2012 (11) TMI 720 - HC - Income Tax

Rejection of Revision u/s 264 Penalty - CIT stated that revision proceedings are contemplated only to mitigate the situation faced by the assessee who are unable to approach the appellate authority for relief. The Commissioner noted that the assessee had already exercised his right of appeal before the appellate authorities. He cannot claim relief under section 264 of the Act. - held that - The fact that the assessee had preferred appeal against quantum additions would not therefore, take away his right to file revision application against the order of penalty. - Commissioner was wholly misguided in his approach. With respect to the Commissioner s stand that deletion of quantum additions not having achieved finality, the revision should be dismissed, also not in agreement.- The penalty was based on certain quantum additions. Such additions came to be deleted by the Commissioner(Appeals). Further appeal by Revenue before the Tribunal was rejected. When the Commissioner was deciding the revision petition of the assessee, what was prevailing was the order of the Tribunal. It may be that further appeal by the Revenue against such decision of the Tribunal was pending before High Court. Mere pendency of appeal before High Court or even admission would not annul the order of the Tribunal or even of course in absence of stay, keep it in abeyance. - Matter remanded back to CIT for fresh consideration.

Summary

Issues:
Challenge to order under section 264 of the Income-tax Act, 1961.

Analysis:
The petitioner challenged an order passed by the Commissioner of Income-tax under section 264 of the Income-tax Act, 1961. The petitioner had declared a loss in the assessment year 2003-2004, but the Assessing Officer disallowed a reduction and imposed a penalty. The petitioner filed a revision application under section 264, pointing out that the quantum additions on which the penalty was based had been deleted by the appellate authorities. However, the Commissioner rejected the revision petition, stating that the quantum issue had not attained finality and that revision proceedings are meant for situations where the assessee cannot approach appellate authorities for relief.

The High Court found the Commissioner's reasons for rejecting the revision petition to be untenable. Section 264 grants revisional powers to the Commissioner to pass orders not prejudicial to the assessee. The Court cited precedents emphasizing the wide discretion of the Commissioner in granting relief to the assessee. The Court held that the Commissioner had misconstrued the scope of revisional powers and that the Commissioner could entertain new grounds not raised before lower authorities. The Commissioner's belief that revision proceedings are only for those unable to approach appellate authorities was deemed incorrect.

Regarding the Commissioner's argument that deletion of quantum additions had not achieved finality, the High Court disagreed. The penalty was based on quantum additions, which had been deleted by the appellate authorities. The Court noted that the pendency of an appeal before the High Court did not nullify the Tribunal's decision. Therefore, the Commissioner should have considered the Tribunal's order while deciding the revision petition.

In conclusion, the High Court allowed the petition, setting aside the Commissioner's order and remanding the proceedings for fresh consideration. The Court clarified the wide discretion of the Commissioner under section 264 and emphasized that revision proceedings are not limited to cases where the assessee cannot approach appellate authorities.