HIGH COURT OF GUJARAT
Aryaman Spinners (P.) Ltd.
Commissioner of Income tax
SPECIAL CIVIL APPLICATION NO. 10636 OF 2012
OCTOBER 10, 2012
Akil Kureshi, J
Heard learned counsel for the parties for final disposal of the petition.
2. The petitioner has challenged an order dated 9.1.2012 passed by the Commissioner of Income-tax under section 264 of the Income-tax Act, 1961 (“the Act” for short). Brief facts are as follows :
2.1 The petitioner assessee for the assessment year 2003-2004 by filing the return of income declared loss of Rs. 93,33,000/-. The Assessing Officer framed a scrutiny assessment under section 143(3) of the Act on 18.1.2006 disallowing the reduction of Rs. 1,08,16,965/-. He also initiated penalty proceedings under section 271(1)(c) of the Act. He eventually passed an order imposing penalty of Rs. 1,19,25,702/-. The petitioner challenged the said order of penalty before the Commissioner by filing revision application under section 264 of the Act. After condoning delay caused in filing such revision application, the proceedings were taken up by the Commissioner for hearing. Before the Commissioner the petitioner had pointed out the quantum additions on the basis of which the penalty was imposed were deleted. It had also come on record that against such appellate order the department’s appeal was also dismissed by the Income Tax Appellate Tribunal. Turning down such contentions of the assessee, the Commissioner rejected the revision petition on following grounds :
“(i) At the outset, it would be pertinent to point out that it is trite law that assessment proceedings and penalty proceedings are distinct in nature. It is seen from the records that the Hon’ble Gujarat High Court has admitted the quantum appeal of the Revenue in the case of the assessee vide Tax Appeal No.1547 of 2009 and 1548 of 2009 for A.Ys 2001-02 and 2002-03 respectively. All these appeals have been filed on the issue of substantial questions of law. The quantum issue has also not attained finality. It would be premature on my part to adjudicate in this regard. As such, the penalty levied u/s. 271(1)(c) of the I.T. Act, 1961 cannot be said to have been mitigated by the relief granted by the Hon’ble ITAT in appeal of the assessee for A.Y. 2003-04.
(ii) Secondly, it is evident from the preceding paragraphs that revision proceedings u/s. 264 of the IT Act, 1961 have been contemplated both in letter and spirit by the Legislature in its wisdom only to mitigate the situation faced by the assessee who is unable to approach the appellate authorities for relief. The present assessee is already exercising its legal rights before the concerned appellate authorities for relief. It cannot claim relief under the provisions of section 264 of the IT. Act, 1961 by a backdoor entry. In this regard, the application filed by the assessee u/s. 264 of the I.T. Act, 1961 is not tenable.”
3. From the impugned order of the Commissioner it can be seen that he rejected the revision petition on two grounds. Firstly, that the question of quantum additions has not achieved finality. Against the judgement of the Tribunal confirming deletion of such quantum additions, the Revenue has preferred further appeal before High Court and such appeal is pending. Second reason why the Commissioner was not inclined to entertain the revision petition was that according to him revision proceedings are contemplated only to mitigate the situation faced by the assessee who are unable to approach the appellate authority for relief. The Commissioner noted that the assessee had already exercised his right of appeal before the appellate authorities. He cannot claim relief under section 264 of the Act.
4. Both the reasons recorded by the Commissioner are not tenable. With respect to scope of revision petition under section 264 of the Act, we are of the opinion that the Commissioner was wholly misguided in his approach. Section 264 pertains to revisional powers of the Commissioner and provides that in the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee as he thinks fit. Under section 264 of course, subject to procedural requirements, only limitation on powers of the Commissioner are that the order that he may pass should be subject to the provisions of the Act and that such order in any case would not be prejudicial to the assessee. Barring these two limitations and of course the inherent nature of the revision being in discretionary character, we do not find any other limitation on the power of Commissioner. This aspect was examined by the Division Bench of this Court in case of C. Parikh & Co. v. CIT  122 ITR 610 making following observation :
“It is clear that under section 264, the Commissioner is empowered to exercise revisional powers in favour of the assessee. In exercise of this power, the Commissioner may, either of his own motion or on an application by the assessee, call for the record of any proceeding under the Act and pass such order thereon not being an order prejudicial to the assessee, as the thinks fit. Sub-sections (2) and (3) of section 264 provide for limitation of one year for the exercise of this revisional power, whether suo motu, or at the instance of the assessee. Power is also conferred on the Commissioner to condone delay in case he is satisfied that the assessee was prevented by sufficient cause from making the application within the prescribed period. Sub-section (4) provides that the Commissioner has no power to revise any order under s. 264(1) : (i) while an appeal against the order is pending before the AAC, and (ii) when the order has been subject to an appeal to the Income Tax Appellate Tribunal. Subject to the above limitation, the revisional powers conferred on the Commissioner under section 264 are very wide. He has the discretion to grant or refuse relief and the power to pass such order in revision as he may think fit. The discretion which the Commissioner has to exercise is undoubtedly to be exercised judicially and not arbitrarily according to his fancy. Therefore, subject to the limitation prescribed in s. 264, the Commissioner in exercise of his revisional power under the said section may pass such order as he thinks fit which is not prejudicial to the assessee. There is nothing in s. 264 which places any restriction on the Commissioner’s revisional power to give relief to the assessee in a case where the assessee detracts mistakes on account of which he was over-assessed after the assessment was completed. We do not read any such embargo in the Commissioner’s power as read by the Commissioner in the present case. It is open to the Commissioner to entertain even a new ground not urged before the lower authorities while exercising revisional powers. Therefore, though the petitioner had not raised the grounds regarding under-totalling of purchases before the ITO, it was within the power of the Commissioner to admit such a ground in revision. The Commissioner was also not right in holding that the over-assessment did not arise from the order of the assessment. Once the petitioner was able to satisfy that there was a mistake in totalling purchases and that there was under-totalling of purchases to the tune of Rs. 20,000, it is obvious that there was over-assessment. In other words, the assessment of the total income of the assessee is not correctly made in the assessment order and it has resulted in over-assessment. The Commissioner would not be acting de hors the I.T. Act, if he gives relief to the assessee in a case where it is proved to his satisfaction that there is over-assessment, whether such over-assessment is due to a mistake detected by the assessee after completion of assessment or otherwise. In our opinion, the Commissioner has misconstrued the words “subject to the provisions of this Act” in section 264(1) and read a restriction on his revisional power which does not exist. The Commissioner was, therefore, not right in holding that it was not open to him to give relief to the petitioner on account of the petitioner’s own mistake which it detected after the assessment was completed. Once it is found that there was a mistake in making an assessment, the Commissioner had power to correct it under section 264(1). In our opinion, therefore, the Commissioner was wrong in not giving relief to the petitioner in respect of over-assessment as a result of under-totalling of the purchases to the extent of Rs. 2 0,000.”
5. Above decision has been followed by this Court in later decisions in case of Ramdev Exports v. CIT  251 ITR 873 and in case of S.R. Koshti v. CIT  276 ITR 165 . Section 264 of the Act nowhere provides that an assessee can resort to such proceedings only when he is unable to approach the appellate authority. The fact that the assessee had preferred appeal against quantum additions would not therefore, take away his right to file revision application against the order of penalty. The scope of appeal under section 246A to the Commissioner of course, would be somewhat different from the nature of power that the Commissioner may exercise in the revisional jurisdiction under section 264 of the Act. For example, under section 246A of the Act read with section 251, the Commissioner may even enhance an assessment or penalty of course, after hearing the assessee which obviously cannot be done under section 264 of the Act, as is already noted here-in-above.
6. With respect to the Commissioner’s stand that deletion of quantum additions not having achieved finality, the revision should be dismissed, also we are not in agreement. The penalty was based on certain quantum additions. Such additions came to be deleted by the Commissioner(Appeals). Further appeal by Revenue before the Tribunal was rejected. When the Commissioner was deciding the revision petition of the assessee, what was prevailing was the order of the Tribunal. It may be that further appeal by the Revenue against such decision of the Tribunal was pending before High Court. Mere pendency of appeal before High Court or even admission would not annul the order of the Tribunal or even of course in absence of stay, keep it in abeyance. Therefore, if the Commissioner was inclined to decide the revision petition without awaiting for the High Court’s decision in appeal of the Revenue, he was duty-bound to apply the order of the Tribunal as it stood at that time. If he was of the opinion that because of pendency of the proceedings before the High Court, the revision should be kept pending, the same would stand on a different footing. In any case, if he did chose to decide the revision petition, he had no choice but to take into account the order of the Tribunal.
7. In the result, petition is allowed. Order of the Commissioner dated 9.1.2012 is set aside. The proceedings are, remanded to the Commissioner for fresh consideration.