Hotel Raj Laxmi v. The Principal Commissioner Of Income Tax- I, Central Revenue Building,Bir Chand Patel Path, Patna.bir Chand Patel Path, Patna

IN THE HIGH COURT OF JUDICATURE AT PATNACivil Writ Jurisdiction Case No.16168 of 2021 ====================================================== Hotel Raj Laxmi, through its Proprietor Sri Manoj Kumar Sah Son of LateDurga Prasad Resident of Navarattan Hatta, P.O. - Purnea, P.S. - SahayakKhazanchi Hatt, in the town and District of Purnea, Bihar. ... ... Petitioner/s Versus 1.The Principal Commissioner of Income Tax- I, Central Revenue Building,Bir Chand Patel Path, Patna.Bir Chand Patel Path, Patna. 2.The Income Tax Officer, Ward - 3 (1), Purnea. 3.The Deputy Commissioner of Income Tax, Centralized Processing Centre, Post Bag No. 2, Electronic City Post Office, Bangalore - 560500. ... ... Respondent/s ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHY ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 13-09-2023 A clear case of a bona fide mistake not having beencorrected by a revision of return, filed within time or an appealor revision taken against the appropriate orders; is the question raised in the writ petition. 2. The assessee is concerned with assessment year 2016-17. A return of income was filed as is indicated atAnnexure-2. The assessee showed Rs.10,08,359/- as thesalary/remuneration to partners of the firm at Column 38 ofAnnexure-2 return. In fact, as is evident from the Annexure-2itself, there were only two partners one of whom alone was paidthe remuneration of Rs.3,54,000/-. The other expenses asindicated in the Profit and Loss Account produced at Annexure-3 were other business expenses entitled to exemption.Obviously, the assessee committed a mistake in filing the returnand did not file a revised return till the Section 143(1)intimation was issued to the assessee, as is evident fromAnnexure-4. 3. The assessee is said to have filed an appeal underSection 246A, which was withdrawn and a revision filed underSection 264. The assessee filed the revision under Section 264against the rejection of the application filed for rectificationunder Section 154 which is produced as Annexure-6. 4. We heard learned Senior Counsel Shri AjayKumar Rastogi and Smt. Archana Sinha, learned StandingCounsel for the respondent. Learned Senior Counsel relied on the decisions of the Madras High Court in Sharp Tools v.Principal Commissioner of Income -Tax; (2020) 421 ITR 90(Mad) and C. Parikh & Co. v. Commissioner of Income-Tax,Baroda (1980) 122 ITR 610 (Guj), a Gujrat High Courtjudgment. Reliance was also placed on the CBDT Circularbearing no. 14 (XL-35) dated 11.04.1955. Learned SeniorStanding Counsel for the Department relied on Commissionerof Income tax v. Keshri Metal (P) Ltd. 1999 234 ITR 785(MP). 5. We will first look at the decisions, of which theone decided by the High Court of Madras was almost in similarcircumstances. After receipt of an intimation under Section143(1), realising a mistake that occurred inadvertently, theassessee filed a revised return which was beyond time. Hence,an application was made for rectification under Section 154,which was rejected, against which a revision petition was filedunder section 264. The Principal Commissioner though findingthe mistake to be inadvertent and the claim to be bona fide,rejected the writ petition. There the mistake was found to be atypographical error, possible of correction in a rectificationapplication; unlike the present case, as we shall shortly indicate. 6. The learned Senior Counsel for the assessee 5. We will first look at the decisions, of which theone decided by the High Court of Madras was almost in similarcircumstances. After receipt of an intimation under Section143(1), realising a mistake that occurred inadvertently, theassessee filed a revised return which was beyond time. Hence,an application was made for rectification under Section 154,which was rejected, against which a revision petition was filedunder section 264. The Principal Commissioner though findingthe mistake to be inadvertent and the claim to be bona fide,rejected the writ petition. There the mistake was found to be atypographical error, possible of correction in a rectificationapplication; unlike the present case, as we shall shortly indicate. 6. The learned Senior Counsel for the assessee specifically placed reliance on the decisions of the Hon’bleSupreme Court relied on, in the decision of the Madras HighCourt; Laxmibai v. Bhagwantbuva; (2013) 4 SCC 97 andUnion of India v. Ajeet Singh; (2013) 4 SCC 186. Both theaforesaid decisions spoke of substantial justice being donewhen obvious failure of justice has occurred, withoutadverting to mere technical flaws. We bow to the aboveproposition, but however, cannot ascribe to the view that,against the rejection of the rectification application an appealcould be entertained by the Commissioner sitting in thevisitorial jurisdiction; to correct the errors of the nature, thathas occurred herein. This is especially so since theconsideration of the Commissioner, against a rejection of arectification application would be confined to whether arectification is possible; which should be errors apparent fromthe face of the record and not those which can be found outonly by a process of deduction or analysis. 7. We also notice Keshri Metal (P) Ltd. (supra)was a case in which additions were made based on excessdepreciation granted, under section 154, by the AssessingOfficer. This was interfered with by the Appellate Authorities.The Hon’be Supreme Court found that there was no occasion for rectification, since the additions made were not apparent, ascoming out from the records of the case. 8. In the present case also the assessee had declaredin the return, Rs.10,08,359/- as remuneration paid to thepartners which would be exigible to tax in the hands of thepartners. However, the remuneration paid to the partners asdeclared in the very same return came only to Rs.3,54,000/-.There are a number of expenses shown under Annexure-3, Profitand Loss Account and it requires a process of deduction, as tothe expenses claimed, to come to the conclusion that those werein fact to be declared as ‘Other Expenses’; wherein, there isspecific indication that the assessee should specify the natureand amount. Hence, it cannot be said that even if it is a bonafide mistake, there can be a rectification made under Section154. In such circumstances neither the order under Section 154can be assailed nor can the rejection of a revision, from thatorder under Section 154.. 9. We are not in finding so, to totally frustrate theclaim of the assessee. As has been rightly pointed out by learnedSenior Counsel, Section 246A of the Income Tax Act, 1961provides for an appeal even against an intimation under Section143(1). The provision for filing a revised return is available 9. We are not in finding so, to totally frustrate theclaim of the assessee. As has been rightly pointed out by learnedSenior Counsel, Section 246A of the Income Tax Act, 1961provides for an appeal even against an intimation under Section143(1). The provision for filing a revised return is available under Section 139(5), which extends to one year after the end ofthe assessment year or till such time as an assessment order ispassed, whichever is earlier. In the present case the assessmentyear ends on 31.03.2017 and the assessee’s remedy to file arevision as per the first limb of Section 139(5) ends only on31.03.2018; one year from the last date of the assessment year.However, the intimation having come on 09.05.2017, it has tobe treated as an assessment order which is also appealable underSection 246A; there can be no revision of return after theintimation under Section 143(1). The assessee all the samecould have either filed an appeal under Section 246A or arevision under Section 264, From the intimation under Section143(1). 10. Under Section 264, the Commissioner has theauthority, either suo moto or on an application to call for therecords of any proceeding under the Act in which any order hasbeen passed and after making such an enquiry, pass such orderstherein not being an order prejudicial to the assessee, as hethinks fit. This confers a discretion on the Commissioner, in arevision, to enable correction of such bona fide errors made bythe assessee. It cannot be said that on account of the assesseemaking an inadvertent mistake in the returns filed and the same not having come to their notice before an assessment order isissued or till the end of one year from the last date of theassessment year; the assessee would be frustrated fromcorrecting the bona fide mistake, thus bringing upon itself amassive tax liability. 11. This is perfectly the circumstance under whichthe Hon’ble Supreme Court in the cited decisions said that insub-serving the cause of substantial justice, technicalconsiderations have to be overlooked. The correction of a mereirregularity or trivial breach of law, cannot be frustrated bytechnical considerations and the endeavour should always be, todo real and substantial justice to the parties; which power isavailable to the Commissioner under Section 264. Though arectification under Section 154 may not be permissible, in thefacts of the case which, according to us requires a process ofdeduction, the Commissioner is clothed with such powers underSection 264. In a revision against the intimation under Section143(1), a due enquiry can be carried out, wherein the assesseewould be able to point out the specific instances, of the expensesincurred and its nature, thus enabling exemption from paymentof tax to that extent. 12. We also do not see any applicability of the CBDT Circular, relied on by the petitioner. Therein, what hasbeen espoused by the CBDT is the laudable objective of theofficers of the Department, not taking advantage of theignorance of the assessee and providing assistance to thetaxpayer, in every reasonable way so as to claim and securereliefs as provided under the Act. The returns filed herein, byitself does not provide the Assessing Officer with the capacity toenable such a consideration. In fact, the assessee wronglydeclared more than 10,00,000/- remuneration paid to theDirectors, which is not reflected in the return itself. TheAssessing Officer could not have devined that it would bebusiness expenses, entitled to exemption from tax. Even at thestage of rectification, as we observed above, there has to be aprocess of deduction, by which alone the nature and extent ofthe business expenses could have been allowed by the AssessingOfficer. 13. We, hence, do not find any infirmity in the ordersimpugned, but however, leave the assessee with the remedy tofile an appeal or revision from the intimation under Section143(1); the delay in which would be condoned on thecompelling circumstances of the assessee having pursued hisremedy, but under a different provision against a different order; which provision only permitted rectification of mistakes,apparent from the records. The writ petition though rejected, itwould be with the above reservation of liberty. (K. Vinod Chandran, CJ) Anushka/- AFR/NAFRAFRCAV DATEUploading Date19.09.2023Transmission Date ( Partha Sarthy, J)