revisionary powers u/s 264 has to ensure that there is relief provided to assessee where the law permits the same. As submitted that assessee should produce documents to prove his share of the indexed renovation expenses. In our view, it is not required because in the assessment order dated 30th December 2010 passed under Section 143(3) of the Act in the case of Ravi R Agarwal, the other co-owner of the flat, the assessing officer has accepted the amount of Rs. 2,95,859/- as the cost of renovation of indexation. Therefore, this figure has to be accepted as correct and suitable allowance should be made while arriving at the long term capital gain. We hereby quash and set aside the impugned order and remand the matter to PCIT for denovo consideration. Order to be passed shall be a reasoned order dealing with all submissions of assessee. The application under Section 264 of the Act shall be disposed within 8 weeks from today.

Issues Involved:
1. Rejection of application under Section 264 of the Income Tax Act, 1961.
2. Allowance of indexed cost of improvement for capital gains computation.
3. Jurisdiction and powers of the Commissioner under Section 264 of the Act.
4. Timeliness and procedural aspects of filing applications under Sections 154 and 264 of the Act.

Summary:

1. Rejection of Application under Section 264:
The petitioner was aggrieved by the order dated 22nd March 2017, passed by respondent no. 1, rejecting the application filed under Section 264 of the Income Tax Act, 1961. The petitioner had initially filed a return of income for A.Y. 2007-08, which included long-term capital gains from the sale of a flat but did not account for the indexed cost of improvement.

2. Allowance of Indexed Cost of Improvement:
The petitioner, a co-owner of the flat, did not claim renovation expenses incurred in September 1990 in the original return. The assessing officer made additions under Section 50C of the Act during scrutiny. The petitioner later discovered that another co-owner had successfully claimed a deduction for similar expenses. Consequently, the petitioner filed an application under Section 154, which was rejected on the grounds that the claim was not made earlier.

3. Jurisdiction and Powers of the Commissioner under Section 264:
The petitioner argued that Section 264 confers wide jurisdiction on the Commissioner to provide relief even if a legitimate claim was not made initially due to an error. The court agreed, citing multiple judgments, including Hindustan Diamond Company Pvt Ltd. Vs. CIT and Smita Rohit Gupta Vs. CIT, which emphasize the broad powers of the Commissioner under Section 264 to correct errors, whether by the assessing officer or the assessee.

4. Timeliness and Procedural Aspects:
The court found no delay in filing the application under Section 264, as it was against the order passed under Section 154 and not Section 143(3). The application under Section 264 was filed within one year of the order under Section 154. The court also rejected the respondent's argument that the petitioner could not file an application under Section 264 after filing an appeal against the assessment order.

Conclusion:
The court quashed the impugned order dated 22nd March 2017 and remanded the matter to respondent no. 1 for reconsideration. The court emphasized that the Commissioner should provide a reasoned order after giving a personal hearing to the petitioner. The application under Section 264 should be disposed of within eight weeks. The court noted that the indexed renovation expenses of Rs. 2,95,859/- should be accepted as correct, as they were acknowledged in the assessment order of another co-owner.

Final Order:
Petition disposed of with instructions for denovo consideration by the Commissioner.

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