2023 (10) TMI 704 - HC - Income Tax

Validity of Revision u/s 264 - assessee sought to trigger the provisions of Section 264 as enabling him to claim a loss on Future and Option contracts, which according to him, resulted in a loss as he had carried on non-speculative business during the period in issue - HELD THAT - PCIT has committed a material irregularity in not exercising the jurisdiction conferred on him under Section 264 of the Act. As correctly submitted PCIT was invested with the necessary revisionary powers to correct the intimation issued under Section 143(1) of the Act, even if the said intimation was a product of a mistake made by the assessee in not claiming set off concerning a loss which according to him, was available under the provisions of the Act. The rationale behind conferring such revisionary power is that the revenue ultimately is entitled to assess the real income of an assessee; albeit as per the provisions of the Act. Therefore, if a particular deduction is amenable within the periphery of the Act and inadvertently an assessee has not claimed the same, Section 264 can be triggered for making such correction. Thus, for the foregoing reasons, we are inclined to set aside the impugned order. PCIT will re-examine the application filed by the petitioner/assessee (which is now sought to be progressed by his legal heirs),

Summary

Issues Involved:
The writ petition concerns Assessment Year (AY) 2018-19 challenging the order passed by the Principal Commissioner of Income Tax (PCIT) rejecting the petitioner's application under Section 264 of the Income Tax Act, 1961 to revise the intimation issued under Section 143(1) of the Act.

Issue 1: Application under Section 264 of the Income Tax Act
The petitioner sought to trigger the provisions of Section 264 to claim a loss amounting to Rs. 36,66,650 concerning Future and Option contracts, which he believed resulted from non-speculative business activities during the relevant period. The PCIT, however, concluded that his revisionary power under Section 264 only applied to orders prejudicial to the petitioner's interest, and since the intimation under Section 143(1) was not prejudicial, he could not revise it.

Issue 2: Interpretation of Section 264 and Revisionary Power
The petitioner argued that the PCIT erred in not exercising his revisionary power under Section 264, contending that the provision allowed for correction of errors, such as the failure to claim set off for losses. Citing relevant case law, the petitioner's counsel emphasized that the PCIT had the authority to correct such mistakes under Section 264.

Issue 3: Jurisdiction of PCIT and Real Income Assessment
The Court found that the PCIT had committed a material irregularity by not utilizing the revisionary powers under Section 264 to correct the intimation issued under Section 143(1) of the Act. It was highlighted that the purpose of conferring such revisionary power was to ensure the accurate assessment of an assessee's real income in accordance with the provisions of the Act, allowing for corrections in cases where deductions were inadvertently not claimed.

Separate Judgment:
The Court, comprising Hon'ble Mr. Justice Rajiv Shakdher and Hon'ble Mr. Justice Girish Kathpalia, set aside the impugned order and directed the PCIT to re-examine the application filed by the petitioner (now being pursued by his legal heirs) and make a fresh decision on it. The writ petition was disposed of accordingly.