2022 (2) TMI 535 - HC - Income Tax

Revision u/s 264 - Scope of jurisdiction u/s 264 - claim of refund of excess DDT - HELD THAT - First, the assessee had not claimed refund in the original and revised return and, thus, there was no error in the assessment order passed under Section 143(3) on 18th December, 2018. Second, respondent no.1 was of the view that the jurisdiction under Section 264 was confined to correct the order which is found to be apparently erroneous. Respondent no.1 was justified in recording that the assessee had not claimed refund of excess tax paid by it in the original and revised return. However, respondent no.1 committed an error in constricting the scope of revisional jurisdiction, in the backdrop of the said undisputed factual position. In fact, the very foundation of the application under Section 264 of the Act, 1961 was that the assessee had inadvertently failed to claim the benefit of Article 10 of the India Kuwait DTAA, under which the dividend distribution was taxed at a lower rate. We are of the view that the approach of respondent no.1 in refusing to exercise the jurisdiction under Section 264 of the Act, 1961 on the premise that it can be lawfully exercised only where such a refund was claimed and considered by the Assessing Officer is neither borne out by the text of Section 264 of the Act, 1961 nor the construction put thereon by the precedents. The aforesaid reasoning indicates that respondent no.1 failed to appreciate the distinction between revisional and review jurisdiction. The principles which govern the exercise of review were sought to be unjustifiably imported to the exercise of power under Section 264 of the Act, 1961 and thereby imposing limitations which do not exist on exercise of such power. Undoubtedly, revisional jurisdiction is not as wide as an appellate jurisdiction. At the same time, revisional jurisdiction cannot be confused with the power of review, which by its very nature is limited. This concurred with the view that Section 264 does not limit the power to correct errors committed by the sub-ordinate authorities and could even be exercised where errors are committed by the assessee and there is nothing in Section 264 which places any restriction on the Commissioner s revisional power to give relief to the assessee in a case where assessee detects mistakes after the assessment is completed.

Summary

Issues:
Challenge to order rejecting revision application under Section 264 of the Income Tax Act, 1961.

Detailed Analysis:

1. Background and Facts:
The petitioner, a private limited company, succeeded United Arab Shipping Agency India Company Pvt. Limited (UASAC) through an amalgamation. UASAC distributed a dividend taxed at 16.91%, failing to claim the benefit of a lower tax rate under India-Kuwait DTAA. The petitioner sought a refund of excess tax paid through an application under Section 264 of the Act.

2. Contentions of the Petitioner:
The petitioner challenged the rejection of the application, arguing that the jurisdiction under Section 264 is not limited to correcting apparent errors but includes a broader power to review. The petitioner emphasized that the failure to claim the refund initially should not bar the exercise of revisional jurisdiction.

3. Respondent's Justification:
The respondent contended that since the refund was not claimed in the original or revised returns, the assessment order under Section 143(3) was not prejudicial to the assessee. Therefore, the respondent justified the refusal to exercise revisional jurisdiction under Section 264.

4. Judgment and Reasoning:
The Court found that the respondent misconstrued the scope of revisional jurisdiction under Section 264. The Court emphasized that the failure to claim the refund initially does not preclude the exercise of revisional powers. It distinguished between revision and review jurisdiction, highlighting that Section 264 allows correction of errors by both authorities and assessee post-assessment.

5. Precedent and Legal Interpretation:
The Court cited a Division Bench Judgment supporting the broader interpretation of Section 264, allowing relief to the assessee even for mistakes detected post-assessment. The Court aligned this interpretation with the case at hand, emphasizing the expansive nature of revisional jurisdiction.

6. Decision and Order:
The Court allowed the petition, quashing the impugned order and remitting the revision application for fresh consideration. It directed the respondent to provide a fair hearing to the petitioner and decide the application expeditiously. The Court clarified that it did not delve into the merits of the case, leaving all other questions open for the respondent's consideration.

In conclusion, the Court's judgment clarified the expansive nature of revisional jurisdiction under Section 264, emphasizing that the failure to claim a refund initially does not bar the exercise of such powers. The decision reinstated the petitioner's right to seek a refund and highlighted the importance of a fair and thorough review process in tax matters.