2017 (11) TMI 1157 - HC - Income Tax

Revision Petition u/s 264 - ground raised was that the AO had wrongly denied and not applied Section 44BB and had incorrectly invoked and applied Section 44DA of the Act - Commissioner s reasoning and observation was that the petitioner, for some unexplained reasons, deliberately did not file an appeal against the assessment order for Assessment Year 2012-13, though it had filed appeals for other years and this was an attempt to invoke Section 264 of the Act as a backdoor entry to file an appeal Held that - We find that the impugned reasoning cannot be sustained for it is contrary to the legislative mandate of Section 264 of the Act and the revisionary power conferred on the Commissioner. Section 264 of the Act empowers the jurisdictional Commissioner to revise any order (other than an order to which Section 263 applies) passed by an authority subordinate to him, on his own motion or on an application by the Assessee for revision. The Commissioner is empowered to call for the record of any proceeding under the Act in which such an order has been passed and may make such inquiry or cause such inquiry to be made and pass such order thereon, not being an order prejudicial to the Assessee and subject to the provisions of this Act, as he thinks fit. Statutory power has been conferred on the Commissioner to examine and correct any order passed by a subordinate authority. It is not the case of the respondents or the reason given by the Commissioner that time for preferring appeal had not expired. It is the admitted case that time for filing appeal against the assessment order for AY 2012-13 had expired. The assessee had waived his right to file appeal. Clause (a) is therefore not attracted. Clause (b) to Section 264(4) of the Act is also not attracted in the present case and it is not the case of the Revenue that the petitioner has filed an appeal for 2012-13 before Dy. Commissioner (Appeals). The petitioner has also not filed any appeal against the said order before the Commissioner (Appeals) or the Tribunal to attract the negative stipulation in clause (c) to Section 264 (4) of the Act. The present case therefore, does not fall under clauses (a) to (c) of Section 264 (4) of the Act. The impugned order no doubt reflects and states that the contention of the petitioner was incorrect and merits rejection but it does not assign and give any reason for the said conclusion. The impugned order cannot be sustained as it does not examine the contention on merits while recording the decision. The Commissioner must give and assign reasons for taking a particular view, even if he accepts the findings and reasons recorded by the assessing officer and does not agree with the contention raised by the assessee. This court is, therefore, deprived and is unable to fathom the reasons and ground which were in the mind of the Commissioner. The order of the Commissioner should have contained reasons for the conclusions arrived at and ought to have dealt with the issue on merits as required under Section 264 of the Act.

Summary

Issues Involved:
1. Maintainability of the Revision Petition under Section 264 of the Income Tax Act.
2. Application of Section 44BB vs. Section 44DA of the Income Tax Act.
3. Jurisdiction and powers of the Commissioner under Section 264.
4. Principle of consistency and res judicata in tax assessments.
5. Requirement for a reasoned order by the Commissioner.

Issue-wise Detailed Analysis:

1. Maintainability of the Revision Petition under Section 264 of the Income Tax Act:
The petitioner, a non-resident company and tax resident of Australia, engaged in providing software solutions to the oil and gas industry, filed a Revision Petition under Section 264 of the Income Tax Act for the Assessment Year 2012-13. The Commissioner rejected the petition, reasoning that the petitioner had not availed the remedy of appeal for the said year, unlike other years. The court found this reasoning unsustainable, clarifying that Section 264 empowers the Commissioner to revise any order passed by a subordinate authority, provided certain conditions are met. The court noted that the time for filing an appeal had expired, and the petitioner had waived the right to appeal, making the Revision Petition maintainable.

2. Application of Section 44BB vs. Section 44DA of the Income Tax Act:
The Assessing Officer (AO) had taxed the petitioner’s receipts as Royalty/Fee from Technical Services under Section 44DA, instead of Section 44BB as claimed by the petitioner. The petitioner contended that the AO wrongly denied the application of Section 44BB, relying on precedents and CBDT Circulars. The Commissioner’s order did not address this contention on merits, which the court found to be a failure in exercising the quasi-judicial powers conferred under Section 264.

3. Jurisdiction and powers of the Commissioner under Section 264:
The court emphasized that the Commissioner has the statutory power to examine and correct any order passed by a subordinate authority. The Commissioner cannot refuse to entertain a revision petition on the ground that a similar issue is pending in another year. The court highlighted that the Commissioner must pass a speaking and reasoned order, addressing the merits of the contentions raised by the petitioner.

4. Principle of consistency and res judicata in tax assessments:
The court noted that each Assessment Year is separate under the Income Tax Act, and strict principles of res judicata do not apply, though the principle of consistency is relevant. The Commissioner cannot refuse to entertain a revision petition based on similar issues pending in other years. The court clarified that new and extraneous conditions cannot be imposed to deny the statutory remedy available to the assessee.

5. Requirement for a reasoned order by the Commissioner:
The court found that the impugned order lacked reasoning and did not address the petitioner’s contentions on merits. The Commissioner must provide reasons for the conclusions arrived at, even if agreeing with the AO’s findings. The absence of such reasoning deprives the court of understanding the grounds for the decision, making the order unsustainable.

Conclusion:
The court allowed the writ petition, quashed the impugned order dated 6th March 2017, and remanded the matter to the Commissioner for fresh consideration in accordance with law. The court clarified that it had not expressed any view on the merits of the case, and the petitioner could challenge any adverse decision in accordance with law.