Gujarat HC quashes orders under sections 154 and 264, directs fresh consideration of revision petition on merits

Gujarat HC quashed orders under sections 154 and 264, remanding the matter to Principal Commissioner. The court held that Commissioner must consider revision petitions on merits when assessee chooses revision over appeal. The opening balance addition under section 68 in best judgment assessment was deemed a mistake apparent on record. Commissioner failed to properly examine the section 144A order as part of the record while deciding the section 264 revision petition, requiring fresh consideration on merits.

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Issues Involved:
1. Validity of the order dated 24.03.2021 under Section 264 of the Income-Tax Act, 1961.
2. Validity of the order dated 22.12.2018 under Section 144 of the Income-Tax Act, 1961.
3. Validity of the order dated 12.08.2021 under Section 154 read with Section 264 of the Income-Tax Act, 1961.
4. Legitimacy of the addition of Rs. 80 lakhs under Section 68 of the Income-Tax Act, 1961.
5. Consideration of the petitioner's circumstances, including the illness and death of the main Director.

Issue-wise Detailed Analysis:

1. Validity of the order dated 24.03.2021 under Section 264 of the Income-Tax Act, 1961:
The petitioner challenged the order dated 24.03.2021, passed by respondent No. 1 under Section 264 of the Income-Tax Act, 1961. The petitioner argued that the Commissioner of Income-Tax failed to consider the merits of the case and the circumstances that prevented the petitioner from participating in the assessment proceedings. The court observed that the Commissioner is supposed to consider the merits while entertaining a petition under Section 264. The court referenced the wide powers conferred under Section 264, as highlighted in the case of Pramod R. Agrawal vs. Principal Commissioner of Income-tax.

2. Validity of the order dated 22.12.2018 under Section 144 of the Income-Tax Act, 1961:
The assessment order dated 22.12.2018 was passed under Section 144 of the Act, where the Assessing Officer made an addition of Rs. 80 lakhs based on the balance-sheet and profit and loss account filed by the petitioner. The petitioner contended that the addition was wrongful as the amount was carried forward from the previous year (A.Y. 2015-2016) and not received during the year under consideration. The court noted that the petitioner did not participate in the assessment proceedings due to the illness and subsequent death of the main Director.

3. Validity of the order dated 12.08.2021 under Section 154 read with Section 264 of the Income-Tax Act, 1961:
The petitioner filed an application under Section 154 for rectification of the mistake in the order passed under Section 264. The Commissioner rejected this application on the ground that there was no mistake apparent on record. The court found that the Commissioner failed to consider the petitioner's submission that the opening balance for the year under consideration could not be added as income.

4. Legitimacy of the addition of Rs. 80 lakhs under Section 68 of the Income-Tax Act, 1961:
The petitioner argued that the Assessing Officer wrongfully made an addition of Rs. 80 lakhs under Section 68 on account of share premium received during the year under consideration. The petitioner claimed that no share application money was received, nor any share capital issued during the year, and the amount of Rs. 80 lakhs was carried forward from the previous year. The court emphasized that the Commissioner should have considered these merits while deciding the revision petition under Section 264.

5. Consideration of the petitioner's circumstances, including the illness and death of the main Director:
The petitioner contended that the main Director's critical medical condition and subsequent death prevented participation in the assessment proceedings. The court noted that the Commissioner dismissed this submission, stating that the petitioner, being a corporate entity assisted by qualified CAs, should have ensured compliance. However, the court found that the Commissioner should have considered the petitioner's circumstances and the merits of the case.

Conclusion:
The court quashed and set aside the impugned orders dated 24.03.2021, 22.12.2018, and 12.08.2021. The matter was remanded back to the Principal Commissioner to decide the revision petition filed by the petitioner under Section 264 on merits. The Principal Commissioner was directed to complete this exercise within twelve weeks from the date of receipt of the court's order. The rule was made absolute to the aforesaid extent, with no order as to costs.

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