Digitallysigned Byshambhavishambhavinileshnileshshivganshivgandate:2023.09.0112:07:58+0530 v. Assistant Commissioner Of Income-Tax Circle

IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO. 6964 OF 2022 Smita Rohit Gupta,aged 41 years, residing at 3301,"C" Lodha Bellissimo, Apollo MillCompound, N.M. Joshi Marg,Mahalaxmi, Mumbai 400011.PAN: …Petitioner Versus 1.Principal Commissioner of Income Tax-1,Thane, having office at B Wing, Ashar ITPark, 6th Floor, Road No.16Z, WagleIndustrial Estate, Thane (West), Thane -400064.Thane, having office at B Wing, Ashar ITPark, 6th Floor, Road No.16Z, WagleIndustrial Estate, Thane (West), Thane -400064. 2Assistant Commissioner of Income-tax Circle 3, Thane,having office at B Wing, Ashar IT Park, 6th Floor, Road No.16Z, Wagle Industrial Circle 3, Thane,having office at B Wing, Ashar IT Park, 6th Floor, Road No.16Z, Wagle Industrial Estate, Thane (West), Thane-400064. 3The Union of India, Throughthe Secretary, Ministry of Finance, Government of India, North Block, New Delhi - 110 001…Respondentsthe Secretary, Ministry of Finance, Government of India, North Block, New Delhi - 110 001…Respondents Mr. Dharan Gandhi with Ms Aanchal Vyas for Petitioner.Mr. Ajeet Manwani with Ms. Samiksha Kanani for Respondent CORAMK. R. SHRIRAM &DR. N. K. GOKHALE, JJ.DATED:28th August 2023 (ORAL JUDGMENT PER K .R. SHRIRAM J.) : 1.Petitioner is an individual who had filed a declaration underthe Income Declaration Scheme, 2016 ("IDS"). Under the Schemethe entire payment of tax was to be made in three instalments:25% taxes, surcharge and penalty in first instalment; for anamount not less than 50% of such tax, surcharge and penalty asreduced by the amount paid in the second instalment; and for thewhole amount to be paid as reduced by the amounts earlier paidin the third instalment. Admittedly, Petitioner made payment of thefirst instalment but defaulted the remaining two instalments. Inview of the default, as provided under Clause 3 of Section 187 ofthe IDS, the declaration filed by Petitioner was deemed to havenever been made under the IDS and as provided under Section197(b) of the Finance Act, 2016 the undisclosed income shall bechargeable to tax under the Income-tax Act, 1961 ("Act") in theprevious year in which the declaration was made. In view thereof, Petitioner filed revised return of income. 2.Subsequently vide Finance (No.2) Act, 2019, a proviso wasinserted in Section 187(1) of the Finance Act, 2016 whichprovided that where the amount of tax, surcharge and penalty, has not been paid within the due date notified under this sub-section,the Central Government may, by Notification in the OfficialGazette, specify class of persons, who may, make the payment ofsuch amounts on or before such date as may be notified by theCentral Government, along with the interest on such amount @1% for every month or part of a month comprised in the periodcommencing on the date immediately following the due date andending on the date of such payment. Using the said power, theCentral Government issued Notification bearing number 103 of2019 dated 13th December 2019 wherein the Central Governmentallowed every person who did not pay tax earlier under theScheme, to pay the tax upto 31st January 2020 along with theinterest. Petitioner was covered by the said Notification. Petitionermade use of the opportunity to revive the declaration under theScheme. Accordingly, Petitioner made an application vide letterdated 13th January 2020 showing her intention to pay balanceinstalments along with interest under the Scheme and requestedwithdrawal of the order dated 24th May 2018 that been passedunder Section 187(3) of the IDS. Petitioner was permitted to paybalance amount along with interest under the Scheme. Petitioner,on 18th January 2020, paid a sum of Rs.37,71,800/-. On payment of the amount, Respondent No.1 also issued Form No.4 on 22ndJanuary 2020. Form No.4, copy whereof is at Exhibit 'O' to thePetition, also mentions that declaration made on 30th September2016 has been accepted and that Petitioner has paid entire tax dueunder the Scheme. In the impugned order dated 20th March 2021,these facts are not disputed. In fact they have been accepted asreflecting the true facts. 3.As a result of the said acceptance of the declaration ofPetitioner under the IDS, amount of undisclosed income ofRs.85,96,886/- could not have been taxed under the Act as perSection 188 of the IDS Finance Act, 2016. The time limit, however,to file revised return had expired. Left with no option, Petitioner,therefore, moved an application under Section 264 of the Actbefore Respondent No.1. Respondent No.1 provided anopportunity to Petitioner to explain her case and also askedAssessing Officer to submit a report after ascertaining correctnessof the contentions of Petitioner. The Assessing Officer submitteddetailed report dated 8th March 2021 wherein the AssessingOfficer submitted that assessee should file revision petition withinone year from the date of the order sought to be revised but the application has not been made in time. At the same time, theAssessing Officer also submitted that considering the circumstancesof the case, delay may be condoned. Impugned order does notreflect anything contrary to what Petitioner submitted regardingthe payment under the IDS. 4.Respondent No.1 condoned the delay but refused to grantrelief to Petitioner on the merits of the case. Paragraph 5 of theimpugned order dated 26th March 2021 reads as under: “5.Coming to merit of the case, as the assessee has filed hisrevised return of income voluntarily on 2.11.2017 by disclosingthe return income at Rs.9419001, which has been processedunder Section 143(1) of the Act on 19.9.2018. Since revisedreturn was processed on the basis of details filed by the assesseeand therefore there is no error in order of processing passed on19.9.2018. Thus, the application does not come under preview of264 of the Act." 5.Mr. Manwani relying upon judgment of the Hon'ble Apex Court in ACIT v Rajesh Jhaveri Stock Brokers (P) Ltd. [1] submittedthat since Petitioner had filed returns under Section 139 and thatwas processed under Section 143(1) of the Act, that processingorder will not be an order and, therefore, Respondent No.1 was 1161 taxmann 316 (SC) justified in not entertaining application under Section 264 of theAct. 6.In our view, judgment of the Hon'ble Apex Court in Rajesh Jhaveri (Supra) will not be applicable to the facts andcircumstances of the case because that was a case where the Courtwas considering the provisions of Section 147 for re-opening theassessment. The Court was considering whether the question ofchange of opinion would arise when an order under Section143(1)(a) of the Act had been passed. 7.The provisions of Section 264 and the power available to theCommissioner to exercise under Section 264 of the Act came up forconsideration before the Division Bench of this Court in HindustanDiamond Company Pvt. Ltd. v. CIT[2]. The Division Bench waspleased to observe that exercise of power under Section 264 wasnot subject to the power of the Assessing Officer to makeadjustment under Section 143(1) of the Act. The Court held thatpower of the Commissioner under Section 264 is rather wide and 2(2003) 175 Taxation 91 (Bom) even the errors committed could be rectified. Paragraph 6 of theHindustan Diamond Company Pvt. Ltd. (Supra) reads as under: 7.The provisions of Section 264 and the power available to theCommissioner to exercise under Section 264 of the Act came up forconsideration before the Division Bench of this Court in HindustanDiamond Company Pvt. Ltd. v. CIT[2]. The Division Bench waspleased to observe that exercise of power under Section 264 wasnot subject to the power of the Assessing Officer to makeadjustment under Section 143(1) of the Act. The Court held thatpower of the Commissioner under Section 264 is rather wide and 2(2003) 175 Taxation 91 (Bom) even the errors committed could be rectified. Paragraph 6 of theHindustan Diamond Company Pvt. Ltd. (Supra) reads as under: “6.Having heard the Counsel on both sides, we are of theopinion that the Commissioner was not justified in rejectingthe revision application of the assessee. As rightly contendedby Mr. Inamdar, Section 264 confers wide jurisdiction on theCommissioner. Proceedings under Section 264 are intendedto meet the situation faced by an aggrieved assessee who isunable to approach the appellate authority for relief and hasno other alternate remedy available under the Act. In thelight of the decision of the Apex Court in the case of BharatEarth Movers (supra), the provision for Leave Encashmentbeing a current liability the assessee is entitled for deductionof that amount. The Assessing Officer had accepted thereturn, ignoring the request of the assessee for deduction ofthe above amount. Therefore, the relief which was notgranted by the Assessing Officer could be granted by theCommissioner under Section 264. Before allowing suchdeduction if any further enquiry was required to be done,the Commissioner could have either himself enquired ordirected the Assessing Officer to do the needful. However,the Commissioner has declined to exercise power underSection 264 because of amendment to Section 143(1) byFinance Act, 1999. Powers of the Assessing Officer to makeprima facie adjustments under Section 143(1), done awaywith by Finance Act, 1999 (with effect from 1st June, 1999)does not in any way effect the right of the Commissionerunder Section 265 of the Act to grant relief to the assessee ifavailable to the assessee as per the decision of the ApexCourt. Exercise of powers under Section 264 is not subject tothe power of the Assessing Officer to make adjustmentsunder Section 143(1) of the Income-tax Act. Therefore,relief can be granted to the assessee under Section 264 evenif the power of adjustment under Section 143(1) is takenaway from the Assessing Officer.” (emphasis supplied) 8.Section 264 of the Act also came up for consideration beforethe Hon'ble Delhi High Court in Vijay Gupta v CIT Delhi-III[3] where paragraph 35 reads as under: “35.From the various judicial pronouncements, it is settled thatthe powers conferred under Section 264 of the Act are very wide.The Commissioner is bound to apply his mind to the questionwhether the petitioner was taxable on that income. Since Section264 uses the expression “any order”, it would imply that thesection does not limit the power to correct errors committed bythe subordinate authorities but could even be exercised whereerrors are committed by assessees. It would even cover situationswhere the assessee because of an error has not put forth alegitimate claim at the time of filing the return and the error issubsequently discovered and is raised for the first time in anapplication under Section 264.”(emphasis supplied) paragraph 35 reads as under: “35.From the various judicial pronouncements, it is settled thatthe powers conferred under Section 264 of the Act are very wide.The Commissioner is bound to apply his mind to the questionwhether the petitioner was taxable on that income. Since Section264 uses the expression “any order”, it would imply that thesection does not limit the power to correct errors committed bythe subordinate authorities but could even be exercised whereerrors are committed by assessees. It would even cover situationswhere the assessee because of an error has not put forth alegitimate claim at the time of filing the return and the error issubsequently discovered and is raised for the first time in anapplication under Section 264.”(emphasis supplied) 9.In the circumstances, it is well settled that powers conferredunder Section 264 of the Act are very wide. Commissioner isbound to apply his mind to the question whether Petitioner'sincome was taxable and to what extent. Admittedly, amountpayable under the IDS has been paid. Section 188 of the IDSprovides that the amount of undisclosed income declared inaccordance with 183 shall not be included in total income of thedeclarant for any assessment year for the Income-tax Act, if thedeclarant makes the payment of tax and surcharge referred to inSection 184 and the penalty referred to in Section 185, by the date3[2016] 68 taxmann.com 131 (Delhi) specified under Sub-section 1 of Section 187. Petitioner havingpaid the tax and surcharge and the penalty with interest, amountof undisclosed income cannot be included in the income of thedeclarant/petitioner. Therefore, in our view, Commissioner shouldhave exercised his power under Section 264 of the Act and decidethe matter on merits. 10.We hereby quash and set aside the impugned order dated26th March, 2021 and remand the matter to Respondent No.1 todecide the matter on merits. Before passing any order, Respondent No.1 shall givepersonal hearing to Petitioner notice whereof shall becommunicated at least five working days in advance. Order passedshould be reasoned order dealing with all the submissions ofPetitioner. Application shall be disposed within eight weeks. (DR. N. K. GOKHALE, J.) (K. R. SHRIRAM, J.)