2024 (11) TMI 1069 - HC - Income Tax

PCIT cannot dismiss Section 264 revision application merely for non-production of materials in response to notice

The Bombay HC allowed a revision application under Section 264 against an ex-parte assessment order passed under Section 143(3) read with Section 144B. ... Revision Application u/s 264 against an ex-parte assessment order passed u/s 143(3) read with the provision of Section 144B - HELD THAT:- As observed that by remedying such mistake by orders being passed u/s 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 Court also observed that the object of such provision 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. Considering the aforesaid position in law, we are of the clear opinion that the cause in the present case warranted that the revision be decided on merits and more particularly considering the case of the petitioner, which although was noticed in the impugned order, was not taken to its logical conclusion, merely on a erroneous presumption in law that the revision is not maintainable for a reason that the petitioner had failed to produce certain materials in response to notice dated 15 April, 2021. In our opinion, there is a manifest error on the part of PCIT in coming to such conclusion to hold the revision not maintainable in the facts of the present case. The impugned order is quashed and set aside. The petitioner’s Revision application are remanded to PCIT to be decided in accordance with law. Issues:Challenge to order dismissing Revision Application under Section 264 of the Income-tax Act on grounds of maintainability.Analysis:The petitioner challenged an order by the Principal Commissioner of Income tax (PCIT) dismissing the Revision Application under Section 264 of the Income-tax Act against an ex-parte assessment order. The PCIT held the Revision Application as not maintainable due to the petitioner's failure to produce certain materials in response to a notice. The petitioner contended that the PCIT erred in holding the Revision Application as not maintainable despite accepting the petitioner's case on merits. The petitioner filed the corrected return of income claiming deductions and exemptions from capital gains under Section 54F. The petitioner's case was selected for scrutiny, and despite submissions by a Chartered Accountant, an ex-parte assessment order was passed. The petitioner approached the PCIT for deletion of additions made in the assessment order, which was rejected on grounds of maintainability.The petitioner argued that the PCIT's order was oblivious of its wide powers under Section 264 of the Income-tax Act, citing relevant case law. The PCIT's consideration of the petitioner's case on merits but holding the Revision Application as not maintainable was deemed erroneous. The PCIT's rejection of the Revision Application was contrary to established legal principles governing the PCIT's powers under Section 264. The High Court referred to precedents emphasizing the broad scope of powers under Section 264 to rectify errors and remedy inadvertent situations in assessment proceedings.The High Court observed that the PCIT should not have rejected the Revision Application as not maintainable, considering the wide powers conferred under Section 264. The Court noted that the PCIT's decision failed to take the petitioner's case to its logical conclusion and was based on an erroneous presumption. The Court held that the PCIT's conclusion on maintainability was manifestly erroneous in the circumstances of the case. Consequently, the High Court quashed and set aside the impugned order and remanded the petitioner's Revision Application to the PCIT for a fresh decision within three months.In conclusion, the High Court found in favor of the petitioner, emphasizing the need for the Revision Application to be decided on merits in accordance with the law. The Court highlighted the importance of rectifying mistakes and ensuring justice in assessment proceedings through the provisions of Section 264 of the Income-tax Act.