2019 (10) TMI 1196 - HC - Income Tax

Revision u/s 264 in favor of assessee - Principal Commissioner or the Commissioner to exercise the revisional jurisdiction over any order other than the order to which Section 263 applies - Delay in filing return - Revision filed by the petitioner herein within one year from the date of rejection of their rectification return - Assessee having not filed revised return within the time stipulated under Section 139(5) - HELD THAT - No doubt Section 139(5) provides for filing a revised return within one year for correcting any mistake. It is true that the petitioner has not exercised such option within such time. However, the petitioner filed a rectification return after receipt of intimation under Section 143(1). It is true that there is a delay in filing such return. But the said rectification return was rejected on 24.10.2017 and immediately, within one year, the petitioner approached the Commissioner under Section 264 of the IT Act, and filed the revision. Since the Commissioner is empowered to entertain the revision under Section 264 of the IT Act, against any order other than the order to which Section 263 applies, the revision filed by the petitioner herein within one year from the date of rejection of their rectification return, is certainly maintainable and consequently, the Commissioner ought to have exercised his power and considered the relief sought for by the petitioner and pass the order to that effect, more particularly, when he has found that the Assessee had committed the error inadvertently and that the expenditure claimed by the Assessee under the head Total Compensation to Employees is also supported by the certified copy of Profit and Loss Account . When the Commissioner is approached by the Assessee within one year from the date of an adverse order passed against the Assessee, the Commissioner is empowered and entitled to look into the grievance of the Assessee and pass such order thereon notwithstanding the fact that the Assessee has not approached the Assessing Officer within the time stipulated for filing the revised return. If such technical objection is allowed to stand in the way of the Commissioner in exercising his jurisdiction/power under Section 264, it would certainly, result in defeating the very purpose and object of granting such ample and wider power to the Commissioner under Section 264 As per revenue exercise of power and granting the relief to the Assessee under Section 264 is subject to the provision of the Income Tax, Act and therefore, the Assessee herein, having not filed revised return within the time stipulated under Section 139(5) of the IT Act, is not entitled to the relief even under Section 264 - Revenue by making such contention, is sought to justify the collection of excess tax over and above the tax payable by the Assessee, even though they admit that only due to inadvertent mistake, a wrong entry was made by the Assessee with lessor figure of the relevant expenses than the actual expenses met out. At this juncture, it is relevant to note that Article 265 of the Constitution of India specifically states that no tax shall be levied or collected except by authority of law. Therefore, both the levy and collection must be done with the authority of law, and if any levy and collection, later are found to be wrong and without authority of law, certainly, such levy and collection cannot withstand the scrutiny of the above constitutional provision and thus, such levy and collection would amount in violation of Article 265 of the Constitution of India. Therefore, it is apparent on the facts and circumstances of the present case, that a mere typographical error committed by the Assessee cannot cost them payment of excess tax as collected by the Revenue. Certainly, the denial for repayment of such excess collection would amount to great injustice to the Assessee. Even though the Statute prescribes a time limit for getting the relief before the Assessing Officer by way of filing a revised return, in my considered view, there is no embargo on the Commissioner to exercise his power and grant the relief under Section 264 of the IT Act. It is manifest that only suo-motu power of the Commissioner under Section 264 of the IT Act, is restricted against an order passed within one year, whereas no such restriction is imposed on the Commissioner to exercise his power in respect of an order, which has been passed more than on year, if such revisional power is sought to be invoked at the instance of the Assessee by making an application under Section 264 of the IT Act. Writ Petition is allowed and the impugned order is set aside. Consequently, the matter is remitted back to the respondent for considering the claim of the petitioner and pass appropriate orders

Summary

Issues Involved:
1. Inadvertent error in the tax return.
2. Rejection of rectification return due to belated filing.
3. Power of the Commissioner under Section 264 of the IT Act.
4. Applicability of Circular No.14/1955.
5. Judicial precedents on Section 264 of the IT Act.
6. Constitutional principles regarding tax collection.

Detailed Analysis:

1. Inadvertent Error in the Tax Return:
The petitioner, a manufacturer of engineering goods, filed their return for the assessment year 2013-2014 on 30.09.2013, declaring "Nil" income after setting off earlier year losses. An error occurred in Column No.14 under "Debits to Profit and Loss Account," where the compensation to employees was incorrectly entered as ?1,38,59,509/- instead of the correct amount of ?1,87,82,244/-. This discrepancy led to a demand of ?17,37,280/- in tax and interest, which the petitioner sought to rectify by filing a return on 09.01.2016.

2. Rejection of Rectification Return Due to Belated Filing:
The Central Processing Centre did not process the rectification return as it was filed beyond the specified time under Section 139(5) of the IT Act. The Assessing Officer also rejected the rectification plea on 24.10.2017, citing the delay. Subsequently, the petitioner filed a revision petition under Section 264 of the IT Act on 25.01.2018, arguing that the error was a typographical one and supported by the profit and loss account filed with the return.

3. Power of the Commissioner Under Section 264 of the IT Act:
The Commissioner, while acknowledging the inadvertent error and the genuine nature of the expenditure under "Compensation to Employees," advised the petitioner to file a revised return. However, he noted that the time for filing such a revised return had expired, thus denying relief. The court examined whether the Commissioner was justified in not granting relief despite recognizing the bona fide mistake.

4. Applicability of Circular No.14/1955:
The petitioner argued that Circular No.14/1955 empowers authorities to permit the correction of mistakes and that the Department should not take advantage of an assessee's ignorance of their rights. The court noted that the application under Section 264 was filed within one year from the rejection of the rectification return, making it timely and within the Commissioner’s purview to grant relief.

5. Judicial Precedents on Section 264 of the IT Act:
The court referenced several judicial precedents emphasizing the wide powers conferred on the Commissioner under Section 264 to prevent miscarriage of justice and provide relief to the assessee. Notable cases included:
- Transformers & Electricals Kerala Ltd. vs. Deputy CIT: Highlighted the broad scope of Section 264, allowing the Commissioner to grant relief even if a revised return was not filed.
- Sri Selvamuthukumar vs. CIT: Emphasized that Section 264 aims to prevent injustice and provide relief where the law permits.
- M/s. Bali Trading Pvt. Ltd. vs. Principal CIT: Reinforced that the power under Section 264 is intended to prevent injustice.
- Vijay Gupta vs. CIT: Stressed that the Commissioner’s revisional power under Section 264 can correct errors committed by the assessee.

6. Constitutional Principles Regarding Tax Collection:
The court underscored that Article 265 of the Constitution mandates that no tax shall be levied or collected without the authority of law. It emphasized that technical objections should not prevent the correction of an apparent injustice, aligning with the principles of substantial justice over technicalities.

Conclusion:
The court concluded that the Commissioner should have exercised his power under Section 264 to grant relief, especially when the error was acknowledged as inadvertent and supported by the profit and loss account. The rejection based on technical grounds was deemed unjust, and the court set aside the impugned order, remitting the matter back to the respondent for reconsideration within six weeks.