C.nedumudikilli v. The Principal Commissioner Of Income Tax,Central

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :09.01.2018 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM W.P.No.17238 to 17241 of 2017 C.Nedumudikilli ... Petitioner in all W.Ps Vs. The Principal Commissioner of Income Tax,Central 146, Nungambakkam High Road,Chennai 600 034. ... Respondent in all W.Ps. COMMON PRAYER:Petition filed under Article 226 of theConstitution of India to issue a Writ of Certiorarified Mandamuscalling for the records of the respondent Principal Commissionerof Income Tax, Central 1, Chennai in his fileC.No.1511/C.1/2016-17 for the assessment year 2001-02, 2002-03,2003-04, 2004-05 and quash the impugned orders dated 27.03.2017under Section 264 of the Income Tax Act, 1961, and consequentlydirect the respondent Principal Commissioner of Income Tax tocondone the delay in filing the revision petitions under Section264, entirely and deal with the same on merits withconsequential directions in accordance with law. For Petitioner in all W.Ps : Mr.T.N.Seetharaman For Respondents in all W.Ps : Mr.A.P.Srinivas & Mr.A.N.R.JayaprathapStanding Counsel for Income TaxO R D E R Heard Mr.T.N.Seetharaman, learned counsel for the petitionerand Mr.A.P.Srinivas, learned Senior Standing counsel appearingon behalf of the respondents. 2. The writ petitioner has filed this writ petitionchallenging an order passed by the respondent under Section 264of the Income Tax Act, 1961 (the Act). The petition filed by thepetitioner under the said provision has been rejected not onmerits but on the ground that it is barred by limitation andunexplained delay. Therefore, the Court is called upon to testthe correctness of the order (as to correctness of the impugned https://hcservices.ecourts.gov.in/hcservices/ order) as to whether the respondent was justified in rejectingthe petitions as being barred by limitation. To examine theseissues, the following facts are essential: 3. Search and seizure operation under Section 132 of theAct was carried out in the residence of the petitioner on11.10.2006. As a consequence thereof, notice under Section 153(A) of the Act dated 10.03.2008 was issued requiring thepetitioner to file a return of income within a period of fifteendays. In response thereto, the petitioner has filed his returnof income on 22.07.2008, admitting an income of Rs.1,45,000/-(Rupees One Lakh Forty Five Thousand only), claiming himself tobe a resident for the assessment year 2001-02 to 2004-05.Subsequently, notice under Section 143(2) of the Act was servedand the petitioner's authorized representative appeared andfiled details which were called for during the course ofassessment. The petitioner filed another return of income on25.11.2008, admitting a total income of Rs.58,64,292/-. Basedon the details furnished by the petitioner and the answers givento the queries raised, the assessing officer framed theassessment by order dated 29.12.2008. Admittedly, thepetitioner/assessee did not prefer any appeal as against theassessment order. 4. After about nearly two years, the respondent in exerciseof his powers under Section 263 of the Act sought to revise theassessment and passed an order dated 30.03.2012 for all theassessment years. It was pointed out that during the course ofassessment, the petitioner responded to the queries of theassessing officer on the claim of foreign remittance and filedreturn dated 25.11.2008, admitting foreign income ofRs.54,80,652/- and he also made a claim of having earned incomefrom abroad which was subjected to taxation by the CanadaRevenue Agency and claimed tax credit of Rs.18,95,279/- inrespect of income included in the global income brought to tax.The respondent pointed out that the assessing officer hadallowed the claim prima facie on the basis of the documentaryevidence submitted by the assessee. It was observed thatenquiries were made and information was received that the claimof the petitioner having earned income in Canada, on which hehas paid tax was false. In response to the Canadian TaxPayment, statement filed by the petitioner, enquiries were madewith the Canadian Revenue Agency and certain discrepancies werenoted. Therefore, the respondent concluded that no credencecould be given to the claim of foreign Tax Payment made by theassessee and to that extent, the tax credit for such foreignpayment given in the assessment order dated 29.12.2008, primafacie appears to be erroneous and prejudicial to the interest ofrevenue. 5. The petitioner/assessee was required to show cause videnotice dated 18.11.2010 as to why such credit given in theassessment order may not be withdrawn. In response to the same,the petitioner furnished information vide his letter dated13.01.2011 and also enclosed eight documents, which included thecopy of the passport issued by the Canadian Government to thepetitioner, the foreign bank account, etc., After taking note ofthe information furnished by the petitioner, the respondentstated that the said information furnished by the assessee wasforwarded to the Director, Foreign Taxation Division, CBDT, NewDelhi, with a request that in the light of the fresh informationreceived by the commissioner, the same may be transmitted to theCanada Revenue Agency for necessary verification. Since theverification report was not received and proceedings underSection 263 of the Act was getting time barred by 31.03.2011,the respondent concluded the proceedings by setting aside thefinding on and remanding back the said issue to the file of theassessing officer with a direction for fresh consideration inaccordance with law. On receipt of the report from the CanadaRevenue Agency of such order being passed, the assessing officertook up the matter and passed assessment orders dated 14.12.2011i.e., after about nine months from the date on which order underSection 263 of the Act was passed by the respondent. With regardto the residential status of the petitioner, the AssessingOfficer noted the contention raised by the petitioner that inthe return of income filed prior to the date of search and thereturn filed after the date of search, the status of thepetitioner was mistakenly taken as 'resident'. In support ofsuch contention, the petitioner had filed the copies of thepassport of the relevant previous year which was forwarded alongwith the order under Section 263 of the Act passed by therespondent dated 30.03.2011 and once again, the copies of thepassport for the relevant year together with the originalpassport were produced before the Assessing Officer for perusal.The Assessing Officer verified the relevant details regardingthe period of stay of the assessee during the assessment year1996-97 and on the basis of the stay of the assessee in Indiaduring the relevant year as well as in the previous year, theassessing officer concluded the status of the petitioner as non-resident. Thus the petitioner's case stood vindicated as theassessing officer accepted the status of the petitioner as non-resident. After about 27 months from the date on which theassessment order was passed i.e., on 14.12.2011, the respondentexercised suo motu powers under Section 263 of the Act,observing that even though the assessee had furnished materialssuch as passport and details of stay in India during theproceedings before the respondent indicating that he wasenjoying non-resident status, held that such issue cannot beconsidered under Section 263 as the assessee could have comeunder Section 264 of the Act separately for the said issue. For this reason, the assessee's claim as a non-resident was rejectedand assessed as resident and the Canadian income were held to betaxable in India. Since the status of the assessee was held tobe resident, as originally claimed by him and held by theAssessing Officer in the original assessment order dated29.12.2008, direction was issued to the Assessing Officer toredo the assessment as per the computation given in the orderdated 28.03.2014 and work out the tax including appropriateinterest. this reason, the assessee's claim as a non-resident was rejectedand assessed as resident and the Canadian income were held to betaxable in India. Since the status of the assessee was held tobe resident, as originally claimed by him and held by theAssessing Officer in the original assessment order dated29.12.2008, direction was issued to the Assessing Officer toredo the assessment as per the computation given in the orderdated 28.03.2014 and work out the tax including appropriateinterest. 6. The petitioner being aggrieved by such order preferredan appeal before the Income Tax Appellate Tribunal (ITAT),Chennai. The Tribunal by order dated 25.06.2015 held that theorder passed by the Assessing Officer holding the petitioner asa non-resident was passed exceeding his limit and withoutconsidering the order passed by the respondent under Section 263of the Act dated 30.03.2011 and held that the order passed bythe Assessing Officer is erroneous and prejudicial to theinterest of the revenue and accordingly, the appeal stooddismissed. The petitioner did not file further appeal to thisCourt as against the order passed by the Tribunal but filed apetition before the respondent under Section 264 of the Act,stating that the petitioner is a Canadian citizen, he has beenpermanently living in Canada since 1995 and during the financialyear 2000-01 (assessment year 2001-02), he had stayed in Indiafor a period of 90 days only and the details were furnished andprayed before the respondent to determine the petitioner'sstatus for the relevant year as non-resident and pass order inthe revision petition. This petition filed under Section 264 ofthe Act has been rejected by the impugned order. As pointed outearlier, the order of rejection passed by the respondent dated27.03.2017 is not on the merits of the matter, but on the groundthat the petition has been filed with undue and very long delayof more than 5 ½ years and therefore cannot be condoned. Sincethe respondent has not gone into the merits of the matter, thisCourt is required to see as to whether the petitioner should benon suited on the ground of delay or in other words, it has toconsider as to whether the delay is more than 5 ½ years, thereason for rendering such a finding in the impugned order is onaccount of the limitation prescribed under Section 264 of theAct. The said provision states that in case of any order otherthan an order to which Section 263 of the Act, applies passed byany authority subordinate to him, the Principal Commissioner orthe Commissioner may either on his own motion or an applicationby the assessee for revision, call for the record of anyproceeding under this Act in which any such order has beenpassed and may make such inquiry to be made and subject to theprovisions of this Act and may pass such orders thereon, notbeing an order prejudicial to the assessee, as he thinks fit.Sub Section 2 of Section 264 of the Act states that the Commissioner shall not on his own motion, revise any such orderunder Section 264 of the Act, if the order has been made morethan one year previously. Therefore, the delay in filing thepetition has been computed from the date on which the originalassessment was passed i.e., 29.12.2008. The stand taken in theimpugned order has been reiterated in the counter affidavit andemphasized in a very vehement manner by the learned standingcounsel for the Revenue. Commissioner shall not on his own motion, revise any such orderunder Section 264 of the Act, if the order has been made morethan one year previously. Therefore, the delay in filing thepetition has been computed from the date on which the originalassessment was passed i.e., 29.12.2008. The stand taken in theimpugned order has been reiterated in the counter affidavit andemphasized in a very vehement manner by the learned standingcounsel for the Revenue. 7. On a reading of Section 264 of the Act, it is clear thatthe language employed in the said provision gives wide powers tothe Commissioner and such powers can be exercised suo motu or anapplication by the assessee. The power of revision includes thepower to call for the records of any provisions under the Act inwhich, a common order passed, the Commissioner is empowered tomake enquiry and cause enquiry to be made subject to theprovision thereto, not being an order prejudicial to theassessee. Thus the Statute does not restrict the powers of theCommissioner in any manner to the said effect. The circular wasissued by the CBDT as early as 11.04.1995 in Circular No.14 (XL-35) states that Officers of the Department must not takeadvantage of ignorance of an assessee as to his rights. It isone of their duties to assist a taxpayer in every reasonableway, particularly in the matter of claiming and securing reliefsand in this regard, the officers should take the initiative inguiding a taxpayer where proceedings or other particulars beforethem indicate that some refund or relief is due to him. Thisattitude would, in the long run, benefit the department for itwould inspire confidence in him that he may be sure of getting asquare deal from the department. Thus, the above circular makesit clear that the officers of the Department cannot takeadvantage of the ignorance of the assessee and they have toassist the tax payer in every reasonable way, particularly inthe matter of claiming and securing relief. 8. The power under Section 264 was explained elaborately inthe decision in the case of Sneh Lata Jain V. Commissioner ofIncome Tax reported in [2004] 140 TAXMAN 156 (J&K) and in thedecision in Ramdev Exports v. Commissioner of Income Taxreported in 2001 Vol.251 ITR 873 which was followed by thisCourt in M/s.Medifield Equipments Corporation Vs. TheCommissioner of Income Tax, Chennai VII, in WP.No.13408 of 2010dated 12.11.2014 and in the case of Vijay Gupta Vs. Commissionerof Income Tax, reported in 2016 386 ITR 643(Delhi), this Courtpointed out that the powers of Commissioner conferred underSection 264 of the Act are very wide and the Commissioner isbound to apply his mind to the question as to whether thepetitioner was taxable on that income and since Section 264 usesan expression “any order”, it would imply that the section doesnot limit the power to correct the errors committed by the sub ordinate authorities but could even be exercised, where errorsare committed by the assessee. Having noted the powers of theCommissioner under Section 264 of the Act, it has to be seen asto whether the order rejecting the petition on the ground ofdelay was justified. It is no doubt true that the Commissionerwas justified in computing the time limit for entertaining therevision from the date of original assessment order. However,the proceedings which followed thereafter commencing from thesuo moto revision done by the Commissioner in 2011, attainedfinality only in 2015. In fact, after nearly two years, theCommissioner invoked his power under Section 263 of the Actresulting in an order dated 30.03.2011. During the course ofproceedings, the Commissioner had accepted additionalinformation furnished by the assessee which was forwarded to theDirector, Foreign Taxation Division, CBDT, New Delhi forverification and appropriate report. Ultimately an order couldnot be passed by the Commissioner on merits as the proceedingsunder Section 263 of the Act were getting time barred and thematter was remanded to the assessing officer for consideration.Once again, the Commissioner exercised suo motu power underSection 263 of the Act and an order was passed after 27 monthsby order dated 28.03.2014. 9. The petitioner, being aggrieved, filed an appeal beforethe ITAT and it took nearly 15 months for the ITAT to take adecision in the matter and ultimately, an order was passed on25.06.2015 dismissing the petitioner's appeal two monthsthereafter. The petitioner filed revision petition on07.09.2015. The learned Senior Standing counsel for the Revenueargued that the petitioner cannot take advantage of theproceeding initiated by the Department under Section 263 of theAct. I am unable to countenance the said submission on accountof the fact that in those proceedings, Commissioner accepted theadditional materials filed by the petitioner which included hisCanadian passport and when the matter went before the AssessingOfficer on remand, he took a decision and rectified the statusof the petitioner as a non-resident and passed revisedassessment order. This was once again called in question by therespondent under Section 263 of the Act and set-aside by orderdated 28.03.2014. This order was put to challenge before theTribunal which was dismissed on 25.06.2015. Therefore, in myconsidered view, the time taken for prosecuting these matters,some of which, was at the instance of the Department and some atthe instance of the petitioner, has to be necessarily excludedwhile computing limitation for exercise of power under Section264 of the Act. This is for, more than one reason, firstly, thepetitioner cannot be shut out from placing facts before theCommissioner and Section 264 of the Act empowers theCommissioner to cause enquiry and verify the facts. Secondly, ifthere has been a genuine mistake committed by the assessee, Statute does not bar the assessee from rectifying his mistakethough there might have been some statement made by thepetitioner that the canadian income has been taxed in the saidcountry which was found to be false and the stand taken by himthat he has received certain Gifts were also found to be falsecannot be a bar to ascertain the correct status of thepetitioner as to whether during the relevant period that he wasa resident or a non-resident. I am of the considered view, thepetitioner should not be shut out on technicalities and thefacts should not be left unexamined. In Venkatadri Traders Ltd.,V. Commissioner of Income Tax and Another reported in 248 ITR681, the Court while considering the question of condonation ofdelay by the revisional authority observed as follows: Statute does not bar the assessee from rectifying his mistakethough there might have been some statement made by thepetitioner that the canadian income has been taxed in the saidcountry which was found to be false and the stand taken by himthat he has received certain Gifts were also found to be falsecannot be a bar to ascertain the correct status of thepetitioner as to whether during the relevant period that he wasa resident or a non-resident. I am of the considered view, thepetitioner should not be shut out on technicalities and thefacts should not be left unexamined. In Venkatadri Traders Ltd.,V. Commissioner of Income Tax and Another reported in 248 ITR681, the Court while considering the question of condonation ofdelay by the revisional authority observed as follows: “While considering the question of condonation, therevisional authority is not to altogether exclude fromconsideration the merits of the revision petition. If the causeof justice requires that a liberal view be taken, then a liberalview would indeed be warranted while considering the question ofcondoning the delay. The case of the assessee being that thesame receipt has been taxed twice over once by way of accruedinterest and for the second time by way of capital gain has notbeen found to be incorrect even prima facie. In matters whererefunds are involved and the assessee's right to such refund isbeyond any reasonable doubt, a liberal view of theconditionalities subject to which the relief can be granted iswarranted. It is not the policy of the Act to enable the Stateto collect monies from citizens and retain the same even whenthe money is not required to be paid as tax. The fact that thepayment had been made erroneously cannot by itself be allowed tostand in the way of the relief being granted to the assessee, ifrelief is permissible by the exercise of a discretionary powervested in the statutory authorities. The discretion so vestedis required to be exercised in a manner which would protect andpromote the just interest of the assessee. The position of theassessee vis-a-vis the Revenue is not strictly adversarial,although more often than not, that is the manner in which thetwo parties perceive their role. The Revenue is not to beregarded as interested in scoring points against the assesee,but only in the just enforcement of the provisions of the Act.The discretion of the authority, therefore, on the facts of thiscase, was required to be exercised by bearing the aforementionedconsiderations in mind.” 10. One more aspect which has to be taken intoconsideration is with regard to the observations made by theCommissioner while passing the order dated 28.03.2014, whereinthe Commissioner himself has stated that the issue pertainingto the status of the petitioner as a resident or a non residentcannot be broached under Section 263 and the assessee could have come under Section 264 of the Act separately on the issue.Therefore, the Commissioner was satisfied with the issue raisedby the petitioner regarding the status was a matter that couldbe considered under Section 264 of the Act. 11. Thus, for all the above reasons, I am of the consideredview that the delay in filing the petition should be computedfrom the date on which the ITAT dismissed the petition (i.e.,)on 25.06.2015 and if that period is reckoned, revision petitionhad to be filed within a period of two months from the saiddate. Therefore, it cannot stated to be either hopelessly timebarred and delay remains unexplained. Thus, for the abovereasons, the delay in filing the revision petition, if any,requires to be condoned. come under Section 264 of the Act separately on the issue.Therefore, the Commissioner was satisfied with the issue raisedby the petitioner regarding the status was a matter that couldbe considered under Section 264 of the Act. 11. Thus, for all the above reasons, I am of the consideredview that the delay in filing the petition should be computedfrom the date on which the ITAT dismissed the petition (i.e.,)on 25.06.2015 and if that period is reckoned, revision petitionhad to be filed within a period of two months from the saiddate. Therefore, it cannot stated to be either hopelessly timebarred and delay remains unexplained. Thus, for the abovereasons, the delay in filing the revision petition, if any,requires to be condoned. 12. In the result, the writ petitions are allowed, theimpugned orders are set aside and the delay in filing therevision petition is condoned and the matter is remanded to therespondents to take a decision on the petition filed by thepetitioner under Section 264 of the Act on merits and inaccordance with law, after affording an opportunity of personalhearing to the authorized representative of the petitioner. Nocosts. Sd/- Assistant Registrar(CS IX) //True Copy// Sub Assistant Registrar sk To The Principal Commissioner of Income Tax,Central 146, Nungambakkam High Road,Chennai 600 034. +1cc to Mr.A.P.Srinivas, Advocate, S.R.No.2021+1cc to Mr.T.N.Seetharaman, Advocate, S.R.No.1572 RV(CO)RRK(15/02/2018)