2024 (10) TMI 35 - HC - Income Tax

Application for revision u/s 264 against the intimation u/s 143 (1) - reduce the excess provision from the returned income - rejecting the petitioner s application u/s 264 on the ground that the petitioner should have filed a revised return of income - HELD THAT - We are of the opinion that there is much substance in the contentions as urged on behalf of the petitioners. Insofar as the revisional powers are concerned, Section 264 inter alia empowers the Commissioner, either on his own motion or on an application made by the assessee, to call for the record of any proceeding under the Act and pass such order thereon not being an order prejudicial to the assessee. It is well settled that such power is conferred on the Commissioner to enable him to give relief to an assessee also in cases of over-assessment, however, such power is required to be exercised by the Commissioner subject to the limitations prescribed in the provision. This would include a situation that after an assessment is completed, if an assessee detects mistakes on account of which he was over-assessed, the revisional jurisdiction can be invoked by the assessee. Such power is not confined merely to erroneous orders passed by the lower authorities. In the present case the Commissioner was not correct in rejecting the revision application filed by the petitioner on the ground that the petitioner had not filed a revised return within the prescribed limitation. In our opinion, Section 264 is a salutary provision which also bridges the gap and / or removes vacuum to remedy a bona fide mistake and / or for correction of an inadvertent situation, which may take place in the assessment proceedings. By remedying such mistake by orders being passed u/s 264 of the Act, any illegality or injustice which would otherwise be caused to the assessee can be corrected so as to maintain a lawful course of action being followed in the course of assessment. The object of such provision also appears to be that the law would not be oblivious to any bona fide human mistake which may occur at the end of the assessee and which if otherwise permitted to remain, may lead to injustice or the provisions of law being breached. Now coming to the decision as cited we are not persuaded to accept that the decision in Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT in the facts of the present case would at all be applicable. Such decision is not in the context of the revisionary powers as conferred under the provisions of section 264 of the Income Tax Act, but in the context of deduction claimed by the assessee by a letter, after the return was filed, without filing of a revised return. Also the decision as rendered in M.S. Raju 2007 (12) TMI 23 - ANDHRA PRADESH HIGH COURT would also not support the respondent s case. In such case the the assessee had made payment of 30 lakhs as damages much after the assessment in question. No material was placed to show that the audit report for the previous year had made any reference to the subsequent event of payment of damages. However in the subsequent assessment year the assessee did not claim any deduction of 30 lakhs. On such facts the assessee filed a revision requesting the Commissioner to direct the assessing officer to allow a deduction of 30 lakhs paid by the assessee as damages. The Commissioner rejected the request holding that the assessment for the relevant year made no reference to any claim for deduction of the said amount in the profit and loss account. In such circumstances, the Court in the facts of the case held that since the record under the provisions of section 264 (1) is only the record of the proceedings before the assessing authority and as assessee did not claim any such deduction in the return of income filed by him before the assessing authority, he was not entitled to raise such question for the first time in revision proceedings under Section 264 (1). Thus, not only the facts of the case are quite distinct but also even otherwise on the position in law the decision is not applicable to the case in hand. Commissioner has certainly erred in law in rejecting the revision application filed by the petitioner merely on the ground that the petitioner had not filed a revised return. The petition needs to succeed. It is accordingly allowed in terms of prayer clause (a). The revision proceedings are accordingly restored to the file of Respondent No. 1 for appropriate orders to be passed under the provisions of Section 264 in the light of the above observations on the merits of the adjustment as claimed by the petitioner.

Summary

Issues Involved:
1. Rejection of revision applications under Section 264 of the Income Tax Act, 1961.
2. Double taxation of excess provision for bonuses.
3. Applicability of Section 264 for rectifying errors after the expiry of the time limit for filing a revised return under Section 139(5).

Detailed Analysis:

1. Rejection of Revision Applications under Section 264:
The petitioner filed three petitions challenging the Principal Commissioner of Income Tax's orders under Section 264 of the Income Tax Act, 1961, which rejected the petitioner's revision applications against the intimation under Section 143(1) for the Assessment Years 2019-20, 2020-21, and 2021-22. The petitions were disposed of by a common judgment as the issues of law and fact were common.

2. Double Taxation of Excess Provision for Bonuses:
The petitioner had made a provision for bonuses payable to employees in the financial statements. For the Assessment Year 2018-19, the petitioner made a provision of Rs. 1,30,00,000/- and paid Rs. 1,18,62,953/- before the due date of filing the return, disallowing the excess provision of Rs. 11,37,047/-. This excess provision was written back and credited to the salary account in the Assessment Year 2019-20. However, while computing the income for the Assessment Year 2019-20, the excess provision of Rs. 11,37,047/- was not reduced from the income, leading to double taxation.

3. Applicability of Section 264 for Rectifying Errors:
The petitioner realized the mistake of double taxation while preparing the return for the Assessment Year 2022-23 and filed an application for revision under Section 264 on 7 November 2022. The application was rejected by the Principal Commissioner on 23 February 2024, stating that the petitioner should have filed a revised return of income.

The petitioner argued that the time limit to file a revised return under Section 139(5) had expired, leaving no option but to file a revision under Section 264. The petitioner contended that Section 264 confers wide powers on the Commissioner to ensure no tax is paid or collected contrary to law, aligning with Article 265 of the Constitution of India.

Court's Observations and Judgment:
The court recognized the substance in the petitioner's contentions, emphasizing that Section 264 empowers the Commissioner to give relief in cases of over-assessment and rectify mistakes detected post-assessment. The court cited relevant case law, including Selvamuthukumar vs. Commissioner of Income-tax and Ena Chaudhuri vs. Assistant Commissioner of Income-tax, which supported the petitioner's position that Section 264 could be invoked to remedy bona fide mistakes.

The court distinguished the decision in Goetze (India) Ltd. vs. Commissioner of Income-tax, noting it was not applicable as it did not pertain to the revisionary powers under Section 264. Similarly, the decision in M.S. Raju vs. Deputy Commissioner of Income-tax was found inapplicable due to distinct facts.

The court concluded that the Commissioner erred in law by rejecting the revision application on the ground of not filing a revised return within the prescribed limitation. The petitions were allowed, and the revision proceedings were restored to the file of Respondent No. 1 for appropriate orders under Section 264, considering the merits of the adjustment claimed by the petitioner.

Conclusion:
The court allowed the petitions, setting aside the impugned orders and directing the Principal Commissioner to reconsider the revision applications under Section 264, thereby ensuring the correction of the inadvertent mistake of double taxation. The judgment underscores the broad remedial scope of Section 264 to address bona fide errors and uphold the principles of justice and lawful taxation.