Wp(C)/9870/2013 Of Transformers And Electricals Kerala Limited v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE THURSDAY, THE 11TH DAY OF AUGUST 2016/20TH SRAVANA, 1938 WP(C).No. 9870 of 2013 (G) --------------------------- PETITIONER(S): ----------------------- TRANSFORMERS AND ELECTRICALS KERALA LIMITED,ANGAMALY SOUTH P.O., ERNAKULAM-683 573, REPRESENTED BY ITS JOINT GENERAL MANAGER(FINANCE & ACCOUNTS) MR.S.V. GANAPATHI IYER. BY SRI.JOSEPH MARKOSE, SENIOR ADVOCATE. ADVS. SRI.V.ABRAHAM MARKOS, SRI.MATHEWS K.UTHUPPACHAN, SRI.BINU MATHEW, SRI.TERRY V.JAMES, SRI.TOM THOMAS (KAKKUZHIYIL), SRI.ABRAHAM JOSEPH MARKOS. RESPONDENT(S): -------------------------- 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4 (2), KOCHI-682 018. CIRCLE 4 (2), KOCHI-682 018. 2. THE COMMISSIONER OF INCOME TAX-I,CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI-682 018. BY ADV. SRI.JOSE JOSEPH, SC. rs. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 06-08-2016, THE COURT ON 11/08/2016 DELIVERED THE FOLLOWING: WP(C).No. 9870 of 2013 (G) APPENDIX PETITIONER'S EXHIBITS:- EXHIBIT-P1: TRUE COPY OF ACKNOWLEDGMENT OF REVISED RETURN DATED 22.03.2010.DATED 22.03.2010. EXHIBIT-P2: TRUE COPY OF ASSESSMENT ORDER DATED 29.12.2010 OF THE 1ST RESPONDENT FOR THE ASSESSMENT YEAR 2008-2009.THE 1ST RESPONDENT FOR THE ASSESSMENT YEAR 2008-2009. EXHIBIT-P3: TRUE COPY OF ASSESSMENT ORDER DATED 23.12.2009 FOR THE ASSESSMENT YEAR 2007-2008.THE ASSESSMENT YEAR 2007-2008. EXHIBIT-P4:TRUE COPY OF THE REVISION PETITION DATED 04/08/2011 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT-P5: TRUE COPY OF ORDER DATED 06.03.2013 PASSED BY THE 2ND RESPONDENT FOR ASSESSMENT YEAR 2008-2009.2ND RESPONDENT FOR ASSESSMENT YEAR 2008-2009. RESPONDENT'S EXHIBITS:- NIL. //TRUE COPY// P.S. TO JUDGE rs. A.M.SHAFFIQUE, J * * * * * * * * * * * * W.P.C.No.9870 of 2013 ---------------------------------------- Dated this the 11[th] day of August 2016 J U D G M E N T This writ petition is filed challenging Ext.P5 and seeking fora direction to the respondents to revise the assessment passedfor the assessment year 2008-09 by allowing deduction ofRs.5,10,20,000/- towards provision for arrears of salary andwages payable to the officers and staff as per the Long TermSettlement. 2.The short facts involved in the writ petition woulddisclose that the petitioner is a Government company and a sickindustrial unit proceeding for re-habilitation under a Schemeapproved by the Board for Industrial and Financial Reconstruction(BIFR). 3.Petitioner is an assessee under the Income Tax Act,1961 (hereinafter referred to as 'the IT Act'). In the return ofincome for the assessment year 2007-08, petitioner claimed adeduction of Rs.5,10,20,000/- being provision made in theaccounts towards arrears of salary and wages payable to theOfficers and staff as per the Long Term Settlement. While W.P.C.No.9870/2013 2.The short facts involved in the writ petition woulddisclose that the petitioner is a Government company and a sickindustrial unit proceeding for re-habilitation under a Schemeapproved by the Board for Industrial and Financial Reconstruction(BIFR). 3.Petitioner is an assessee under the Income Tax Act,1961 (hereinafter referred to as 'the IT Act'). In the return ofincome for the assessment year 2007-08, petitioner claimed adeduction of Rs.5,10,20,000/- being provision made in theaccounts towards arrears of salary and wages payable to theOfficers and staff as per the Long Term Settlement. While W.P.C.No.9870/2013 completing the assessment for the said year, the AssessingOfficer disallowed the claim on the ground that cause of action forpayment of arrears was not approved for the financial year 2006-07. It was stated that since the pay revision was approved by theBoard of Directors only on 08/06/2007 and permission wasobtained from the Government on 28/06/2007. Further, as on30/06/2007, no written communication was received by thecompany. Therefore, the effect of the agreement did not exist ason 31/03/2007. The petitioner preferred an appeal against thesaid assessment order, which, according to the petitioner waspending at the relevant time. It is submitted that while filingincome tax return for the assessment year 2008-09, petitioner didnot claim deduction of Rs.5,10,20,000/- as, already a claim hasbeen made in the previous assessment year and was pendingadjudication. Later, petitioner was advised to make an alternateclaim for the assessment year 2008-09. Petitioner thereforesubmitted a revision petition before the 2[nd] respondent on04/08/2011 under Section 264 of the IT Act. The said petition wasrejected as per Ext.P5 order dated 06/03/2013 on the ground thata fresh claim for deduction can be allowed only by way of filing a revised return and that apart, since the assessee had approachedthe Commissioner of Income Tax (Appeals) for relief against theassessment order for the assessment year 2007-08, the 2[nd]respondent refused to interfere with the order of assessment forthe assessment year 2008-09 and the petition under Section 264is rejected. 4.Learned senior counsel appearing for the petitionersubmits that the 2[nd] respondent had not exercised the jurisdictionvested in it, in accordance with law. It is submitted that Section264 permits revision of any order of assessment on any of thegrounds. This is an instance where petitioner was entitled toclaim deduction during the assessment year 2007-08 which wasrejected only on technical grounds since the permission fromPrincipal Secretary was obtained only on 28/06/2007, that isduring the assessment year 2007-08. If the said deduction is notallowable in the year 2007-08, petitioner was entitled for claimingdeduction during the year 2008-09. Since an appeal was pendingagainst the assessment order 2007-08, deduction was notclaimed for the assessment year 2008-2009. When that mistakewas noticed and the time for making a revised return has expired, Ext.P4 application was filed. It is submitted that, even if norevised return is filed, still the Commissioner has power to allowthe deduction as it is an amount for which deduction can beclaimed either during the assessment year 2007-08 or 2008-09.It is also pointed out that the appeal against the assessment order2007-08 filed had been dismissed as early as on 31/03/2010 asinfructuous observing that the petitioner produced a copy of orderunder Section 154 dated 25/05/2010 which has resulted in wipingof the entire tax demand to nil. Copies of the rectification ordersdated 12/01/2010 and 25/05/2010 were also placed on record.Therefore, there was no surviving income tax demand on theassessee for the assessment year 2007-08. Ext.P4 application was filed. It is submitted that, even if norevised return is filed, still the Commissioner has power to allowthe deduction as it is an amount for which deduction can beclaimed either during the assessment year 2007-08 or 2008-09.It is also pointed out that the appeal against the assessment order2007-08 filed had been dismissed as early as on 31/03/2010 asinfructuous observing that the petitioner produced a copy of orderunder Section 154 dated 25/05/2010 which has resulted in wipingof the entire tax demand to nil. Copies of the rectification ordersdated 12/01/2010 and 25/05/2010 were also placed on record.Therefore, there was no surviving income tax demand on theassessee for the assessment year 2007-08. 5.Learned counsel for the petitioner also placed relianceon the judgment in Parekh Brothers v. Commissioner ofIncome Tax[1984 150 ITR 105]. In that case, a Division Bench ofthis Court, while considering the scope and power of theCommissioner under Section 264 of the Act held that even thougha mistake was committed by the assessee and it was detected byhim after the order of assessment and the the order ofassessment is not erroneous, still it is open for the assessee to file a revision before the Commissioner under Section 264 of the ITAct and claim appropriate relief. It is held as under “In the light of the above discussions, wehave no hesitation to hold that the Commissionerof Income Tax committed an error of law inholding that it is not open to him for the first timeto entertain a relief of the kind pleaded by theassessee and in denying jurisdiction. We hold,that even though a mistake was committed bythe assessee 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 S.264 of the Act and claimappropriate relief. But it should not be forgottenthat the power to be exercised under S.264 is arevisionary one. The limitations implicit in theexercise of such power are well known. Thejurisdiction is discretionary. Whether in aparticular case, on the basis of facts disclosed,the Commissioner will exercise his jurisdictionand interfere in the matter, is a matter ofdiscretion. It is certainly a judicial discretionvested in the Commissioner, to be exercised inaccordance with law. We are not called upon topronounce on the scope and amplitude of therevisional power. The only question mooted for our consideration in this case is whether theCommissioner has got revisional jurisdiction atall, where the assessee having included theincome for assessment, can claim the relief ofweighted deduction under S.35B of the Act, forthe first time, in a petition filed under S.264 ofthe Act. On that aspect of the question, we haveno doubt in our mind that the Commissioner hasjurisdiction to entertain a revision petition underS.264 of the Act.” 6.On the other hand, learned Standing Counselappearing for the respondents/Revenue submits that in Goetze(India) Ltd. v. Commissioner of Income Tax [(2006) 284 ITR323 SC], the Apex Court, while considering the question on thepower of the Tribunal under Section 254 of the IT Act, 1961 heldthat in order to entertain for the first time a point of law, the facton the basis of which the issue of law can be raised before theTribunal should be available. It is stated that when the revisedreturn is not filed, there is no claim at all for such a deduction andit is not for the Commissioner to adjudicate upon the same. Thatapart, at the relevant time, no materials were produced to showthat the appeal for the assessment year 2007-08 was disposed of. 7.Section 264(1) to (4) of the IT Act reads as under: “264. Revision of other orders. 7.Section 264(1) to (4) of the IT Act reads as under: “264. Revision of other orders. (1) In the case of any order other than anorder to which section 263 may, either of his ownmotion or on an application by the assessee forrevision, call for the record of any proceeding underthis act in which any such order has been passed andmay make such inquiry or cause such inquiry to bemade and, subject to the provisions of this Act, maypass such order thereon, not being an orderprejudicial to the assessee, as he thinks fit. (2)the Commissioner shall not of his ownmotion revise any order under this section if theorder has been made more than one year previously. (3)In the case of an application for revisionunder this section by the assessee, the applicationmust be made within one year from the date onwhich the order in question was communicated tohim or the date on which he otherwise came to knowof it, whichever is earlier. Provided that the Commissioner may, if he issatisfied that the assessee was prevented bysufficient cause from making the application withinthat period, admit an application made after theexpiry of that period. (4)The Commissioner shall not revise anyorder under this section in the following cases- (a)where an appeal against the order lies tothe Deputy Commissioner (Appeals) or to theCommissioner (Appeals) or to the Appellate Tribunalbut has not been made and the time within whichsuch appeal may be made has not expire, or, in thecase of an appeal to the Commissioner (Appeals) orto the Appellate Tribunal, the assessee has notwaived his right of appeal; or (b)where the order is pending on an appealbefore the Deputy Commissioner (Appeals); or (c)where the order has been made thesubject of an appeal to the Commissioner (Appeals)or to the Appellate Tribunal.”or to the Appellate Tribunal.” 8.In fact the judgment in Goetze (India) Ltd. (supra) was with reference to the power of the Tribunal under Section 254of the IT Act which can have no basis for the power to beexercised by the Commissioner under Section 264 of the IT Act.Very wide powers have been conferred on the Commissionerunder Section 264 of the IT Act to conduct an enquiry to be madeand to pass such orders, as he thinks fit. In the impugned order,the Commissioner proceeds on the basis that the petitioner hadnot filed a revised return for the year 2008-09. It is pointed out by the petitioner that the time for filing a revised return hadalready expired and once the said period has expired, revisedreturn cannot be filed. The question is whether, in the absence offiling a revised return, a claim for deduction for the aforesaidamount is permissible for the assessment year 2008-09. As heldby a Division Bench in Parekh Brothers (supra), there is no limitto exercise the jurisdiction under Section 264 of the IT Act. Thatwas also a case in which the claim was not made by the assesseein the return or at the time of arguments when the assessmentwas made. In such an instance, the Division Bench held that,even assuming that the assessment order was correct, still it isopen for the assessee to seek the revisional jurisdiction in respectof an item which was not made by way of a mistake. Therefore,the jurisdiction of the Commissioner to pass orders even if arevised return is not filed, is very much available. 9.Then the only question is whether any deduction hasbeen permitted during the assessment year 2007-08. As alreadyindicated, the appellate order was passed as early as on31/03/2010 dismissing the appeal as infructuous. Whether suchdeduction has been permitted during 2007-08 is not made clear. 9.Then the only question is whether any deduction hasbeen permitted during the assessment year 2007-08. As alreadyindicated, the appellate order was passed as early as on31/03/2010 dismissing the appeal as infructuous. Whether suchdeduction has been permitted during 2007-08 is not made clear. However, taking into consideration the overall facts andcircumstances involved in the matter, I am of the view that thematter requires consideration. The commissioner shall hear thepetitioner and if deduction has not been made for the assessmentyear 2007-08, it has to be considered whether the deductioncould be made for the assessment year 2008-09 irrespective ofthe fact that the petitioner has filed any revised return. In the result, this writ petition is disposed of as under: i)Ext.P5 is set aside. ii)The 2[nd] respondent shall consider Ext.P4 revisionpetition filed by the petitioner and take a decision in the matterafter hearing the petitioner, within a period of two months fromthe date of receipt of a copy of this judgment. ii)Petitioner shall place all necessary materials includingthe appellate order in respect of the assessment year 2007-08before the Commissioner. (sd/-) (A.M.SHAFFIQUE, JUDGE)