Gujarat High Court
Shri Gujarat Bhavsar Samaj vs The Commissioner Of Income Tax ... on 15 October, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 26208 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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SHRI GUJARAT BHAVSAR SAMAJ
Versus
THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) & ANR.
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Appearance:
MR JIMI S PATEL(10578) for the Petitioner(s) No. 1
MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1
NOTICE SERVED for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 15/10/2024
ORAL JUDGMENT
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1. Heard learned advocate Mr. Jimi S. Patel for the petitioner and learned Senior Standing Counsel Ms. Maithili Mehta for the respondent.
2. Rule returnable forthwith. Learned Senior Standing Counsel Ms. Maithili Mehta waives service of notice of rule on behalf of the respondent State.
3. Having regard to the controversy involved which is in a narrow compass, with the consent of learned advocates for the respective parties, the petition is taken up for hearing today.
4. By this petition under Article 227 of Page 2 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined the Constitution of India, the petitioner has challenged the legality and validity of the order dated 22.03.2019 passed by the respondent Commissioner of Income Tax (Exemption) under section 264 of the Income Tax Act, 1961 (For short "the Act") as well as order/communication dated 29.03.2017 issued under section 154 of the Act.
5. Brief facts of the case are that the the petitioner is a charitable trust registered with Charity Commissioner, Ahmedabad having Registration No. F-227 dated 19.08.1964. Subsequently, the trust was granted registration under section 12AA of the Act on 06.01.1975 and allotted registration no.64G.71/74. The said trust is running students hostel in Ahmedabad Page 3 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined and Dharmashala in Ambaji.
6. The petitioner filed its return of income for the Assessment Year 2014-2015 on 20.09.2014 by claiming application of income of Rs. 16,09,553/- on Gross Total Income of Rs.21,88,443/-. After claiming aforesaid application of income, tax payable was arrived at Rs.5214/- which was adjusted against Tax Deducted at Source of Rs. 45,604/- and accordingly, refund of Rs.40,360/- was due to the petitioner at time of filing of original return as per the acknowledgement of income generated from the portal of Income Tax Department. Books of Accounts of petitioner is also audited under the Bombay Public Trust Act, 1950 and Income Tax Act under section 12A(b) in FORM No.10B by the independent Chartered Accountant. It is the case of Page 4 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined the petitioner that on perusal of audit report in FORM 10B, it can be seen that auditor has certified that amount of Rs.16,09,553/- was applied by the petitioner trust during the year under consideration.
7. Thereafter, return of income filed by the petitioner was processed under section 143(1) of the Act by Centralized Processing Center of the Income Tax Department vide intimation/order dated. 18.11.2016. In said Intimation/Order passed under section 143(1), demand of Rs.4,80,470/- was generated by the CPC as against refund of Rs.40,390/- claimed by the petitioner. It is the case of the petitioner that on receipt of aforesaid intimation, the petitioner came to know that while uploading income tax return in Page 5 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined XML utility, due to unknown technical glitch, amount feeded in the column of application of income at column 9(ii) of Rs. 16,09,553/- was not fetched in final return uploaded in XML Utility and hence, against the column 9(ii), the amount of application was shown as NIL and return was uploaded/filed as if the petitioner has not applied any income during the year under consideration towards the object of Trust. It is the case of the petitioner that the petitioner and his consultant failed to took note of said error at time of generation of acknowledgement of original income tax return due to the fact that in the Acknowledgement of Original Income Tax Return, amount shown as Refund due of Rs. 40,390/- and not tax payable of Rs.4,80,470/-.
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8. It is the case of the petitioner that on realisation of aforesaid mistake, the petitioner has filed rectified return through Return Data Correction Facility available on portal vide rectification request dated 01.02.2017. The aforesaid rectification request was rejected by the CPC vide order passed under section 154 dated.29.03.2017 stating that "Fresh claim of Exemption/Income or other details in the return shall not be made in rectification request."
9. Being aggrieved by the said rejection of rectification request, the petitioner has preferred revision application under section 264 before respondent No.1 vide application dated 15.11.2017 which was submitted on 16.11.2017. In application, the respondent No.1 was appraised about Page 7 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined the genuine bonafide technical error occurred while uploading return in XML utility on the Income Tax Portal. The petitioner also annexed original return, rectified return and audit report in Form No.10B to establish its bona fide that audit that audit report, which was obtained on 08.09.2014 i.e before filing of original return on 20.09.2014, had clearly mentioned that petitioner has applied amount of Rs.16,09,553/- in the year under consideration and hence, there is no occasion not to claim application of Rs. 16,09,553/-.
10. Respondent No.1 dismissed the revision application preferred under section 264 of the Act by order dated 22.03.2019.
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11. Thereafter, the petitioner received certain recovery notices under section 226 of the Act. Subsequently, the petitioner came to know that it is unable to operate his Savings bank account bearing no.72500100003623 maintained with Bank of Baroda, Nava Vadaj Branch and hence, the petitioner addressed letter dated 13.12.2022 to Branch Manager of the bank asking him to provide the reasons and supporting evidences to freeze the bank account of the petitioner. It is the case of the petitioner that the petitioner had not received any reply from the bank in connection with the above letter till date.
12. Being aggrieved by the order passed under section 264 and notice under section 154 of the Act, the petitioner has Page 9 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined preferred the present petition.
13. Learned advocate Mr. Jimi Patel submitted that the petitioner had incurred expenditure of Rs.16,09,553/- being the income applied under section 11(1)(d) of the Act for the purpose of the objects of the trust during the year under consideration. However, the same was not reflected due to some technical glitch in the income tax form return in Form No. ITR-7 filed for the year under consideration which is evident from Column 9 at page 17 of the petition.
14. It was further submitted that the petitioner had obtained Form 10B as required as per Rule 17B under section 12A(b) of the Act which was uploaded on 18.09.2014 prior to filing of return of Page 10 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined income on 20.09.2014. It was pointed out that inspite of such fact that the petitioner had applied the income for the purpose of charitable purpose as required under the provisions of the Act, the same was not given set off by the respondent while passing the order under section 154 of the Act and therefore, the petitioner preferred a revision application. However, the same was rejected on the ground that the petitioner ought to have filed appeal challenging the intimation under section 143(1) read with section 154 of the Act.
15. It was further pointed out that respondent has wrongly stated that the petitioner did not file Form 10B though it was uploaded by the petitioner prior to filing of the return of income. Page 11 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024
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16. It was further submitted that the petitioner being a charitable trust has been saddled with the tax though the petitioner is entitled to claim the benefit of provisions of sections 11 and 12 of the Act.
17. Reliance was placed on the decision of this Court in case of Shree Rudra Technocast Private Limited v. The Principal Commissioner of Income Tax, Rajkot (judgment dated 23.09.2024 passed in Special Civil Application No.8472 of 2022) as well as decision of Bombay High Court in case of Pramod R. Agrawal v. Principal Commissioner of Income Tax reported in (2023) 156 taxmann.com 126 (Bombay) to submit that the respondent ought to have entertained the revision application filed under section 264 of the Page 12 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined Act.
18. On the other hand, learned Senior Standing Counsel Ms. Maithili Mehta for the respondent placed reliance upon the following averments made in affidavit in reply filed on behalf of the respondent :
"7.1 say and submit that the assessee, petitioner herein, filed their Return of Income for AY 2014-15 on 20.09.2014. As per the said returns, a gross total income of Rs. 21,88,443/- was declared. The amount reflected in the column of 'application of income towards charitable purposes' was NIL. Hence, the total income as per Part B-Total Income' in the said returns was calculated at Rs. 18,60,180/-.
8. I say and submit that the said return was processed u/s 143(1) of the I.T. Act on 18.11.2016, wherein it was observed that the tax payable was wrongly calculated at Rs, 5214/. Hence, the assessing officer revised the amount of tax payable as Rs 4,80,870/- including Page 13 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined interest u/s 234B and 234C of the Act for late payment of tax which is calculated on the total income of Rs. 18,60,180/-, after setting aside 15% of the total income being Rs. 3,28,266 as per provisions of section 11(1)(a) and 11(1)(b). For the purpose of clarity, the calculation of total taxable income is as below:
Gross total income(GTI): 21,88,443 Income applied(charitable purpose 0 Exemption of 15% of GTI (3,28,266) [as per section 11(1)(a) & 11(1)(b)] ___________ Total Income for tax calculation: 18,60,180 Net Tax Payable on 4,80,870 total income: (including interest after allowing credit for prepaid taxes)
9. I say and submit that on 01.02.2017, the assessee filed a rectified return to CPC, Bangalore, claiming exemption of income of Rs. 16,09,553/ under the head of income applied for charitable purpose. The assessee contends that the said income was erroneously omitted and was not reflected in the income tax returns due to a technical error in transferring the data into the XML file. It is pertinent to note Page 14 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined that the said rectified return was filed after a lapse of 2.5 years from the date of filing the return of income. The rectified return stood rejected by the CPC vide order u/s 154 dated 29.03.2017 on the ground that a fresh claim cannot be made in a rectified return.
10. I say and submit that on 16.11.2017, the assessee preferred a Revision petition before the CIT(E). The assessee was given various opportunity of being heard, before the CIT(E), wherein the assessee did not remain present nor did they submit any necessary documents. Then, on 12.03.2019, an authorized representative of the assessee appeared before the CIT(E). He exclusively relied on the Revision application filed by the assessee and failed to adduce any additional evidence proving their contention of occurrence of technical error caused. Further, the ITR-V generated and furnished by them portrayed total income computed to Rs. 18,60,180/ without including the income applied for charitable purposes, which was not sufficient evidence to prove their contention that the amount of Rs.
16,09,553/- in the column of application of income was erroneously omitted.
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11. The said application was hence, rejected by the CIT(E) vide order dated 22.03.2019 on the following grounds A. The assessee failed to challenge the Assessment proceedings u/s 143(1) and rectification order u/s 154 before the appellate authority.
B. A revision application was filed after the lapse of time frame i.e. one year from the date on which the assessee came to know of the same, and no reasonable explanation was provided for delay caused in filing the revision application u/s 264.
C. There was lack of evidence to prove the omission of 'income applied' by the assessee due to technical error.
D. There was no evidence to prove that Form 10B was filed manually in due date.
The CIT(E) further stated that the remedy of revision lies in narrow compass and the said remedy cannot be treated as a regular appellate remedy.
12. I further say and submit that the assessee failed to comply with Page 16 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined the statutory provisions of filing of Form 10B which was not filed within the due date. The assessee claims to have filed the said form manually but there are no evidences proving the same. It was filed online on 18.09.2019 which was after a considerable period from the due date and after the passing of order u/s 264 of the Act by the CIT(E), Ahmedabad.
13. I say and submit that after the said application, the Department issued various demand notices to the assessee requesting payment of the outstanding dues, however, the assessee failed to pay the said outstanding tax dues to the Department or reply to the notices issued."
19. Referring to the above averments, it was submitted that the respondent has rightly rejected the revision application filed by the petitioner as stated in para 6 of the impugned order.
20. Having considered the submissions made by the learned advocates for both the Page 17 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined parties, it is not in dispute that the petitioner has incurred expenditure amounting to Rs.16,09,553/- for the year under consideration which was towards the application of income as required under section 11(1)(d) of the Act. From the computation of total income as well as Form No.10B issued by the Chartered Accountant, it is evident that the amount of income applied is clearly shown as Rs. 16,09,553/- however, same is not reflected in Form ITR-7 uploaded by the petitioner copy of which is placed on record at page
- 17 of the petition wherein in column no.9 clearly shows Nil amount with regard to the application of income for charitable or religious purpose. In such circumstances, when the petitioner has incurred the expenditure and applied Page 18 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined income/donation received by it for the charitable purpose, the petitioner is entitled to benefit of the same and the respondent ought to have taken into consideration this fact while deciding the revision application under section 264 of the Act.
21. This Court in case of Shree Rudra Technocast Private Limited (supra) in similar facts has held as under wherein decision of Hon'ble Bombay High Court is considered:
"8. Having heard the learned advocates for the respective parties and considering the facts of the case, it is a trite law to the effect that Commissioner of Income-Tax is supposed to consider the merits of the case while entertaining the petition filed by the assessee under Section 264 of the Act. It is not in dispute that the assessee has availed the remedy of revision instead of filing of appeal as per his choice Page 19 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined of the assessee and the Commissioner was therefore, duty bound to consider such revision petition on merits.
9. The Hon'ble Bombay High Court in case of Pamod R.Agrawal (supra) has considered the scope of powers under Section 264 of the Act as under:
"11. The other submission of Mr. Suresh Kumar also cannot be accepted in view of the wide powers conferred on respondent No. 1 under section 264 of the Act. As held by this court in Smita Rohit Gupta (supra), section 264 confers wide jurisdiction on the Commissioner. The proceedings under section 264 of the Act are intended to meet a situation faced by an aggrieved assessee, who is unable to approach the Appellate Authorities for relief and has no other alternate remedy available under the Act. The Commissioner is bound to apply his mind to the question whether petitioner was taxable on that income and his powers are not limited to correct the error committed by the subordinate authorities but could even be exercised where errors are committed by assessee. It would even cover situation where assessee because of an error has not put forth legitimate claim at the time of filing the return and Page 20 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined the error is subsequently discovered and is raised for the first time in an application under section 264 of the Act. Paragraphs 7 and 8 of Smita Rohit Gupta (supra), read as under:
"7. The provisions of section 264 and the power available to the Commissioner to exercise under section 264 of the Act came up for consideration before the Division Bench of this Court in Hindustan Diamond Company Pvt. Ltd. v. CIT
2. The Division Bench was pleased to observe that exercise of power under section 264 was not subject to the power of the Assessing Officer to make adjustment under section 143(1) of the Act. The Court held that power of the Commissioner under section 264 is rather wide and even the errors committed could be rectified. Paragraph 6 of the Hindustan Diamond Company (P.) Ltd. (supra), reads as under:
"6. Having heard the Counsel on both sides, we are of the opinion that the Commissioner was not justified in rejecting the revision application of assessee. As rightly contended by Mr. Inamdar, section 264 confers wide jurisdiction on the Commissioner. Proceedings under section 264 are intended to meet the situation faced by an aggrieved assessee who Page 21 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined is unable to approach the appellate authority for relief and has no other alternate remedy available under the Act. In the light of the decision of the Apex Court in the case of Bharat Earth Movers (supra), the provision for Leave Encashment being a current liability assessee is entitled for deduction of that amount. The Assessing Officer had accepted the return, ignoring the request of assessee for deduction of the above amount. Therefore, the relief which was not granted by the Assessing Officer could be granted by the Commissioner under section 264. Before allowing such deduction if any further enquiry was required to be done, the Commissioner could have either himself enquired or directed the Assessing Officer to do the needful. However, the Commissioner has declined to exercise power under section 264 because of amendment to section 143(1) by Finance Act, 1999. Powers of the Assessing Officer to make prima facie adjustments under section 143(1), done away with by Finance Act, 1999 (with effect from 1st June, 1999) does not in any way effect the right of the Commissioner under section 265 of the Act to grant relief to assessee if available to assessee as per the decision of the Apex Page 22 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined Court. Exercise of powers under section 264 is not subject to the power of the Assessing Officer to make adjustments under section 143(1) of the Income-tax Act. Therefore, relief can be granted to assessee under section 264 even if the power of adjustment under section 143(1) is taken away from the Assessing Officer."
(emphasis supplied)
8. Section 264 of the Act also came up for consideration before the Hon'ble Delhi High Court în Vijay Gupta v CIT Delhi-III 3 where paragraph 35 reads 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 assessees. It would even cover situations where assessee because of an error has not put forth a legitimate claim at the time of filing the return and the error is subsequently Page 23 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined discovered and is raised for the first time in an application under section 264. "
(emphasis supplied)
12. In Ms. Asmita A. Damale (supra), also the court held that the Commissioner while exercising revisionary powers under section 264 of the Act has to ensure that there is relief provided to assessee where the law permits the same. Paragraphs 3 and 4 read as under:
"3 In view thereof, assessee filed the application under section 154 for rectification of the assessment order. This application was rejected. Against that order, the petitioner filed a revision under section 264 of the Act to the Commissioner of Income-tax, for refund. The Commissioner of Income-tax, by the impugned order held that there was no mistake apparent from record. He held that the provisions of section 264 were not attracted.
4 There is no dispute regarding the petitioner's entitlement to the benefit. The only question is whether the petitioner is entitled to enforce that remedy in the manner in which she has done. In a similar matter, a Division Bench of this Court in the case of Devdas Rama Mangalore v. The Commissioner of Income-tax 26 in Page 24 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined writ petition No. 2422 of 2013 dated 15th January 2014, granted complete relief, including an order of refund. The only difference between this case and that case is that, in that case, the petitioner had made an application for condonation of delay under section 119 (2) (b) of the Income-tax Act, which was rejected, in view of the circular issued by the CBDT. In the case before us, the course adopted was under section 264 of the Act. In view of the judgment of the Division Bench of this Court in Hindustan Diamond Company (P.) Ltd v. Commissioner of Income-tax (2003) 175 Taxation 91(Bom). the course adopted by the petitioner in the facts and circumstances of the present case was valid."
13. In Selvamuthu Kumar (supra), paragraphs 6 to 11 and 13 read as under.
"6. The language of section 264 provides ample powers to the Commissioner of Income-tax to make or cause such inquiry to be made as he thinks fit in dealing with an application for Revision under section 264. This would include taking into consideration relevant material that would have a bearing on the issue for consideration, which, in this case, includes the order under section 144A of the Page 25 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined Act dated 31-12-2007.
7. Mr. Swaminathan would object on the ground that the inquiry contemplated under section 264 is restricted to the record of any proceeding under this Act and has, necessarily to refer to the specific assessee alone. He would also refer to section 263 dealing with revision of orders prejudicial to the revenue and to the explanation thereto wherein 'Record' is defined as being all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner. In the absence of such definition in section 264, he would urge that 'record' for the purpose of section 264 would be limited to such records as were available at the time of assessment. We are not impressed with the distinction. The necessity for the insertion of a definition of 'record' by the Finance Act 1988 has been explained in a Circular issued by the Central Board of Direct Taxes No. 528 dated 16-12-1998 to the following effect.
39.1 Under the existing provisions of section 263 of the Income-tax Act, the Commissioner of Income- tax is empowered to call for and examine the record of any Page 26 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined proceeding and if he considers that the order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of revenue, he may pass an order enhancing or modifying the assessment or cancelling the same with a direction to make it afresh. The provisions as presently worded have given rise to two areas of controversy. The first is relating to the interpretation of the word "record" and the second is regarding the issue relating to merger of the order of the Assessing Officer with the order of the appellate authority. Courts have held in some cases that the word 'record' occurring in section 263 could not mean the record as it stood at the time of examination by the CIT but the record as it stood at the time when the order was passed by the Assessing Officer. Limiting the power of the CIT only to the situation that was existing at the time of making the assessment is to make the provision too restrictive, as many times information comes on record from various sources which indicate that the order of the Assessing Officer is erroneous and prejudicial to the interests of revenue. The above interpretation of the term "record" by some court Page 27 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined besides being against the legislative intent also defeats the very objective sought to be achieved which is to revise the orders on the basis of records as is available to the CIT at the time of examination. With a view to clarifying the legislative intent of the term "record", a definition of the term "record"
has been inserted in the Explanation to subsection (1) of section 263 by the Finance Act to include all records relating to any proceedings under the Act available at the time of examination by the CIT. This has been carried out for removal of doubts."
(emphasis supplied)
8. Useful reference can also be made to a judgment of the Supreme Court in the case of Commissioner of Income-tax v. Sri. Manjunathesware Packing Products and Camphor Works (231 ITR 53), wherein the Supreme Court, while considering the import of the word 'record' in section 263 of the Act states as follows:-
'If the material, which was not available to the Income-tax Officer when he made the assessment could thus be taken into consideration by the CIT after holding an enquiry, there is no reason why the material which Page 28 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined had already come on record though subsequently to the making of the assessment cannot be taken into consideration by him.'
9. The view of the department as reflected in the above Circular is thus to the effect that what constitutes 'record' cannot be limited to the return of income or order of assessment, but should be extended to include information from other sources that would impact the issue in question.
10. Mr. Swaminathan would refer to the judgment of the Division Bench of the Andhra Pradesh High Court in M.S Raju v. Deputy Commissioner of Income-tax (298 ITR 373). which has expressed a view to the effect that the import of the word 'record' as set out in the Circular (supra), would be restricted to the power under section 263 only and not section
264. The distinction noted by the Division Bench in that case was that the power of revision under section 263 of the Act was intended to be exercised in cases where the interests of revenue were prejudiced and it was for this reason that the inquiry of the Commissioner of Income-tax was not limited only to material available before the Assessing Officer, but also material obtained subsequently. The power Page 29 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined under section 264 of the Act is, in fact as wide a power, and one that is intended to prevent miscarriage of justice. Courts have consistently taken a view that the conferment of powers under section 264 of the Act is to enable the Commissioner to provide relief to an assessee, where the law permits the same. Reference may be made to the decisions of the Gujarat High Court in C. Parikh and Co. v. Commissioner of Income-tax (122 ITR 610); Ramdev Exports v. Commissioner of Income- tax (251 ITR 873); Kerala High Court in Parekh Brothers v. Commissioner of Incometax and Calcutta High Court in Smt. Phool Lata Somani v. Commissioner of Income-tax (276 ITR 216). In this view of the matter, we see no reason to take a different view on the interpretation of the word 'record' occurring in section 264 of the Act from that expressed by the Central Board of Direct Taxes in the Circular extracted above. The order under section 144A dated 31-12-2007 is thus part of the record and ought to have been take into consideration in deciding the petition under section 264 of the Act.
11. In fact the objection raised by the Department is hypertechnical and runs counter to the stand taken by it in the Page 30 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined assessment of this appellant in the three earlier assessment orders. Thus even applying the principles of consistency the treatment accorded to an issue arising in a continuing transaction should be consistent for the entire period in question. 12 **
13. Mr. Swaminathan would submit that the appellant ought to have filed a revised return under section 139(5) since there was sufficient time available and not having done so, he cannot seek remedy under section 264 of the Act. He would urge that both reliefs cannot run concurrently and one can be availed of only when the other is exhausted as otherwise an assessee who misses the time limit for filing a revised return would take recourse to the provisions of section 264 and seek a revision."
14. At this stage, Mr. Suresh Kumar submitted that assessee should produce documents to prove his share of the indexed renovation expenses of Rs. 2,95,859/-. In our view, it is not required because in the assessment order dated 30th December 2010 passed under section 143(3) of the Act in the case of Ravi R Agarwal, the other co-owner of the flat, Page 31 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined the Assessing Officer has accepted the amount of Rs. 2,95,859/- as the cost of renovation of indexation. Therefore, this figure has to be accepted as correct and suitable allowance should be made while arriving at the long-term capital gain.
15. In the circumstances, we hereby quash and set aside the impugned order dated 22nd March 2017 and remand the matter to respondent No. 1 for de novo consideration. Before passing any order, personal hearing shall be given, notice whereof shall be given at least five working days in advance. The order to be passed shall be a reasoned order dealing with all submissions of assessee. The application under section 264 of the Act shall be disposed within 8 weeks from today. Mr. Gandhi assures the court that so long as five working days notice is given, petitioner shall not seek any adjournment on any ground."
10. We are in agreement with the aforesaid observations and findings given by the Hon'ble Bombay High Court and adopting the same, the impugned order dated 24.03.2021 passed by respondent No.1 under Section 264 as well as the order under Section 154 of the Act are hereby quashed and set Page 32 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined aside and the matter is remanded back to the Principal Commissioner
- Respondent No.1 to decide the revision petition filed by the petitioner under Section 264 on merits."
22. In view of above facts and settled legal position as stated here in above, petition deserves to be allowed and is accordingly allowed. Impugned order dated 22.03.2019 passed under section 264 of the Act is hereby quashed and set aside and the matter is remanded back to the respondent to pass a fresh de novo order under section 264 of the Act on merits while considering the fact which is not in dispute that due to technical glitch the income applied by the petitioner amounting to Rs.16,09,553/- is not reflected in return of income in Form ITR-7 and the same is required to be taken into Page 33 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024 NEUTRAL CITATION C/SCA/26208/2022 JUDGMENT DATED: 15/10/2024 undefined consideration while computing the income and the tax for the year under consideration. Such exercise shall be completed within 12 weeks from the date of receipt of a copy of this order.
23. Petition is disposed of. Rule is made absolute to the aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J) (D.N.RAY,J) RAGHUNATH R NAIR Page 34 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Tue Oct 29 2024 Downloaded on : Sat Nov 02 22:08:32 IST 2024