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2024 (10) TMI 186 - HC - Income TaxRectification u/s 154 - Revision u/s 264 - scope of powers u/s 264 - what constitutes 'record' ? - mistake apparent on the record to the effect that the opening balance for the year under consideration could not be added as income by the AO and ought to have been considered by the Commissioner while passing the order under Section 264 - HELD THAT - Commissioner of Income-Tax is supposed to consider the merits of the case while entertaining the petition filed by the assessee under Section 264 of the Act. It is not in dispute that the assessee has availed the remedy of revision instead of filing of appeal as per his choice of the assessee and the Commissioner was therefore, duty bound to consider such revision petition on merits. As decided in Pamod R. Agrawal 2023 (10) TMI 1142 - BOMBAY HIGH COURT held that Commissioner while exercising revisionary powers under section 264 of the Act has to ensure that there is relief provided to assessee where the law permits the same. We see no reason to take a different view on the interpretation of the word 'record' occurring in section 264 of the Act from that expressed by the Central Board of Direct Taxes in the Circular extracted above. The order under section 144A dated 31-12-2007 is thus part of the record and ought to have been take into consideration in deciding the petition under section 264 Thus, impugned order passed by respondent No. 1 u/s 264 as well as the order under Section 154 of the Act are hereby quashed and set aside and the matter is remanded back to the Principal Commissioner Respondent No. 1 to decide the revision petition filed by the petitioner under Section 264 on merits.
Issues Involved:
1. Validity of the order dated 24.03.2021 under Section 264 of the Income-Tax Act, 1961. 2. Validity of the order dated 22.12.2018 under Section 144 of the Income-Tax Act, 1961. 3. Validity of the order dated 12.08.2021 under Section 154 read with Section 264 of the Income-Tax Act, 1961. 4. Legitimacy of the addition of Rs. 80 lakhs under Section 68 of the Income-Tax Act, 1961. 5. Consideration of the petitioner's circumstances, including the illness and death of the main Director. Issue-wise Detailed Analysis: 1. Validity of the order dated 24.03.2021 under Section 264 of the Income-Tax Act, 1961: The petitioner challenged the order dated 24.03.2021, passed by respondent No. 1 under Section 264 of the Income-Tax Act, 1961. The petitioner argued that the Commissioner of Income-Tax failed to consider the merits of the case and the circumstances that prevented the petitioner from participating in the assessment proceedings. The court observed that the Commissioner is supposed to consider the merits while entertaining a petition under Section 264. The court referenced the wide powers conferred under Section 264, as highlighted in the case of Pramod R. Agrawal vs. Principal Commissioner of Income-tax. 2. Validity of the order dated 22.12.2018 under Section 144 of the Income-Tax Act, 1961: The assessment order dated 22.12.2018 was passed under Section 144 of the Act, where the Assessing Officer made an addition of Rs. 80 lakhs based on the balance-sheet and profit and loss account filed by the petitioner. The petitioner contended that the addition was wrongful as the amount was carried forward from the previous year (A.Y. 2015-2016) and not received during the year under consideration. The court noted that the petitioner did not participate in the assessment proceedings due to the illness and subsequent death of the main Director. 3. Validity of the order dated 12.08.2021 under Section 154 read with Section 264 of the Income-Tax Act, 1961: The petitioner filed an application under Section 154 for rectification of the mistake in the order passed under Section 264. The Commissioner rejected this application on the ground that there was no mistake apparent on record. The court found that the Commissioner failed to consider the petitioner's submission that the opening balance for the year under consideration could not be added as income. 4. Legitimacy of the addition of Rs. 80 lakhs under Section 68 of the Income-Tax Act, 1961: The petitioner argued that the Assessing Officer wrongfully made an addition of Rs. 80 lakhs under Section 68 on account of share premium received during the year under consideration. The petitioner claimed that no share application money was received, nor any share capital issued during the year, and the amount of Rs. 80 lakhs was carried forward from the previous year. The court emphasized that the Commissioner should have considered these merits while deciding the revision petition under Section 264. 5. Consideration of the petitioner's circumstances, including the illness and death of the main Director: The petitioner contended that the main Director's critical medical condition and subsequent death prevented participation in the assessment proceedings. The court noted that the Commissioner dismissed this submission, stating that the petitioner, being a corporate entity assisted by qualified CAs, should have ensured compliance. However, the court found that the Commissioner should have considered the petitioner's circumstances and the merits of the case. Conclusion: The court quashed and set aside the impugned orders dated 24.03.2021, 22.12.2018, and 12.08.2021. The matter was remanded back to the Principal Commissioner to decide the revision petition filed by the petitioner under Section 264 on merits. The Principal Commissioner was directed to complete this exercise within twelve weeks from the date of receipt of the court's order. The rule was made absolute to the aforesaid extent, with no order as to costs.
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