Case Law Details
Puneet Dhanda Vs PCIT (Delhi High Court)
Introduction: In a recent judgment, the Delhi High Court addressed a matter involving Assessment Year (AY) 2018-19, highlighting the significance of Section 264 of the Income Tax Act, 1961. The petitioner, an assessee, filed a writ petition challenging the order passed by the Principal Commissioner of Income Tax (PCIT) rejecting the petitioner’s application for revision under Section 264. The issue at the heart of this case was the correction of a deduction claim that the petitioner had inadvertently overlooked.
1. Application of Section 264: Section 264 of the Income Tax Act provides a provision for the revision of orders that are prejudicial to the interests of the assessee. This revisionary power allows for the correction of errors and adjustments to ensure that the tax assessment aligns with the taxpayer’s actual financial situation.
2. Overlooked Deduction Claim: In this case, the petitioner sought to invoke Section 264 to correct an error in the intimation issued to them under Section 143(1) of the Act. The error pertained to the claim of a loss amounting to Rs. 36,66,650 related to Future and Option contracts. The petitioner had carried on non-speculative business activities during the relevant period, resulting in this loss. However, the petitioner had inadvertently failed to claim the set-off of this loss against income from business and profession.
3. PCIT’s Rejection: The PCIT rejected the application under Section 264, arguing that the intimation issued under Section 143(1) was not prejudicial to the petitioner’s interest. Therefore, the PCIT believed he could not exercise revisionary power under Section 264.
4. Legal Precedent: The petitioner, represented by Mr. Krishanan S., relied on legal precedent, particularly the judgment in the case of Vijay Gupta vs. Commissioner of Income-Tax [2016] 386 ITR 643 (Delhi) and the Bombay High Court judgment in Aafreen Fatima Fazal Abbas Sayed vs. Assistant Commissioner of Income-Tax [2021] 434 ITR 504 (Bom.). These cases supported the petitioner’s position that Section 264 could be used to correct errors in situations where deductions were inadvertently not claimed.
5. The Court’s Decision: The Delhi High Court, in line with the legal precedent, concluded that the PCIT had erred in not exercising the revisionary power under Section 264. The court explained that the purpose of conferring such revisionary power was to ensure that taxpayers are not unfairly burdened due to inadvertent errors in claiming deductions that are within the framework of the Act.
6. Future Proceedings: As the petitioner had passed away during the course of the writ petition, necessary steps were taken to involve the legal heirs in the proceedings. The legal heirs would continue the application under Section 264 before the concerned tax authorities.
Conclusion: The Delhi High Court’s judgment in the case of Puneet Dhanda vs. PCIT underscores the importance of Section 264 for rectifying overlooked deduction claims. It reinforces the principle that the tax assessment should accurately reflect the taxpayer’s real financial situation, and revisionary powers can be used to correct errors that may have resulted from inadvertence or oversight. This case sets a precedent for similar situations where taxpayers seek to correct their tax assessments for genuine, permissible deductions that were inadvertently not claimed.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This writ petition concerns Assessment Year (AY) 2018-19.
2. The petitioner/assessee, via the instant writ petition, seeks to challenge the order dated 05.03.2021 passed by the Principal Commissioner of Income Tax [in short, “PCIT”].
3. Via the impugned order, the PCIT rejected the petitioner/assessee’s application preferred under Section 264 of the Income Tax Act, 1961 [in short, “Act”].
3.1 This application was filed by the petitioner/assessee to revise the intimation issued to him under Section 143(1) of the Act.
4. The petitioner/assessee sought to trigger the provisions of Section 264 of the Act for the purpose of enabling him to claim a loss amounting to Rs.36,66,650/- concerning Future and Option contracts, which according to him, resulted in a loss as he had carried on non-speculative business during the period in issue.
5. The petitioner claimed that he had overlooked the fact that he could set off this loss, against the income from business and profession.
6. PCIT, however, concluded that the power available to him under Section 264 enabled him only to revise those orders which are prejudicial to the interest of the petitioner/assessee. Taking this rationale further, PCIT also observed that since the intimation issued under Section 143(1) of the Act was not prejudicial to the interest of the assessee, he could not exercise his revisionary power under Section 264 of the Act.
7. Mr Krishanan S., who appears on behalf of the petitioner/assessee says that PCIT has committed an error in failing to exercise his revisionary power under the provisions of Section 264 of the Act. According to Mr Krishanan, a plain reading of the said provision would show that PCIT could exercise revisionary jurisdiction either himself or based on the application moved by the assessee [in this case, the petitioner] in any order, other than an order to which the provisions of Section 263 applied.
7.1 It is, therefore, Mr Krishanan’s submission that since the petitioner/assessee inadvertently did not claim set off concerning future and option losses, this was an error which the PCIT could have corrected under Section 264 of the Act.
7.2 In support of the above, submission, Mr Krishanan seeks to placereliance on the judgment of a coordinate Bench of this court rendered in Vijay Gupta vs. Commissioner of Income-Tax and Another [2016] 386 ITR 643 (Delhi) and the judgment of the Bombay High Court in Aafreen Fatima Fazal Abbas Sayed vs. Assistant Commissioner of Income-Tax and Another [2021] 434 ITR 504 (Bom.).
8. Mr Gaurav Gupta, learned senior standing counsel, who appears on behalf of the respondents/revenue, cannot but accept that the application needs to be re-examined on merits, given the position of law articulated by this court in Vijay Gupta case.
9. According to us, PCIT has committed a material irregularity in not exercising the jurisdiction conferred on him under Section 264 of the Act. As correctly submitted by Mr Krishanan, the PCIT was invested with the necessary revisionary powers to correct the intimation issued under Section 143(1) of the Act, even if the said intimation was a product of a mistake made by the assessee in not claiming set off concerning a loss which according to him, was available under the provisions of the Act.
10. The rationale behind conferring such revisionary power is that the revenue ultimately is entitled to assess the real income of an assessee; albeit as per the provisions of the Act.
11. Therefore, if a particular deduction is amenable within the periphery of the Act and inadvertently an assessee has not claimed the same, Section 264 can be triggered for making such correction.
12. At this stage, we are informed by Mr Krishanan that since the petitioner/assessee passed away during the pendency of the writ petition, necessary steps were taken for bringing the legal heirs of record. Similar steps will also be taken by Mr Krishanan to bring his legal heirs on record before the concerned statutory authorities.
13. Thus, for the foregoing reasons, we are inclined to set aside the impugned order.
14. PCIT will re-examine the application filed by the petitioner/assessee (which is now sought to be progressed by his legal heirs), and render a decision on it afresh.
15. The writ petition is disposed of, in the aforesaid terms.
