DCIT Vs Om Siddhakala Associates (Supreme Court of India)
The respondent-assessee challenged before the Bombay High Court an order dated 28 March 2023 rejecting its application under Section 264 of the Income Tax Act, 1961. The application concerned the assessee’s contention regarding the tolerance limit between declared sales consideration and stamp duty valuation under Section 43CA. Respondent No. 3 had rejected the claim, observing that the 5% tolerance limit introduced by the Finance Act, 2018 with effect from 1 April 2019, and subsequently enhanced to 10% by the Finance Act, 2020 with effect from 1 April 2021, operated prospectively.
Before the High Court, reliance was placed on an ITAT, Pune order. Referring to Union of India and Others v. Kamlakshi Finance Corporation Ltd., the High Court held that Revenue authorities were required to follow binding decisions of higher appellate authorities. It therefore quashed the order dated 28 March 2023 and remanded the matter to Respondent No. 3 for de-novo consideration in accordance with the law laid down by the ITAT, with directions for personal hearing and a reasoned order.
The Department challenged the High Court’s remand before the Supreme Court. The Department submitted that the demand was based on the returns filed by the assessee and that the claim could not be raised under Section 264 without first filing a revised return. The assessee submitted that the High Court had merely remanded the matter and that all contentions could be raised before the appropriate authority.
