Jharkhand HC Restores Section 264 Revision After Holding It Maintainable

Sri Kaushik Narayan Bhattacharya Son of Krishnendu Narayan Bhattacharya Vs PCIT (Jharkhand High Court)

Summary: The Jharkhand High Court set aside the Revisional Authority’s order dated 14.03.2024, which had dismissed the petitioner’s revision under Section 264 of the Income-tax Act, 1961 as not maintainable while also making observations on merits. The Court noted that under Section 264(4)(a), revisional powers would not be exercised where an appeal lies, has not been filed, and the time for filing the appeal has not expired, or where the assessee has not waived the right of appeal. In the present case, the limitation period for filing an appeal against the assessment order had already expired, and there was no material showing that an appeal or condonation application had been filed or that there was any waiver. The Court therefore held that the Revisional Authority was not justified in refusing to exercise revisional jurisdiction or treating the revision as not maintainable. The matter was restored to the Revisional Authority to decide the revision afresh on merits and in accordance with law, uninfluenced by the observations in the set-aside order. All merits-based contentions were kept open.

Where the statutory period for filing an appeal against an assessment order has already expired and no appeal or application for condonation is pending, the bar contained in section 264(4)(a) does not operate to prevent exercise of revisional jurisdiction under section 264. The Revisional Authority cannot reject the revision merely on the ground that an appellate remedy was available during the expired limitation period.

Core Issue: Maintainability of Revision Under Section 264

The principal issue was whether a revision petition under section 264 of the Income-tax Act, 1961 was maintainable against an assessment order where the statutory period for filing an appeal had already expired and the assessee had not filed an appeal or an application seeking condonation of delay. The further issue was whether the Revisional Authority, after holding the revision to be non-maintainable, could nevertheless make observations on the merits of the assessment.

Facts of the Case

The petitioner challenged the order dated 14 March 2024 passed by the Revisional Authority under section 264, whereby the revision petition against the assessment order dated 26 December 2022, passed under section 143(3) read with section 144B, was rejected as not maintainable. The Revisional Authority proceeded on the basis that the assessee had an appellate remedy against the assessment order and had chosen to invoke section 264 instead. The petitioner contended that the revision was maintainable because the limitation period for filing the appeal had already expired and, therefore, the statutory restriction contained in section 264(4) was no longer attracted. It was also contended that once the Revisional Authority had concluded that the revision was not maintainable, it ought not to have entered into or made observations regarding the merits of the case.

Revisional Authority’s Finding

The Revisional Authority held that the petitioner had a statutory remedy of appeal against the assessment order and, instead of pursuing that remedy, had preferred revision under section 264. On this basis, it concluded that the revision petition was not maintainable. At the same time, the Revisional Authority made certain observations concerning the merits of the matter.

Jharkhand High Court Finding and Observation

Section 264(4)(a) Bar After Expiry of Appeal Limitation

The High Court examined section 264(4), particularly clause (a), and observed that the circumstances in which revisional jurisdiction is not to be exercised are specifically prescribed. The statutory restriction applies where an appeal against the order lies but the time within which such appeal may be made has not expired, or, in the specified cases, where the assessee has not waived the right of appeal. The Court therefore held that the mere availability of an appellate remedy at an earlier point of time cannot indefinitely operate as a bar to section 264 jurisdiction after the appellate limitation period has expired.

In the present case, the Court found that the limitation period for filing an appeal against the assessment order had already expired. There was no material to show that the petitioner had filed an appeal or even an application seeking condonation of delay. There was also no question of waiver of the right of appeal. Consequently, the Revisional Authority was not justified in refusing to exercise revisional jurisdiction or in holding the revision petition to be non-maintainable.

Observations on Merits After Holding Revision Non-Maintainable

The Court further made an important procedural observation that once an authority concludes that it lacks jurisdiction, ordinarily there is no occasion for it to adjudicate upon the merits. Since the Revisional Authority’s observations on merits had been made against the background of its erroneous conclusion that the revision itself was not maintainable, those observations could not be allowed to prejudice the assessee when the matter was reconsidered.

Cases Relied Upon

The order, as supplied, does not cite any separate judicial precedent for the proposition. The decision proceeds principally on an interpretation of section 264(4)(a) of the Income-tax Act, 1961, read with the factual position that the appellate limitation had expired, no appeal or condonation application was pending, and waiver was not involved.

Outcome: Section 264 Revision Restored for Fresh Adjudication

The Jharkhand High Court set aside the Revisional Authority’s order dated 14 March 2024 and restored the assessee’s revision petition for fresh adjudication on merits in accordance with law. The Revisional Authority was directed not to be influenced by any observations on merits contained in the earlier order. All contentions on merits were expressly kept open. The Court further directed the Revisional Authority to follow principles of natural justice and fair play and endeavour to dispose of the revision preferably within six months from communication of the High Court’s order. The Rule was made absolute without any order as to costs.

Key Proposition on Section 264 Revisional Jurisdiction

Section 264 is not barred merely because an appeal once lay against the assessment order. If the prescribed appellate limitation has expired, no appeal or condonation application is pending, and there is no question of waiver, section 264(4)(a) does not justify rejection of the revision as non-maintainable.

FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT

1. Heard Mr Rudra Pratap Singh, who appears with Mr Prashant Jha for the petitioner and Mr Vaibhav Kumar for the respondents.

2. Rule. The Rule is made returnable immediately at the request of and with consent of the learned counsel for the parties.

3. The petitioner challenges the impugned order dated 14th March, 2024 made by the Revisional Authority under Section 264 of the I.T. Act, 1961 (the said Act), dismissing the petitioner’s revision petition as not maintainable, but at the same time making some observations on the merits of the matter as well.

4. Mr Rudra Pratap Singh, learned counsel for the petitioner, submitted that the revision petition was maintainable under Section 264 of the said Act and, therefore, the conclusion that the same was not maintainable virtually amounts to a failure to exercise the jurisdiction vested in the Revisional Authority. He submits that in any event, the Revisional Authority, having reached the conclusion that no revision was maintainable, should not have adjudicated the merits of the rival contentions and made some observations thereon.

5. Mr Kumar Vaibhav, learned counsel for the respondents, submitted that even if it is assumed that a revision was maintainable, the same has been decided by the Revisional Authority on the merits. He submitted that there is no error in the decision on the merits and therefore, this Court should not interfere with the impugned order.

6. The rival contentions now fall for our determination.

7. The Revisional Authority has reasoned that the petitioner herein had the remedy of an appeal against an assessment order made under Section 143(3) read with Section 144 B of the said Act. Instead, the petitioner chose to prefer a revision under Section 264 of the said Act, and therefore, such revision was not maintainable.

8. From the perusal of Section 264 of the said Act, including sub-Section 4 thereof, we find that the circumstances in which revisional powers should not be exercised by the Revisional Authority have been clearly set out. Under sub-clause-A of Section 264 (4), it is provided that where an appeal against the order lies to the appellate authority but has not been made and the time within which such appeal may be made has not expired, or in case of an appeal to the Joint Commissioner (Appeals) or Commissioners (Appeals) or to the Appellate Tribunal, the assessee has not waived his right of appeal, then, revisional powers would not be exercised.

9. In this case, the records show that the period of limitation for instituting an appeal against the assessment order had already expired. There was nothing on record to suggest that the petitioner had filed an appeal or any application seeking condonation of delay. There was no question of waiver in the present case. Therefore, in such circumstances, the Revisional Authority was not justified in refusing to exercise its revisional jurisdiction or in holding that the revision filed by the petitioner herein was not maintainable.

10. Generally, once the Authority concludes that it lacks jurisdiction, there is no question of the Authority making any observations on the merits of the matter. In this case, although it is correct that the Revisional Authority has made some observations on the merits of the matter, we find that such observations have been affected by the Revisional Authority’s overarching opinion that the revision itself was not maintainable.

11. Therefore, the interest of justice would be best served if the Revisional Authority’s impugned order dated 14.03.2024 is set aside and the matter is restored to the file of the Revisional Authority to decide the petitioner’s revision petition afresh on its own merits and in accordance with law. This time, however, this Revisional Authority should not be influenced by any of the observations made on merits in the impugned order dated 14.03.2024, which, in any case, is now being set aside.

12. Accordingly, this petition is disposed of by setting aside the Revisional Authority’s impugned order dated 14.03.2024 and directing the Revisional Authority to decide the petitioner’s revision petition against the assessment order dated 26.12.2022 afresh on its own merits and in accordance with law. The Revisional Authority, as indicated above, must not be influenced by any of the observations on merits contained in the impugned order dated 14.03.2024, which, in any event, is now set aside.

13. All contentions of all parties on merits of the matter are kept open for the decision by the Revisional Authority, since this Court has not examined such rival contentions.

14. Needless to add that the Revisional Authority would follow the principles of natural justice and fair play when disposing of the revision petition on merits and in accordance with law.

15. The Revisional Authority must endeavour to dispose of the revision petition as expeditiously as possible, preferably within six months from this order being communicated. Mr Kumar Vaibhav agrees to communicate this order to the Revisional Authority.

16. The Rule is made absolute in the above terms without any order for costs. All concerned should act on an authenticated copy of this order.