2023 (2) TMI 34 - HC - Income Tax

Revision u/s 264 - Addition of income twice - seeking refund with interest - HELD THAT - Section 264 of Act enables the Principal Commissioner or Commissioner, on its own motion or on an application made by the assessee, to call for records of any proceedings under the Act or to cause such inquiry to be made and, subject to the provisions of the Act, pass such order thereon as the Commissioner thinks fit. The only condition being that such order cannot be prejudicial to the assessee. Undisputedly, if the records for the AY 2014-15 are recalled, it would reveal that the sum received on account of interest on income tax, was assessed as income for the Previous Year 2013-14 relevant to the Assessment Year 2014-15. However, as stated above, the said amount was brought to tax by the Income Tax Authority in the Assessment Year 2012-13. Clearly, the same amount cannot be taxed twice over. It is settled law that an assessee is liable to pay income tax only on the income that is chargeable under the Act. Merely because an assessee has offered a receipt of income in his return does not necessarily make him liable to pay tax on the said receipt, if otherwise the said income is not chargeable to tax. In CIT v. Shelly Products 2003 (5) TMI 4 - SUPREME COURT the Supreme Court held that if the assessee had, by mistake or inadvertently, included his income or any amount, which was otherwise not chargeable to tax under the Act, the Assessing Officer was required to grant the assessee necessary relief and refund any tax paid in excess. As also well settled that the powers conferred under Section 264 are wide. In Vijay Gupta v. Commissioner of Income Tax Delhi-XIII Anr 2016 (3) TMI 977 - DELHI HIGH COURT a Co-ordinate Bench of this Court held that powers under Section 264 of the Act were not limited to correcting any errors committed by the authorities but also extended to errors committed by the assessee. Amount cannot be taxed twice. As apposite for the Commissioner to have revised the assessment order for the Assessment Year 2014-15 in light of the reassessment order dated 08.12.2017, whereby the amount was brought to tax in an earlier Assessment Year (Assessment Year 2012-13).

Summary

Issues:
Liability to pay tax on interest received on income tax refund for Assessment Years 2009-10 and 2010-11. Application for revision of assessment for Assessment Year 2014-15 under Section 264 of the Income Tax Act, 1961.

Analysis:

1. Liability to Pay Tax on Interest Received:
The petitioner credited interest on income tax refunds for Assessment Years 2009-10 and 2010-11 in its books for the Financial Year 2013-14. The interest amount was included in the income for the Financial Year 2013-14 and subsequently in the return of income for Assessment Year 2014-15. The assessment order for 2014-15 included this interest amount, leading to tax payment.

2. Reopening of Assessment for 2012-13:
The assessment for the year 2012-13 was reopened to include the interest on tax refunds for 2009-10 and 2010-11 as taxable income for that year. The petitioner contested this inclusion, but the Assessing Officer added the amount as income for 2012-13. However, no order was passed to exclude this amount from the taxable income for 2014-15, resulting in double taxation.

3. Application for Revision under Section 264:
The petitioner applied for revision of the assessment for 2014-15, as the interest amount had been taxed twice. Despite the delay in processing the application, the impugned order rejected the application on the grounds that the interest issue did not form part of the original assessment order under Section 143(3) of the Act.

4. Judicial Interpretation of Section 264:
The High Court emphasized that the power under Section 264 is wide and extends to correcting errors made by authorities or even by the assessee. Referring to precedents, the Court highlighted that the jurisdiction under Section 264 is judicial, and the authority must act judiciously in the interest of justice.

5. Decision and Remand:
The Court set aside the impugned order, stating that the interest amount cannot be taxed twice. It directed the concerned Commissioner to pass a fresh order considering the observations made. The petition was allowed, and the pending application was disposed of accordingly.

This detailed analysis of the judgment highlights the issues related to tax liability on interest income, assessment reopening, application for revision under Section 264, and the judicial interpretation guiding the decision to set aside the impugned order and remand the matter for a fresh assessment.