Bombay High Court
Bahar Infocons Pvt. Ltd.-2019-2020 vs Principal Commissioner Of Income-Tax, ... on 23 September, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:14828-DB WP2658-24=WP2664-24-3444-24 F COPY.DOCX
pvr
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 2658 OF 2024
Bahar Infocons Pvt. Ltd. ...Petitioner
Versus
Principal Commissioner of Income Tax, Mumbai-2 & Ors. ...Respondents
And
WRIT PETITION NO. 2664 OF 2024
Bahar Infocons Pvt. Ltd. ...Petitioner
Versus
Principal Commissioner of Income Tax, Mumbai-2 & Ors. ...Respondents
And
WRIT PETITION NO. 3444 OF 2024
(NOT ON BOARD TAKEN ON BOARD)
Bahar Infocons Pvt. Ltd. ...Petitioner
Versus
Principal Commissioner of Income Tax, Mumbai-2 & Ors. ...Respondents
----
Dr. K. Shivaram, Senior Advocate i/b. Rahul Hakani, for the Petitioner.
Mr. N. C. Mohanty, for the Respondents.
_______________________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
DATED: 23 SEPTEMBER 2024
_______________________
JUDGMENT (Per G. S. Kulkarni, J.)
1. Rule, made returnable forthwith. Heard finally by consent of
the parties. These are three petitions filed by the petitioner/assessee,
assailing the orders passed by the Principal Commissioner of Income Tax
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under Section 264 of the Income Tax Act, 1961 (for short 'the Act'),
whereby the petitioners' revision applications filed against the intimation
under Section 143(1) of the Act for the Assessment Years 2019-20, 2020-
21 and 2021-22 are rejected. As the issues of law and fact are common
except for the amounts being different, the petitions are being disposed of
by this common judgment.
2. Writ Petition no.2664 of 2024 which is for the Assessment
year 2019-20 is argued as the lead matter, hence, we refer to the facts of the
said case.
3. The petitioner filed its return of income for the Assessment
year 2019- 20 declaring income of Rs.1,89,71,207/-. It is the petitioner's
case that the petitioner was making a provision for bonus, ex-gratia and
incentives (collectively referred as 'bonus') payable to employees, at the time
of preparation of the financial statements. It is stated that the actual
payment was dependent on various factors, and on an aggregate basis the
amount could be lower or equal to the provisions made. The petitioner
contends that in the previous year the petitioner Company had made
provision of Rs.1,30,00,000/- in the accounts for payment of bonus, and
factually paid bonus of Rs.1,18,62,953/- before the due date of filing return
of income, for the assessment year 2018-19, and thus disallowed excess
provision of Rs.11,37,047/- in the return of income for the assessment year
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2018-19 under Section 43B of the Act. The computation of income is
placed on record at Exhibit B.
4. It is contended that such excess provision of Rs. 11,37,047/-
made in the assessment year 2018-19 had been written back by crediting to
the salary account in the year under consideration, that is in the year
relevant to assessment year 2019-20. This position is pointed out to us from
the ledger account annexed at Exhibit C.
5. The petitioner, however, contends that while computing the
income for the assessment year 2019-20, inadvertently, the excess provision
of Rs 11,37,047/- was not reduced from the income which resulted in
double taxation of excess provision. The calculation of the said amount is as
under:
Provision made in Assessment Year 2018-19: Rs.1,30,00,000
Less: Paid before due date of filing of Return
of Income for Assessment Year 2018-19: Rs. 1,18,62,953
------------------
Excess provision disallowed in
Asst. Year 2018-19 Rs. 11,37,047/-
===========
6. It is thus stated that the excess provision of Rs.11,37,047/-
which was written back in Assessment Year 2019-20, and credited to salary
account, however was not adjusted, from the income returned.
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7. The petitioner's return of income for Assessment Year 2019-
2020 was processed by respondent No 2. An intimation under Section
143(1) was received by the petitioner on 4 December 2019, accepting the
returned income. It is the petitioner's case that while preparing the return
of income for Assessment Year 2022-2023, the petitioner realized the
inadvertent mistake of double taxation of excess provision for bonus in
Return of income for Assessment Years 2019-2020, 2020-2021 and 2021-
2022.
8. In the aforesaid circumstances, the petitioner filed an
application for revision under Section 264 against the intimation under
Section 143(1) dated 4 December 2019 on 7 November 2022 with a view
to reduce the excess provision of Rs 11,37,047/- from the returned income.
The petitioner also filed an application dated 17 February 2023 for
condonation of delay. In the said proceedings, the petitioner placed on
record a chart showing summary of bonus provisions written back relevant
to the Assessment Years along with an explanation in brief.
9. Respondent No.1 considered the petitioner's case, however, by
the impugned order dated 23 February 2024 by rejecting the petitioner's
application under Section 264 of the Act on the ground that the petitioner
should have filed a revised return of income. It is in these circumstances the
present petition has been filed praying for the following substantial reliefs:
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"(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari
or a Writ in the nature of Certiorari or any other appropriate writ,
order or direction under Article 226 of the Constitution of India
calling for the records of the Petitioner's case and after examining
the legality and validity thereof quash and set aside the impugned
order dated 23rd February, 2024 (Exhibit-A) passed by Respondent
No.1 and the order dated 4th December, 2019 (Exhibit-H) passed
by the Respondent No.2.
(b) that this Hon'ble Court may be pleased to issue a Writ of
Mandamus or a Writ in the nature of Mandamus or any other
appropriate writ, order or direction under Article 226 of the
Constitution of India ordering and directing the Respondent No.1
and/or Respondent No.2 to allow the reduction of excess provisions
of Rs. 11,37,047/- from the returned income."
10. We have heard Dr. K. Shivaram, learned Senior Counsel for
the petitioners and Mr. Mohanty, learned Counsel for the
respondents/revenue.
11. Mr. Shivaram would submit that the time limit to file revised
return of income under Section 139(5) had expired after which the
petitioner realized it's inadvertent mistake that while filing return of income
for the Assessment Year 2019-2020. He submits that the petitioner had no
option but to file revision under Section 264 of the Act for all the
assessment years in question, when there was certainly an error in the return
of income filed by the Assessee. He would submit that Section 264 of the
Act confers wide powers on the commissioner and they are meant to do
justice, with a view that no tax is paid / collected which is not in accordance
with law, being also the mandate of Article 265 of the Constitution of India.
It is his contention that this is a clear case wherein there was an inadvertent
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mistake of double taxation of excess provisions made qua the bonus, in the
return of income for the relevant assessment years, and which was required
to be reduced from the income, failing which it would result in a situation,
of an undue tax being deposited without there being any warrant in law. It is
his submission that it is in these peculiar circumstances and as the time limit
to file the revised return under Section 139(5) of the Act had expired, the
petitioner has no remedy but to file revision under Section 264 of the Act
which is the whole intent and purpose of the said provisions. In support of
his contentions Dr. K. Shivaram has relied on the decisions in
Selvamuthukumar vs. Commissioner of Income-tax & Anr.1; Hapag Lloyd
India Pvt. Ltd. vs. Principal Commissioner of income-tax and Anr. 2, and
Ena Chaudhuri vs. Assistant Commissioner of Income-tax 3.
12. On the other hand Mr. Mohanty in opposing the petitions
would submit that respondent No.1 has taken a correct view of the matter
and more particularly referring to the decision of the Supreme Court in
Goetze (India) Ltd. vs. Commissioner of Income-tax 4. He has also relied on
the decision of the Division Bench of the Andhra Pradesh High Court in
M.S. Raju vs. Deputy Commissioner of Income-tax5 in support of his
contentions.
(2017) 394 ITR 247 (Mad.)
(2022) 443 ITR 168 (Bom.)
(2023) 148 taxmann.com 100 (Calcutta)
(2006) 284 ITR 323 (SC)
(2008) 298 ITR 373 (AP)
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13. Having heard learned Counsel for the parties and having
perused the record, we are of the opinion that there is much substance in the
contentions as urged on behalf of the petitioners. Insofar as the revisional
powers are concerned, Section 264 interalia empowers the Commissioner,
either on his own motion or on an application made by the assessee, to call
for the record of any proceeding under the Act and pass such order thereon
not being an order prejudicial to the assessee. It is well settled that such
power is conferred on the Commissioner to enable him to give relief to an
assessee also in cases of over-assessment, however, such power is required to
be exercised by the Commissioner subject to the limitations prescribed in
the provision. This would include a situation that after an assessment is
completed, if an assessee detects mistakes on account of which he was over-
assessed, the revisional jurisdiction can be invoked by the assessee. Such
power is not confined merely to erroneous orders passed by the lower
authorities. In such context Dr Shiravaman's reliance on the decision of the
decision of the Division Bench of the Madras High Court in
Selvamuthukumar vs. Commissioner of Income-tax & Anr. (supra) is
apposite. The court in the context which are relevant to the present
proceedings made the following observations:-
"The power under section 264 of the Act extends to passing any
order as the Principal Commissioner or Commissioner may think fit
after making an inquiry and subject to the provisions of the Act,
either suo-moto or on an application by the assessee. Though the
remedies overlap, power under section 264 is significantly wider and
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the wisdom of choosing one over the other would really depend on
the facts and legal position of each case. The facts in the present case
are to the effect that the petition under section 264 was filed on
12.03.2009 once it became clear that the 144A directions issued in
the case of SASTRA were in fact being accepted and applied by the
Revenue in the re-assessments of the appellant dated 21.10.2008,
24.12.2008 and 14.12.2009 (AY 2003-04, 2004-05 and 2005-06),
by which time, limitation under Section 139(5) for filing a revised
return, being 31.3.2008, had lapsed. Suffice it to say that, on the facts
of this case, the remedy under section 264 is appropriate and ought to
have been exercised in favour of the appellant by the
Commissioner of Income tax."
14. The observations of the Division Bench of Calcutta High
Court in Ena Chaudhuri vs. Assistant Commissioner of Income-tax 6 on the
powers as conferred under section 264 of the Act are required to be noted,
which reads thus:
"
25. Even though the Statute prescribes a time limit for
getting the relief before the Assessing Officer by way of filing a
revised return, in my considered view, there is no embargo on the
Commissioner to exercise his power and grant the relief under
section 264 of the Income-tax Act. In other words, for granting the
relief to an assessee, which the Commissioner finds that the
Assessee is entitled to otherwise, no time restriction is provided
under section 264 of the Income-tax Act, if such revisional
jurisdiction is invoked by the assessee by making an application
under section 264 of the Income-tax Act. However, the
Commissioner is not entitled to revise any order under section 264
on his own motion, if the order has been made more than an year
previously. Thus, it is manifest that only suo-motu power of the
Commissioner under section 264 of the Income-tax Act, is
restricted against an order passed within one year, whereas no such
restriction is imposed on the Commissioner to exercise his power in
respect of an order, which has been passed more than on year, if
such revisional power is sought to be invoked at the instance of the
Assessee by making an application under section 264 of the IT Act.
26. Considering the facts and circumstances of the case as
appears from record, submission of the petitioner and ratio laid
down in the judgments cited, I am of the considered view that the
respondent Commissioner of Income Tax concerned in the facts
and circumstances of the case has committed error in law in
(2023) 148 taxmann.com 100 (Calcutta)
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dismissing the revision applications of the petitioner filed under
section 264 of The Income Tax Act, 1961, by refusing to consider
the claim of the petitioner on merit that the income in question was
exempted from tax and not liable to tax under The Income Tax Act,
1961, which according to the petitioner was included in her return
as taxable income due to bonafide mistake and which she could not
rectify by filing revised return since original return itself was
belatedly filed and petitioner had no other remedy except taking
recourse to filing of revision application under section 264 of The
Income Tax Act, 1961."
(emphasis supplied)
15. Considering the aforesaid position in law which we respectfully
endorse, in our opinion, in the present case the Commissioner was not correct in
rejecting the revision application filed by the petitioner on the ground that the
petitioner had not filed a revised return within the prescribed limitation.
16. In our opinion, Section 264 is a salutary provision which also
bridges the gap and / or removes vacuum to remedy a bona fide mistake and / or
for correction of an inadvertent situation, which may take place in the assessment
proceedings. By remedying such mistake by orders being passed under Section
264 of the Act, any illegality or injustice which would otherwise be caused to the
assessee can be corrected so as to maintain a lawful course of action being
followed in the course of assessment. The object of such provision also appears to
be that the law would not be oblivious to any bona fide human mistake which
may occur at the end of the assessee and which if otherwise permitted to remain,
may lead to injustice or the provisions of law being breached.
17. Now coming to the decision as cited by Mr Mohanty, w e are not
persuaded to accept that the decision in Goetze (India) Ltd. (supra) in the
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facts of the present case would at all be applicable. Such decision is not in
the context of the revisionary powers as conferred under the provisions of
section 264 of the Income Tax Act, but in the context of deduction claimed
by the assessee by a letter, after the return was filed, without filing of a
revised return. Also the decision as rendered by the Division Bench of the
Andhra Pradesh High Court in M.S. Raju (supra), would also not support
the respondent's case. In such case the the assessee had made payment of 30
lakhs as damages much after the assessment in question. No material was
placed to show that the audit report for the previous year had made any
reference to the subsequent event of payment of damages. However in the
subsequent assessment year the assessee did not claim any deduction of 30
lakhs. On such facts the assessee filed a revision requesting the
Commissioner to direct the assessing officer to allow a deduction of 30
lakhs paid by the assessee as damages. The Commissioner rejected the
request holding that the assessment for the relevant year made no reference
to any claim for deduction of the said amount in the profit and loss account.
In such circumstances, the Court in the facts of the case held that since the
"record" under the provisions of section 264(1) is only the record of the
proceedings before the assessing authority and as assessee did not claim any
such deduction in the return of income filed by him before the assessing
authority, he was not entitled to raise such question for the first time in
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revision proceedings under Section 264(1). Thus, not only the facts of the
case are quite distinct but also even otherwise on the position in law the
decision is not applicable to the case in hand.
18. In the light of the aforesaid discussion, in our opinion, the
Commissioner has certainly erred in law in rejecting the revision application
filed by the petitioner merely on the ground that the petitioner had not filed
a revised return. The petition needs to succeed. It is accordingly allowed in
terms of prayer clause (a).
19. The revision proceedings are accordingly restored to the file of
Respondent No.1 for appropriate orders to be passed under the provisions
of Section 264 of the Act, in the light of the above observations on the
merits of the adjustment as claimed by the petitioner.
Writ Petition No.2658 of 2024 and Writ Petition No.3444 of
20. These petitions also raise similar issues as noted hereinabove
which are for the Assessment Years 2020-21 and 2021-22. In view of the
reasons as contained in the our aforesaid judgment, these writ petitions are
also required to be allowed in terms of prayer clause (a) of each of these
petitions which read thus:
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"(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari
or a Writ in the nature of Certiorari or any other appropriate writ,
order or direction under Article 226 of the Constitution of India
calling for the records of the Petitioner's case and after examining
the legality and validity thereof quash and set aside the impugned
order dated 26th February, 2024 (Exhibit-A) passed by Respondent
No.1 and the order dated 30/6/2022 (Exhibit-H) passed by the
Respondent No.2."
"(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari
or a Writ in the nature of Certiorari or any other appropriate writ,
order or direction under Article 226 of the Constitution of India
calling for the records of the Petitioner's case and after examining
the legality and validity thereof quash and set aside the impugned
order dated 26th February, 2024 (Exhibit-A) passed by Respondent
No.1 and the order dated 22 nd December 2021 (Exhibit-H) passed
by the Respondent No.2."
21. The revision proceedings are accordingly restored to the file of
Respondent No.1 for appropriate orders to be passed under the provisions of
Section 264 of the Act in the light of the above observations, on the merits of
the adjustment as claimed by the petitioner.
22. Disposed of in the above terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
Designation: PS To Honourable Judge Sepeember 2024
Date: 27/09/2024 18:33:18
