2025 (7) TMI 1439 - HC - Income Tax

Revisional Authority Can Correct Assessee's Genuine Errors Under Section 264 Even After Section 143(1) Time Limit

Crown Electromechanical Pvt Ltd. Versus Principal Commissioner Of Income Tax, Kolkata – 1 And Ors.

The HC held that the revisional authority under s. 264 is competent to correct bona fide errors committed by the assessee in the return, even if the time ... Revision u/s 264 - alteration return filed by an assessee in ITR-6 - HELD THAT:- From a perusal of the order impugned, it would transpire as rightly pointed out by Mr. Sengupta that the appropriate authority despite acknowledging the fact that the application filed by the petitioner was maintainable in law had refused to permit the petitioner to rely on the disclosure made in connection with the profit and loss account only on the consideration that the particulars of the return cannot be altered by a person other than the assessee himself. In this context, it may be relevant to note that the petitioner had approached the revisional authority, inter-alia, contending that it had committed a mistake while filling its return. Admittedly, by the time the notice u/s143(1) was issued, the time to rectify the returns for the relevant assessment year had already expired. The question, therefore, that falls for consideration in the present writ petition, is whether the revisional authority exercising jurisdiction u/s 264 of the said Act is competent to correct an error committed by the assessee. Hon’ble Supreme Court in the said case Goetze (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] was dealing with the claim of deduction of the assessee introduced by way of a letter of the AO which was disallowed on the ground that there was no provision under the Income Tax Act to make amendment in the return of income by modifying the application at the assessment stage without revising the return. Although, the assessee on an appeal had succeeded before the Cit (Appeals), the department was able to secure a favorable order by way of reversal on the further appeal before the Income Tax Appellate Tribunal. The matter thus, travelled to the Supreme Court. The Hon’ble Supreme Court while considering the above and the power of the tribunal under Section 254 of the said Act observed that the tribunal can entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised was before the tribunal. While observing as such, the Hon’ble Supreme Court had, however, made it clear that the exercise of powers by Assessing Authority does not impinge upon the power of the Income Tax Tribunal under Section 254 of the said Act. Although, much stress has been laid on the aforesaid judgment, however, find that in the said cause as noted above, the question as to whether an error by an assessee could be corrected by a revisional authority u/s 264 was not an issue. As rightly pointed out by the learned advocate representing the petitioner and as would appear from the scheme of Section 264, the consistent view of this Court and all the other High Courts that the power under Section 264 can be exercised when a bona fide mistake has been committed even by the assessee, an appropriate rectification of the return can be effected thereunder, as has been noted in the judgment delivered in the case of Ena Chaudhuri [2023 (1) TMI 873 - CALCUTTA HIGH COURT] It is clear that respondent no. 1 had committed error in failing to exercise jurisdiction, thereby rejecting the above application. Remand the matter back to the appropriate authority to decide the cause on the basis of the observation made herein. ISSUES: Whether the revisional authority under Section 264 of the Income Tax Act, 1961 is competent to correct a bona fide mistake committed by an assessee in the originally filed return.Whether a return filed in ITR-6 form can be altered by any person other than the assessee himself.Whether the principles laid down in the Supreme Court judgment in Goetze (India) Ltd. restrict the revisional authority's power under Section 264 to rectify errors in the return. RULINGS / HOLDINGS: The revisional authority under Section 264 of the Income Tax Act, 1961 is competent to correct an error committed by the assessee in the return, including bona fide mistakes, and can effect appropriate rectification of the return filed in ITR-6 form.The return filed in ITR-6 form cannot be altered by any person other than the assessee himself; however, the revisional authority may exercise jurisdiction to correct mistakes made by the assessee.The Supreme Court judgment in Goetze (India) Ltd. does not preclude the revisional authority from exercising powers under Section 264 to rectify errors committed by the assessee, as the issue of correction by revisional authority was not directly considered in that case. RATIONALE: The Court applied the statutory framework of Section 264 of the Income Tax Act, 1961, which confers revisional powers to the Commissioner to modify or cancel any order passed by the Assessing Officer if it is erroneous or prejudicial to the interests of revenue.Precedents from various High Courts, including the judgment in Ena Chaudhuri, were relied upon to establish that Section 264 jurisdiction can be exercised to rectify bona fide mistakes by the assessee in the return, even after the time for filing a revised return has expired.The Supreme Court decision in Goetze (India) Ltd. was distinguished on the ground that it dealt with the power of the Assessing Officer and the Income Tax Appellate Tribunal in relation to claims for deductions, and did not address the revisional jurisdiction under Section 264 to correct errors in the return.The Court identified a misinterpretation and misconstruction of the scope of Section 264 jurisdiction by the revisional authority, which equated it with the Assessing Officer's jurisdiction to allow claims only through revised returns.Accordingly, the Court set aside the impugned order and remanded the matter to the appropriate authority for fresh consideration in light of these principles.