2024 (1) TMI 1039 - HC - Income Tax

Commissioner must adopt liberal approach when condoning delay in Section 264 revision applications for substantial justice

Hindalco Industries Limited Versus Union of India, Principal Chief Commissioner of Income Tax, Mumbai

The Bombay HC held that the Commissioner should have condoned the delay in filing revision under Section 264 of the Income Tax Act, adopting a liberal ... Condonation of delay filling Revision u/s 264 - refund of the FBT return - HELD THAT:- On the issue of condonation of delay in an application filed under Section 264 of the Act, this court and many other courts have held that authorities should not take a pedantic approach but should be liberal. The courts have held that the words ‘sufficient cause' should be given a liberal construction so as to advance substantial justice when no negligence nor inaction nor want of bonafide is imputable to assessee. The courts have held that the principle of advancing substantial justice is of prime importance and while considering the question of condonation, the revisional authority is not all together excluded from considering the merits of the revision petition. It is also note worthy to mention that under Section 264 of the Act, the Commissioner is empowered either on his own motion or on an application made by assessee to call for the record of any proceedings under the Act and pass such order thereon not being an order prejudicial to assessee and this power has been conferred upon the Commissioner in order to enable him to give relief to the assessee in cases of overassessment. As observed by the Hon’ble Gujarat High Court in Digvijay Cement Co. Ltd. [1993 (9) TMI 23 - GUJARAT HIGH COURT] the power conferred on commissioner is wider in terms. The revisional power is coupled with a duty to exercise it in the interests of justice of the parties and the revisional authority must act according to the rules of reason and justice. Therefore, the commissioner having been conferred the power to condone the delay to do substantial justice to parties by disposing the matter on merits should have, considering the facts and circumstances of the case, in particular that it took a long time for the CIT(A) to dispose petitioner’s appeal, ought to have condoned the delay. Whether intimation under Section 143(1) of the Act is not an assessment order? - As decided in Smita Rohit Gupta [2023 (9) TMI 220 - BOMBAY HIGH COURT] provisions of Section 264 and the power available to the Commissioner to exercise under Section 264 wherein as 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. Powers conferred under Section 264 of the Act are very wide. Commissioner is bound to apply his mind to the question whether Petitioner's income was taxable and to what extent. Admittedly, amount payable under the IDS has been paid. Section 188 of the IDS provides that the amount of undisclosed income declared in accordance with 183 shall not be included in total income of the declarant for any assessment year for the Income-tax Act, if the declarant makes the payment of tax and surcharge referred to in Section 184 and the penalty referred to in Section 185, by the date specified under Sub-section 1 of Section 187. Petitioner having paid the tax and surcharge and the penalty with interest, amount of undisclosed income cannot be included in the income of the declarant/petitioner. Therefore, in our view, Commissioner should have exercised his power under Section 264 of the Act and decide the matter on merits. Thus Respondent no. 2 is directed to consider petitioner’s application under Section 264 of the Act on merits and pass order in accordance with law. Issues Involved:1. Condonation of delay in filing the application under Section 264 of the Income Tax Act, 1961.2. Whether intimation under Section 143(1) of the Act can be considered an assessment order.Summary:Issue 1: Condonation of Delay in Filing Application under Section 264 of the Income Tax Act, 1961The petitioner challenged an order dated 6th March 2019, which rejected their application under Section 264 of the Income Tax Act, 1961, on the grounds of substantial delay and that the intimation under Section 143(1) was not an assessment order. The petitioner argued that there was no delay since the appeal was only resolved by the Commissioner of Income Tax (Appeals) [CIT(A)] after several years. The petitioner relied on the principle that 'substantial justice' should prevail over technical considerations, citing the Supreme Court's judgment in Collector, Land Acquisition vs. Mst. Katiji (1987) 167 ITR 471(SC). The court noted that the power conferred on the Commissioner under Section 264 is intended to provide relief in cases of overassessment and should be exercised liberally to advance substantial justice. The judgment highlighted that the Commissioner should not adopt a pedantic approach but should consider genuine hardship and substantial justice, as supported by various precedents including Octra Health Private Limited vs. Additional Commissioner of Income Tax and Sitaldas K. Motwani v. Director General of Income-tax (International Taxation).The court concluded that the Commissioner should have considered the delay in the context of the lengthy appeal process and should have condoned the delay to ensure substantial justice.Issue 2: Whether Intimation under Section 143(1) is an Assessment OrderThe court referred to the judgment in Smita Rohit Gupta vs. Principal Commissioner of Income Tax-1, which clarified that the processing of returns under Section 143(1) does not constitute an assessment order. The court also cited Hindustan Diamond Company Pvt. Ltd. v. CIT, emphasizing that the power under Section 264 is wide and can correct errors even if the Assessing Officer's power to make adjustments under Section 143(1) is limited. The court noted that the Commissioner should have exercised his power under Section 264 to consider the merits of the petitioner's case, as the powers under Section 264 are broad and intended to correct errors and provide relief.Conclusion:The court allowed the petition, quashing the impugned order dated 6th March 2019, and directed the Commissioner to consider the petitioner's application under Section 264 on its merits. The Commissioner was instructed to pass a reasoned order by 31st May 2024, following a personal hearing with adequate notice.The judgment in Writ Petition No. 569 of 2023 was applied to Writ Petition No. 597 of 2023, disposing of both petitions with the same directions. The court clarified that it had not made any observations on the merits of the application under Section 264 of the Act.