Commissioner cannot reject revision under Section 264 just for no revised return filing, must consider merits

The HC held that the Commissioner erred in rejecting the revision application under s 264 solely because the petitioner did not file a revised return. Section 264 empowers the Commissioner to correct over-assessment or bona fide mistakes even after assessment completion, not limited to errors by lower authorities. The court emphasized that s 264 serves to prevent injustice from inadvertent errors by the assessee. Prior decisions cited by the respondent were found inapplicable as they involved different factual and legal contexts. The HC allowed the petition, restored the revision proceedings to the Commissioner, and directed appropriate orders to be passed under s 264 considering the merits of the petitioner's claim.

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Issues Involved:
1. Rejection of revision applications under Section 264 of the Income Tax Act, 1961.
2. Double taxation of excess provision for bonuses.
3. Applicability of Section 264 for rectifying errors after the expiry of the time limit for filing a revised return under Section 139(5).

Detailed Analysis:

1. Rejection of Revision Applications under Section 264:
The petitioner filed three petitions challenging the Principal Commissioner of Income Tax's orders under Section 264 of the Income Tax Act, 1961, which rejected the petitioner's revision applications against the intimation under Section 143(1) for the Assessment Years 2019-20, 2020-21, and 2021-22. The petitions were disposed of by a common judgment as the issues of law and fact were common.

2. Double Taxation of Excess Provision for Bonuses:
The petitioner had made a provision for bonuses payable to employees in the financial statements. For the Assessment Year 2018-19, the petitioner made a provision of Rs. 1,30,00,000/- and paid Rs. 1,18,62,953/- before the due date of filing the return, disallowing the excess provision of Rs. 11,37,047/-. This excess provision was written back and credited to the salary account in the Assessment Year 2019-20. However, while computing the income for the Assessment Year 2019-20, the excess provision of Rs. 11,37,047/- was not reduced from the income, leading to double taxation.

3. Applicability of Section 264 for Rectifying Errors:
The petitioner realized the mistake of double taxation while preparing the return for the Assessment Year 2022-23 and filed an application for revision under Section 264 on 7 November 2022. The application was rejected by the Principal Commissioner on 23 February 2024, stating that the petitioner should have filed a revised return of income.

The petitioner argued that the time limit to file a revised return under Section 139(5) had expired, leaving no option but to file a revision under Section 264. The petitioner contended that Section 264 confers wide powers on the Commissioner to ensure no tax is paid or collected contrary to law, aligning with Article 265 of the Constitution of India.

Court's Observations and Judgment:
The court recognized the substance in the petitioner's contentions, emphasizing that Section 264 empowers the Commissioner to give relief in cases of over-assessment and rectify mistakes detected post-assessment. The court cited relevant case law, including Selvamuthukumar vs. Commissioner of Income-tax and Ena Chaudhuri vs. Assistant Commissioner of Income-tax, which supported the petitioner's position that Section 264 could be invoked to remedy bona fide mistakes.

The court distinguished the decision in Goetze (India) Ltd. vs. Commissioner of Income-tax, noting it was not applicable as it did not pertain to the revisionary powers under Section 264. Similarly, the decision in M.S. Raju vs. Deputy Commissioner of Income-tax was found inapplicable due to distinct facts.

The court concluded that the Commissioner erred in law by rejecting the revision application on the ground of not filing a revised return within the prescribed limitation. The petitions were allowed, and the revision proceedings were restored to the file of Respondent No. 1 for appropriate orders under Section 264, considering the merits of the adjustment claimed by the petitioner.

Conclusion:
The court allowed the petitions, setting aside the impugned orders and directing the Principal Commissioner to reconsider the revision applications under Section 264, thereby ensuring the correction of the inadvertent mistake of double taxation. The judgment underscores the broad remedial scope of Section 264 to address bona fide errors and uphold the principles of justice and lawful taxation.

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