Diwaker Tripathi Vs PCIT-17 & Ors. (Bombay High Court)
Summary: The Bombay High Court considered a writ petition arising from an incorrect return filed by the petitioner for Assessment Year 2013-2014. The petitioner had filed his return on 28th March 2015 declaring total income of Rs.12,48,160/-. While filing the ITR, he mistakenly treated the assessment year as the financial year and consequently entered details relating to Assessment Year 2014-2015 in the return for Assessment Year 2013-2014.
The return was processed and an intimation under Section 143(1) of the Income-tax Act, 1961 was issued on 17th October 2015, raising a demand of Rs.3,06,080/-. During processing, the legitimate tax credit relating to tax deducted by one of the petitioner’s two employers was not granted, while credit for tax deducted by the employer for Assessment Year 2013-2014 was correctly granted despite the petitioner not having claimed it in his return. The petitioner subsequently filed his return for Assessment Year 2014-2015 showing the correct income.
The petitioner thereafter invoked Section 264. The Court noted that, before the Finance Act, 2016, Section 139(4) permitted a belated return to be furnished within the prescribed period, whereas Section 139(5) permitted a revised return where the original return had been furnished under Section 139(1) or pursuant to notice under Section 142(1). Since the petitioner had filed the relevant return under Section 139(4), he had no option of filing a revised return under the then applicable Section 139(5) and therefore resorted to revision under Section 264.
The Section 264 application was rejected on 27th March 2017 on the ground that an intimation under Section 143(1) was not an order and therefore was not amenable to revision under Section 264. The petitioner then sought rectification under Section 154, but that application was rejected on 21st September 2021. The writ petition challenged both orders as well as the consequential Section 143(1) intimation.
The High Court noted that, in the subsequent Section 154 order, respondent no.1 accepted that, having regard to the law laid down by the jurisdictional High Court, an intimation under Section 143(1) was an order subject to revision under Section 264 and proceeded to consider the matter on merits. The authority nevertheless rejected the revision application on the ground that the petitioner sought changes in the figures originally entered in the verified ITR, including gross total income and its break-up, deductions and tax credits, and that determining total income involved scrutiny which could not merely be substituted by accepting the revised figures.
The Court referred to the Delhi High Court decision in Vijay Gupta V/s. Commissioner of Income Tax, Delhi – III, reported as (2016) 68 taxmann.com 131 (Delhi), which held that the powers under Section 264 are very wide and can extend to errors committed by assessees themselves, including cases where a legitimate claim was omitted at the time of filing the return and was subsequently raised for the first time in a Section 264 application.
The Bombay High Court held that the Commissioner was duty bound to apply his mind to the petitioner’s application. Section 264 empowers the revisional authority to call for the record, make an inquiry or cause an inquiry to be made and pass such order as he thinks fit. Therefore, if a detailed inquiry was considered necessary, the Commissioner could have caused the Assessing Officer to conduct the inquiry and submit a report.
On the facts, the Court found that the mistakes in the return were rather obviously not deliberate and were not an attempt to obtain an unfair advantage or evade tax. It therefore quashed and set aside the order dated 27th March 2017 under Section 264, the order dated 21st September 2021 under Section 154 and the intimation dated 17th October 2015 under Section 143(1). The matter was remanded for de novo consideration by respondent no.1 on the merits of the petitioner’s Section 264 application.
The Court further permitted respondent no.1 to make any inquiry considered necessary or cause an inquiry to be made by the Assessing Officer, with the petitioner being liable to be called for clarification or explanation. The final order was required to be a reasoned order dealing with every submission of the petitioner, after giving him a personal hearing with at least five working days’ advance notice. The order was directed to be passed by 31st December 2023.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Petitioner is impugning an order dated 27th March 2017 passed under Section 264 of the Income Tax Act, 1961 (the Act) read with order dated 21st September 2021 under Section 154 of the Act and intimation dated 17th October 2015 issued under Section 143(1) of the Act.
2. Petitioner, an individual, filed return of income for Assessment Year 2013-2014 on 28th March 2015 declaring total income of Rs.12,48,160/-. While filing the ITR form, petitioner mistook the assessment year to be financial year and all the details of income for Assessment Year 2014-2015 were filled in the return of income for Assessment Year 2013-2014.
3. Respondent no.3 then issued intimation under Section 143(1) of the Act on 17th October 2015 raising a demand for tax payable for Rs.3,06,080/- after processing the return of income accepting the incorrect details declared by petitioner. In the course of processing, respondent no.3 did not grant credit of petitioner’s legitimate tax credit in respect of tax deducted by one of its two employers and respondent no.3 correctly granted credit of the tax deducted at source by the employer for Assessment Year 2013-2014 though not claimed by petitioner in his return. Petitioner then filed his return of income for Assessment Year 2014-2015 showing the correct income.
4. In view of the above, petitioner filed an application under Section 264 of the Act. Petitioner had, for Assessment Year 2013-2014, not filed return of income under Section 139(1) of the Act but filed under Section 139(4) of the Act. Prior to the Finance Act, 2016, sub-section 4 of Section 139 provided that any person who has not furnished a return within the time allowed to him under sub-section 1, or within the time allowed under a notice issued under sub-section 1 of Section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Sub-section 5 of Section 139, prior to the Finance Act, 2016, provided that if any person, having furnished a return under sub-section 1, or in pursuance of a notice issued under sub- section 1 of Section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Since sub-section 5 of Section 139 only provided for filing of revised return when a return has been filed under sub-section 1 of Section 139 and petitioner having filed his return under sub-section 4 of Section 139, petitioner had no choice but to file the application for revision under Section 264 of the Act. This application of petitioner came to be rejected by an order dated 27th March 2017. It came to be rejected only on the ground that intimation under Section 143(1) is not an order and, therefore, prayer made by petitioner in the petition cannot be accepted as revision application under Section 264 was not applicable. Thereafter, petitioner filed an application under Section 154 of the Act to rectify this order dated 27th March 2017 passed in the application under Section 264 of the Act. That application of petitioner came to be rejected by an order dated 21st September 2021. Petitioner has, therefore, impugned in this petition both the order dated 27th March 2017 passed under Section 264 of the Act and order dated 21st September 2021 passed under Section 154 of the Act and the consequent communication dated 17th October 2015.
5. In the order dated 21st September 2021 respondent no.1 admits that he had power to entertain the application under Section 264 of the Act by accepting that intimation under Section 143(1) of the Act was an order subject to revision under Section 264. In paragraph 5 of the order dated 21st September 2021 respondent no.1 says as under:
5. ………… However, as the Law laid down by the Jurisdictional High Court is required to be respectfully followed, therefore, contingent on the final position of law on this matter, it is held that intimation u/s 143(1) is an order subject to revision u/s 264 and to that extent undersigned is considering the case on merits.
6. Respondent no.1, however, rejected petitioner’s application on merits because according to him, the assessee had sought a revision on some fact which was indisputably apparent from record. He also accepts that the assessee is claiming change in all the figures duly filled in by him in his verified ITR and since the change was not only to the figures of deduction and tax credits but also his gross total income and its break up under various heads of income, the sanctity of ITR will get disturbed and hence, the new revised figures cannot be considered. According to respondent no.1, income of an assessee is dependent on the sources he has, head under which it is assessed, special rate, applicable if any, etc. Determination of income of any assessee is an exercise which involves deep scrutiny and cannot be merely substituted by acceptance of the income figure claimed by the assessee. Respondent no.1 says determination of total income of the assessee cannot be the mandate of Section 264.
7. The Delhi High Court in Vijay Gupta V/s. Commissioner of Income Tax, Delhi – III1 has, in paragraph 35, held as under:
35. From the various judicial pronouncements, it is settled that the powers conferred under section 264 of the Act are very wide. The Commissioner is bound to apply his mind to the question whether the petitioner was taxable on that income. Since section 264 uses the expression “any order”, it would imply that the section does not limit the power to correct errors committed by the subordinate authorities but could even be exercised where errors are committed by assesses. It would even cover situations where the assessee because of an error has not put forth a legitimate claim at the time of filing the return and the error is subsequently discovered and is raised for the first time in an application under Section 264.
8. Therefore, as the power conferred under Section 264 of the Act is very wide, in our view, the Commissioner is duty bound to apply his mind to the application filed by the assessee and pass such order thereon. Section 264 of the Act also empowers respondent no.1 to call for the record of any proceedings under the Act in which any order has been passed and make such inquiry or cause such inquiry to be made and pass such order as he thinks fit. Therefore, if respondent no.1 feels that detailed inquiry is necessary and he will be hard pressed for time, he may cause such inquiry made by the Assessing Officer and direct the Assessing Officer to file a report.
9. In the present case, as per petitioner in his return of income he has made mistakes as noted earlier in this order. Looking at the mistake, it is rather obvious that it was not a deliberate mistake or an attempt to gain some unfair advantage or to evade any tax. 10 In the circumstances, we quash and set aside the order dated 27th March 2017 passed under Section 264 of the Act, order dated 21st September 2021 under Section 154 of the Act and intimation dated 17th October 2015 issued under Section 143(1) of the Act and remand the matter for denovo consideration to respondent no.1 to dispose petitioner’s application under Section 264 of the Act on merits.
10. It is open to respondent no.1 to make any inquiry as he deems fit or cause any inquiry to be made by the Assessing Officer and during the course of inquiry, petitioner may be called for clarification/explanation. The final order to be passed by respondent no.1 shall be a reasoned order dealing with every submission of petitioner. Before passing any order, respondent no.1 shall give personal hearing to petitioner, notice whereof shall be communicated atleast five working days in advance. The order to be passed by 31st December 2023.
11. Petition disposed.
1 (2016) 68 taxmann.com 131 (Delhi)
