2017 (6) TMI 982 - HC - Income Tax

Revision u/s 264 - AO failed to rectify the quantum of income against an application u/s 154 - petitioner did not apply for the two reliefs as claimed by the petitioner before him - Held that - With respect, the Commissioner misunderstood the application dated March 24, 2010. Such application contains the prayer for both of the reliefs. Therefore, there is an error apparent on the face of the record so far as the impugned order is concerned. The finding that the application dated March 24, 2010 does not contain the reliefs as claimed by the petitioner is perverse. Application u/s 264 against an order passed by the assessing officer is maintainable or not- Held that - Again, with respect, Section 264 of the Act of 1961 permits the Commissioner to revise all orders which are not under Section 263 of the Act of 1961. The order impugned before the Commissioner under Section 264 of the Act of 1961 was passed under Section 154 of the Act of 1961. The revisional application directed against the order passed under Section 154 of the Act of 1961 is revisable under Section 264 of 1961. The Commissioner, therefore, failed to exercise jurisdiction vested upon in law by rejecting the application made under Section 264 of the act of 1961 by holding that the application before him was not maintainable. Filing of rectification petition five years after passing an order of assessment is an exercise to bypass limitation made under Section 264 of filing of a petition - Held that - Such ground is not available in the facts of the present case. The petitioner had applied before the assessing officer under Section 154 of the Act of 1961 within four years of the order sought to be corrected. The petitioner did not delay in filing the petition under Section 264 beyond the prescribed of one year from the date of passing of the order under Section 154 by the assessing officer. Consequently limitation is not available to defeat the petition under Section 264 of the Act of 1961. Thus the four orders passed under Section 264 of the Act of 1961 by the Commissioner in respect of the assessee for the assessment years 2004-05 to 2007-08 are set aside.

Summary

Issues:
Challenge to four orders under Section 264 of the Income Tax Act, 1961 for assessment years 2004-05 to 2007-08.

Detailed Analysis:

1. Treatment of CENVAT Credit and Depreciation:
The petitioner included CENVAT Credit in its profit and loss account and claimed depreciation based on the cost of plant and machinery inclusive of the CENVAT Credit for multiple assessment years. Upon realizing the mistake, the petitioner filed a revised return under Section 139(5) of the Act of 1961, which was accepted by the assessing officer. The assessing officer rectified the income by removing the CENVAT Credit from the income and adjusted the depreciation claim accordingly.

2. Rejection of Rectification Applications under Section 264:
The petitioner applied under Section 154 for rectification for the years 2004-05 to 2007-08. The Commissioner rejected the applications under Section 264 primarily on three grounds. Firstly, the Commissioner claimed that the petitioner did not apply for both reliefs, but the petitioner argued that the initial application contained prayers for both reliefs. Secondly, the Commissioner held that a petition under Section 264 is not maintainable against an order passed by the assessing officer, which was contested by the petitioner citing the provisions of Section 264. Lastly, the Commissioner raised the issue of limitation, suggesting that filing a rectification petition five years after the assessment order was an attempt to bypass the limitation period. However, the petitioner had applied within the prescribed time frame, and therefore, the limitation did not apply.

3. Court's Decision:
The High Court set aside the four orders passed under Section 264 by the Commissioner for the assessment years 2004-05 to 2007-08. The Court directed the Commissioner to reconsider the applications under Section 264 in accordance with the law and the observations made in the judgment. The writ petition was disposed of with no order as to costs.