The powers given to Commissioner of Income Tax under section 264 are very wide and he can revise any order including intimation under section 143(1)

Aafreen Fatima Fazal Abbas Sayed v. ACIT AND PCIT (Bombay High Court) WRIT PETITION (L) NO. 6096 OF 2021

Revision application under section 264 cannot be rejected without deciding the same on merits if the Assessee’s case does not fall in the exceptions provided under section 264(4) of the Act. The Principal Commissioner of Income Tax vide order dated 12.02.2021 dismissed the application filed by Petitioner on the ground that, the same was not maintainable on account of alternate effective remedy of appeal and that assessee had also not waived right of appeal before the Commissioner of Income Tax (Appeals) as per provisions of section 264 (4) of the Income Tax Act. What is relevant for our purposes is section 264 (4)(a) of the Income Tax Act. Under this section, the Principal Commissioner is mandated not to revise any order in two situations: first where an appeal that lies to the Commissioner (Appeals) but has not been made and the time within which such appeal may be made has not expired or second, where the assessee has not waived his right of appeal. Matter restored to file of Commissioner of Income Tax.

Facts of this case were similar to following order of Delhi High Court reported as Vijay Gupta v. CIT (2016) 386 ITR 643 (Del.). Part of this order is reproduced below :

Issue of maintainability of revision application against the order passed under section 143 (1) of the Income Tax Act – Assessee, in his return of income had erroneously offered to tax gains arising on sale of shares as short-term capital gains, instead of the same being offered as long-term capital gains exempt from tax, where Section 154 application of the assessee was refused to be accepted and when the assessee filed a revision application under section 264, the same was rejected on the ground that section 143(1) intimation was not an order and was not amenable to the revisionary jurisdiction under section 264. The Delhi High Court negatived these contentions of the Revenue. 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 assessees. 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.

Article 265 of the Constitution of India and section 114 of the State Constitution imposes an embargo on imposition and collection of tax if the same is without authority of law.  In the present case, as per the petitioner, in his return of income, he has erroneously offered to tax gains arising on sale of shares as short-term capital gains instead of same being long-term capital gains exempt from tax. Subsequently, the petitioner on 14.01.2011 filed the application under section 154 of the Act.

The Assessing Officer on 21.02.2011 partly rectified the intimation and computed the tax on capital gains at 1- per cent as against 30 per cent computed in the intimation issued under section 143(1) of the Act. The Assessing Officer, however, refused to accept the application under Section 154 filed by the petitioner. When the Assessing Officer could rectify the intimation on 21.02.2011, he could also consider the prayer of the petitioner made in the rectification application under section 154 of the Act, which was already pending before him on that date.

When the Commissioner was called upon to examine the revision application under section 264 of the Act, all the relevant material was already available on the record of the Assessing Officer, The Commissioner instead of merely examining whether the intimation was correct based on the material then available should have examined the material in the light of the Circular No.14(XL35) of 1955, dated April, 1955 and article 265 of the Constitution of India. The Commissioner has erred in not doing so and in failing to exercise the jurisdiction vested in him on mere technical grounds. In view of the above, the impugned order dated 20.11.2012 is set aside. The revision application under section 264 of the Act is restored to the file of the Commissioner. The Commissioner is directed to consider the same afresh on merits and dispose the same within a period of eight weeks from today. The writ petition is disposed of leaving the parties to bear their own costs.

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June 2021