Kewal Krishan Jain v. Commissioner Of Income Tax, Jalandharand Another

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Writ Petition No.1818 of 1995 Date of Order: 11[th] October, 2013 Kewal Krishan Jain ...Petitioner Versus Commissioner of Income Tax, Jalandharand another. ..Respondents CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present:Mr. Alok Mittal, Advocatefor the petitioner. Mr. Vivek Sethi, Advocate,for the respondent. RAJIVE BHALLA, J. The petitioner prays for issuance of a writ of certiorariquashing order dated 24.10.1994 (Annexure P-5), passed by theCommissioner of Income Tax, Jalandhar, dismissing a petition filedunder Section 264 of the Income Tax Act, 1961 (hereinafter referred toas 'the Act'). Counsel for the petitioner submits that the petitioner soldagricultural land situated at Jalandhar, on 25.05.1990 and during thesame financial year purchased agricultural land at village Badot, TehsilGanour, District Sonepat. The petitioner was, therefore, entitled toexemption from capital gain tax in terms of Section 54B of the Act. The petitioner filed his return of income for assessment year 1991-92 on30.08.1991. A revised return was filed on 20.01.1994 in order toinclude capital gains from sale of agricultural land, but inadvertently thepetitioner did not claim exemption from capital gains, admittedly,available under Section 54-B of the Act. The error was occasioned asthe petitioner's son was seriously ill and hospitalised and thepetitioner's mother suffered a paralytic stroke. The petitioneraccordingly filed a petition under Section 264 of the Act, before theCommissioner of Income Tax, Jalandhar, praying that assessment orderdated 09.03.1994 be revised and exemption be granted under Section54-B of the Act. The petition was dismissed on the ground that thepetitioner did not claim exemption before the Assessing Officer, whetherin the original or in the revised return. The fact that the petitioner did notraise a plea before the Assessing Officer is irrelevant as Section 264 ofthe Act confers jurisdiction to grant relief where on account of abonafide error, whether by the assessee or the Assessing Officer, theassessment order is contrary to an available exemption. The revenuedoes not deny that the petitioner was entitled to exemption underSection 54-B of the Act. The Commissioner should have, therefore,allowed the petition. Counsel for the petitioner relies upon a judgmentof the High Court of Jammu and Kashmir at Jammu inSneh Lata Jainv. Commissioner of Income Tax and Anr., (2004) 192 CTR (J&K) 50,Allahabad High Court inRashtriya Vikas Ltd.v. CIT, (1992) 196 ITR694(AII),Gujarat High Court in C.Parikh & Co.v. Commissioner ofIncome Tax, (1980) 122 ITR 610(Guj),Ramdev Exportsv.Commissioner of Income Tax, (2001) 251 ITR 873(Guj)andDigvijay Cement Company Limited v. Commissioner of Income Tax andanother, 1994 ITR, 797. Counsel for the petitioner also relies uponcircular No.14(XL-35) of 1955, dated 11.04.1955 issued by the Boardof Directors, to urge that officers of the department must not takeadvantage of ignorance of an assessee as to his rights as it is their dutyto assist a tax payer in every way particularly in claiming and securingrelief. Counsel for the revenue submits that power under Section264 of the Act is limited to rectifying errors committed by an AssessingOfficer. The failure of the assessee to claim exemption under Section54-B of the Act, before the Assessing Officer, disentitles the petitioner toany relief under Section 264 of the Act. Counsel for the revenue reliesupon a judgment of Jammu and Kashmir High Court in M.QasimBrothersv. Commissioner of Income Tax and another, 1991 ITR,675and submits that the circular relied by the petitioner does not applyto the present case. We have heard counsel for the parties and perused theimpugned order. Counsel for the revenue submits that power under Section264 of the Act is limited to rectifying errors committed by an AssessingOfficer. The failure of the assessee to claim exemption under Section54-B of the Act, before the Assessing Officer, disentitles the petitioner toany relief under Section 264 of the Act. Counsel for the revenue reliesupon a judgment of Jammu and Kashmir High Court in M.QasimBrothersv. Commissioner of Income Tax and another, 1991 ITR,675and submits that the circular relied by the petitioner does not applyto the present case. We have heard counsel for the parties and perused theimpugned order. The questions that fall for an answer are the scope and ambitof Section 264 of the Act and whether failure to claim an availableexemption, before the Assessing Officer, prohibits an assessee fromfiling a petition or the Commissioner from exercising power underSection 264 of the Act. Civil Writ Petition No.1818 of 1995 Commissioner to revise other orders, i.e., orders that are prejudicial tothe interest of the assessee. Section 264 of the Act, reads as follows:- “264 Revision of other orders. (1) In the case of any order other than an order towhich section 263 applies passed by anauthority subordinate to him, the Commissionermay, either of his own motion or on anapplication by the assessee for revision, call forthe record of any proceeding under this Act inwhich any such order has been passed andmay make such inquiry or cause such inquiry tobe made and, subject to the provisions of thisAct, may pass such order thereon, not being anorder prejudicial to the assessee, as he thinkswhich section 263 applies passed by anauthority subordinate to him, the Commissionermay, either of his own motion or on anapplication by the assessee for revision, call forthe record of any proceeding under this Act inwhich any such order has been passed andmay make such inquiry or cause such inquiry tobe made and, subject to the provisions of thisAct, may pass such order thereon, not being anorder prejudicial to the assessee, as he thinks fit. (2) The Commissioner shall not of his own motionrevise any order under this section if the orderhas been made more than one year previously.revise any order under this section if the orderhas been made more than one year previously. (3) In the case of an application for revision underthis section by the assessee, the applicationmust be made within one year from the date onwhich the order in question was communicatedto him or the date on which he otherwise cameto know of it, whichever is earlier.this section by the assessee, the applicationmust be made within one year from the date onwhich the order in question was communicatedto him or the date on which he otherwise cameto know of it, whichever is earlier. Provided that the Commissioner may, if he issatisfied that the assessee was prevented bysufficient cause15 from making the applicationwithin that period, admit an application madeafter the expiry of that period.satisfied that the assessee was prevented bysufficient cause15 from making the applicationwithin that period, admit an application madeafter the expiry of that period. (4) The Commissioner shall not revise any order under this section in the following cases— Provided that the Commissioner may, if he issatisfied that the assessee was prevented bysufficient cause15 from making the applicationwithin that period, admit an application madeafter the expiry of that period.satisfied that the assessee was prevented bysufficient cause15 from making the applicationwithin that period, admit an application madeafter the expiry of that period. (4) The Commissioner shall not revise any order under this section in the following cases— (a) where an appeal against the order lies tothe 16 [Deputy Commissioner (Appeals)][or to the Commissioner (Appeals)] or tothe Appellate Tribunal but has not beenmade and the time within which suchappeal may be made has not expired, or, inthe case of an appeal to the Commissioner(Appeals) or to the Appellate Tribunal, theassessee has not waived his right ofappeal; orthe 16 [Deputy Commissioner (Appeals)][or to the Commissioner (Appeals)] or tothe Appellate Tribunal but has not beenmade and the time within which suchappeal may be made has not expired, or, inthe case of an appeal to the Commissioner(Appeals) or to the Appellate Tribunal, theassessee has not waived his right ofappeal; or (b) where the order is pending on an appealbefore the [Deputy Commissioner(Appeals); orbefore the [Deputy Commissioner(Appeals); or (c) where the order has been made the subjectof an appeal to the Commissioner(Appeals) or to the Appellate Tribunal.of an appeal to the Commissioner(Appeals) or to the Appellate Tribunal. (5) Every application by an assessee for revisionunder this section shall be accompanied by afee of [five hundred] rupees.under this section shall be accompanied by afee of [five hundred] rupees. (6) On every application by an assessee forrevision under this sub- section, made on orafter the 1st day of October, 1998, an ordershall be passed within one year from the end ofthe financial year in which such application ismade by the assessee for revision.revision under this sub- section, made on orafter the 1st day of October, 1998, an ordershall be passed within one year from the end ofthe financial year in which such application ismade by the assessee for revision. Explanation.—In computing the period oflimitation for the purposes of this subsection,the time taken in giving an opportunity to the assessee to be re-heard under the proviso tosection 129 and any period during which anyproceeding under this section is stayed by anorder or injunction of any court shall beexcluded. (7) Notwithstanding anything contained in sub-section (6), an order in revision under sub-section (6) may be passed at any time inconsequence of or to give effect to any findingor direction contained in an order of theAppellate Tribunal, [National Tax Tribunal,] theHigh Court or the Supreme Court.] Explanation 1.—An order by the Commissionerdeclining to interfere shall, for the purposes ofthis section, be deemed not to be an orderprejudicial to the assessee. Explanation 2.—For the purposes of thissection, the 24[Deputy Commissioner(Appeals)] shall be deemed to be an authoritysubordinate to the Commissioner.” Section 264 confers power upon a Commissioner to reviseproceedings or orders subject however to restrictions, prescribedtherein. A Commissioner, may either suo-motto or an application filedby an assessee, call for the record of any proceedings or orderand after making “such enquiry” pass “such order” in accordance withprovisions of the Act. The expressions “such enquiry” and “suchorder” are wide enough, to include a situation where but for a bonafideerror, committed by an assessee, he would not be liable to pay tax. Theprohibition, against raising a plea that has not been raised before theAssessing Officer, invoked by the revenue, applies to appeals and not Section 264 confers power upon a Commissioner to reviseproceedings or orders subject however to restrictions, prescribedtherein. A Commissioner, may either suo-motto or an application filedby an assessee, call for the record of any proceedings or orderand after making “such enquiry” pass “such order” in accordance withprovisions of the Act. The expressions “such enquiry” and “suchorder” are wide enough, to include a situation where but for a bonafideerror, committed by an assessee, he would not be liable to pay tax. Theprohibition, against raising a plea that has not been raised before theAssessing Officer, invoked by the revenue, applies to appeals and not to proceedings under Section 264 of the Act. If such a prohibition wereto be read into Section 264 of the Act, it would obliterate the differencebetween an appeal and power conferred by Section 264 of the Act.Section 264 of the Act, was enacted, to ensure that proceeding beforeand orders passed by Assessing Officers are passed in accordancewith provisions of the Act.. To punish an assessee with payment of tax,where admittedly such a tax is not payable, would, in essence, lead toaffirmation of an order that is admittedly contrary to provisions of the Actand thus without authority of law. At this stage, it would be appropriateto refer to a judgment of the High Court of Jammu and Kashmir atJammu inSneh Lata Jainv. Commissioner of Income Tax and Anr.(supra), where, in an identical situation, it was held that the mere factthat the assessee had not raised a plea before the Assessing Officer,does not prohibit the assessee from claiming relief under Section 264 ofthe Act. A similar controversy was decided by the Kerala High Court inParekh Brothersv. Commissioner of Income Tax, Kerala-IIErnakulam and others, 1984, ITR, 105, by holding as follows:- “The revisional jurisdiction may be a part of or aspecies of appellate jurisdiction, and not part oforiginal jurisdiction. On that basis, it does not followthat all powers so exercisable by the appellateauthority with all limitations inherent therein asenunciated by the above Supreme Court decisionwill be equally applicable in construing the scopeand content of the revisional power under Section264 of the Act. We are unable to accept the plea soput forward by the counsel for the Revenue..........” In the light of above discussions, we haveno hesitation to hold that the Commissioner ofIncome-tax committed an error of law in holdingthat it is not open to him for the first time toentertain a relief of the kind pleaded by theassessee and in denying jurisdiction. We hold, thateven though a mistake was committed by theassessee and it was detected by him after theorder of assessment, and the order of assessmentis not erroneous, none the less it is open to theassessee to file a revision before theCommissioner under Section 264 of the Act andclaim appropriate relief. But it should not beforgotten that the power to be exercised underSection 264 is a revisionary one. The limitationsimplicit in the exercise of such power are wellknown. The jurisdiction is discretionary. Whetherin a particular case, on the basis of facts disclosed,the Commissioner will exercise his jurisdiction andinterfere in the matter, is a matter of discretion. It iscertainly a judicial discretion vested in theCommissioner, to be exercised in accordance withlaw. We are not called upon to pronounce on thescope and amplitude of the revisional power. Theonly question mooted for our consideration in thiscase is whether the Commissioner has gotrevisional jurisdiction at all, where the assessee having included the income for assessment, canclaim the relief of weighted deduction under Section35B of the Act, for the first time, in a petition filedunder Section 264 of the Act. On that aspect of thequestion, we have no doubt in our mind that theCommissioner has jurisdiction to entertain arevision petition under Section 264 of the Act.”To similar effect, are judgments of the Allahabad High Court in Rashtriya Vikas Ltd.v. CIT, (1992) 196 ITR 694(AII),Gujarat HighCourt inC.Parikh & Co.v. Commissioner of Income Tax, (1980) 122ITR 610(Guj),Ramdev Exports v. Commissioner of Income Tax,(2001) 251 ITR 873(Guj)andDigvijay Cement Company Limited v.Commissioner of Income Tax and another, 1994 ITR, 797. We,however, express our respectful disagreement with the judgment of theJammu & Kahsmir High Court in M.Qasim Brothersv. Commissionerof Income Tax and another. Thus, we hold that a bonafide errorcommitted by an assessee in claiming an admissible exemption, duringassessment proceeding, would not prohibit the assessee fromapproaching the Commissioner or the Commissioner from consideringa petition under Section 264 of the Act, provided other conditionscontained in Section 264 are satisfied. Admittedly, the petitioner sold and purchased agricultural landin the previous year relevant to the assessment year and was entitled toexemption from capital gain under Section 54-B of the Act. Theassessee filed a return of income declaring a net loss of Rs.2,29,700/-,but did not declare any capital gain. The case was taken up for scrutiny. The assessee was asked to furnish his bank accounts. Theassessee filed a revised return of income declaring a net loss ofRs.42,330/- and also declared taxable capital gain of Rs.84,714/-. Theassessee, however, did not claim exemption under Section 54-B of theAct, whether in the original or in the revised return. The assessmentwas completed vide order dated 09.03.1994 on a net taxable income ofRs.60,330/-, and an agricultural income of Rs.2,00,000/-. It would beappropriate to point out that the revised return was ignored by theAssessing Officer as it was filed beyond the period prescribed underSection 139(5) of the Act. As referred to hereinabove, it is not denied by the revenue thatthe assessee had purchased agricultural land within the relevantprevious year and was , therefore, statutorily entitled to claim and begranted exemption from capital gain, under Section 54B of the Act. Theassessee, filed a petition under Section 264 of the Act, praying that ashe had purchased agricultural land during the previous year, precedingthe assessment year and was prevented by a bonafide error fromclaiming exemption, the exemption may be allowed under Section 54-Bof the Act. The Commissioner of Income Tax, Jalandhar, placed reliance upon a judgment in M.Qasim Brothersv. Commissioner of Income Tax and another(supra) and dismissed the petition by holding thatSection 264 of the Act cannot be invoked as the petitioner did not raisethe plea for exemption, before the Assessing Officer whether in theoriginal or in the revised return. The revenue does not deny that the petitioner sold andpurchased land during the previous year, relevant to assessment year Civil Writ Petition No.1818 of 1995 Officer, was entitled to benefit, under Section 54-B of the Act. Thus, theonly assertion put forth by the revenue is that as the petitioner did notrely upon the purchase of agricultural land, whether in his original or inrevised return, the Commissioner has rightly refused to exercise powerunder Section 264 of the Act. As we have already held that powerunder Section 264 of the Act, is wide enough, to include rectification ofa “bonafide” error committed by an assessee, while claimingexemptions, under the Act, the Commissioner should have in theexercise of his revisional power under Section 264 of the Act, decidedthe petition, filed by the petitioner, on merits. Civil Writ Petition No.1818 of 1995 Officer, was entitled to benefit, under Section 54-B of the Act. Thus, theonly assertion put forth by the revenue is that as the petitioner did notrely upon the purchase of agricultural land, whether in his original or inrevised return, the Commissioner has rightly refused to exercise powerunder Section 264 of the Act. As we have already held that powerunder Section 264 of the Act, is wide enough, to include rectification ofa “bonafide” error committed by an assessee, while claimingexemptions, under the Act, the Commissioner should have in theexercise of his revisional power under Section 264 of the Act, decidedthe petition, filed by the petitioner, on merits. In view of what has been recorded hereinabove, the writpetition is allowed, the impugned order is quashed and the matter isremitted to the Commissioner of Income Tax, Jalandhar, to pass a freshorder, in accordance with law. No order as to costs. (RAJIVE BHALLA) JUDGE 11[th]October, 2013nt (DR. BHARAT BHUSHAN PARSOON) JUDGE