High Court sets aside Section 264 orders for assessment years 2004-2007, directs reconsideration.

The High Court set aside the four orders passed under Section 264 by the Commissioner for the assessment years 2004-05 to 2007-08. The Court directed the Commissioner to reconsider the applications under Section 264 in accordance with the law and the observations made in the judgment. The writ petition was disposed of with no order as to costs.

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Issues:
Challenge to four orders under Section 264 of the Income Tax Act, 1961 for assessment years 2004-05 to 2007-08.

Detailed Analysis:

1. Treatment of CENVAT Credit and Depreciation:
The petitioner included CENVAT Credit in its profit and loss account and claimed depreciation based on the cost of plant and machinery inclusive of the CENVAT Credit for multiple assessment years. Upon realizing the mistake, the petitioner filed a revised return under Section 139(5) of the Act of 1961, which was accepted by the assessing officer. The assessing officer rectified the income by removing the CENVAT Credit from the income and adjusted the depreciation claim accordingly.

2. Rejection of Rectification Applications under Section 264:
The petitioner applied under Section 154 for rectification for the years 2004-05 to 2007-08. The Commissioner rejected the applications under Section 264 primarily on three grounds. Firstly, the Commissioner claimed that the petitioner did not apply for both reliefs, but the petitioner argued that the initial application contained prayers for both reliefs. Secondly, the Commissioner held that a petition under Section 264 is not maintainable against an order passed by the assessing officer, which was contested by the petitioner citing the provisions of Section 264. Lastly, the Commissioner raised the issue of limitation, suggesting that filing a rectification petition five years after the assessment order was an attempt to bypass the limitation period. However, the petitioner had applied within the prescribed time frame, and therefore, the limitation did not apply.

3. Court's Decision:
The High Court set aside the four orders passed under Section 264 by the Commissioner for the assessment years 2004-05 to 2007-08. The Court directed the Commissioner to reconsider the applications under Section 264 in accordance with the law and the observations made in the judgment. The writ petition was disposed of with no order as to costs.

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