Case Note & Summary
The petitioner, an individual, filed her return of income for Assessment Year 2018-19 on 20 July 2018, showing total income of Rs. 27,05,646/- from house property and other sources, with a refund determined at Rs. 34,320/-. However, due to an inadvertent error by her accountant, the figure of long term capital gains of Rs. 3,07,60,800/- from the previous assessment year (A.Y. 2017-18) was wrongly copied into the return. The Central Processing Centre processed the return under Section 143(1) of the Income Tax Act, 1961, on 2 May 2019, including the erroneous capital gains, resulting in a total income of Rs. 3,34,66,446/- and a tax demand of Rs. 87,40,612/-. The petitioner had not transferred any capital asset during the relevant year and no capital gains had accrued. She filed a revision petition under Section 264 before the Principal Commissioner of Income Tax, explaining the mistake and seeking to set aside the intimation. The Principal Commissioner rejected the petition by order dated 12 February 2021, without considering the merits of the explanation. The petitioner then filed a writ petition under Article 226 of the Constitution of India before the Bombay High Court. The High Court observed that the Principal Commissioner had not applied his mind to the petitioner's explanation and had merely dismissed the petition on the ground that the return was processed under Section 143(1) and no revised return was filed. The Court held that the Commissioner had the power to examine the correctness of the intimation and to grant relief in case of a bona fide mistake. The Court set aside the order of the Principal Commissioner and directed him to reconsider the revision petition afresh, after giving the petitioner an opportunity of being heard, and to pass a reasoned order within four weeks. The writ petition was allowed in these terms.
Headnote
A) Income Tax - Revision under Section 264 - Bona fide mistake - Section 264 of Income Tax Act, 1961 - The petitioner inadvertently included long term capital gains from a previous assessment year in the return for A.Y. 2018-19 due to an error by the accountant. The Principal Commissioner rejected the revision petition without considering the explanation. Held that the Commissioner ought to have considered the bona fide mistake and set aside the intimation under Section 143(1) to allow the petitioner to file a revised return (Paras 1-15).
Issue of Consideration
Whether the Principal Commissioner of Income Tax erred in rejecting the revision petition under Section 264 of the Income Tax Act, 1961, without considering the petitioner's explanation that the inclusion of long term capital gains in the return was a bona fide mistake by the accountant, and whether the intimation under Section 143(1) should be set aside to allow rectification.
Final Decision
The High Court allowed the writ petition, set aside the order dated 12 February 2021 passed by the Principal Commissioner of Income Tax, and directed the Principal Commissioner to reconsider the revision petition afresh, after giving the petitioner an opportunity of being heard, and to pass a reasoned order within four weeks.
Law Points
- Section 264 of Income Tax Act
- 1961
- Revision by Principal Commissioner
- Bona fide mistake
- Inadvertent error
- Return of income
- Long term capital gains
- Section 143(1) processing
- Natural justice
- Suo motu revision
Case Details
2021 LawText (BOM) (04) 14
WRIT PETITION (L) NO.6096 OF 2021
SUNIL P. DESHMUKH, ABHAY AHUJA
Mr. K. Gopal with Ms. Neha Paranjpe, for the Petitioner. Mr. Sham Walve, for the Respondents.
Aafreen Fatima Fazal Abbas Sayed
Assistant Commissioner of Income Tax, Circle 23(1) & Principal Commissioner of Income Tax-19, Mumbai
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging the order of the Principal Commissioner of Income Tax rejecting the revision petition under Section 264 of the Income Tax Act, 1961.
Remedy Sought
Petitioner sought to set aside the order dated 12 February 2021 rejecting the revision petition and to direct the Principal Commissioner to reconsider the matter and set aside the intimation under Section 143(1) to allow rectification of the mistake in the return.
Filing Reason
The petitioner's accountant inadvertently copied long term capital gains from the previous assessment year into the return for A.Y. 2018-19, leading to a tax demand. The Principal Commissioner rejected the revision petition without considering the explanation.
Previous Decisions
The return for A.Y. 2018-19 was processed under Section 143(1) on 2 May 2019, raising a tax demand. The revision petition under Section 264 was rejected by the Principal Commissioner on 12 February 2021.
Issues
Whether the Principal Commissioner of Income Tax erred in rejecting the revision petition under Section 264 without considering the petitioner's explanation of a bona fide mistake.
Whether the intimation under Section 143(1) should be set aside to allow the petitioner to rectify the inadvertent error in the return.
Submissions/Arguments
Petitioner submitted that the inclusion of long term capital gains was a bona fide mistake by the accountant, as no capital asset was transferred in the relevant year, and the Commissioner ought to have considered this explanation.
Respondents argued that the return was processed under Section 143(1) and no revised return was filed, and the Commissioner had no power to interfere.
Ratio Decidendi
The Principal Commissioner of Income Tax, while exercising revisional powers under Section 264 of the Income Tax Act, 1961, is duty-bound to consider the explanation of the assessee regarding a bona fide mistake in the return and cannot reject the revision petition without applying his mind to the merits. The power under Section 264 is wide enough to set aside an intimation under Section 143(1) if the assessee demonstrates a genuine error, even if no revised return was filed.
Judgment Excerpts
This petition has been filed under article 226 of the Constitution of India, 1950, whereby Petitioner is challenging the order dated 12 February 2021 passed by the Respondent No. 2- Principal Commissioner of Income Tax, rejecting the revision petition filed by Petitioner under section 264 of the Income Tax Act, 1961.
It is submitted that the returns filed by the petitioner for A.Y 2018 – 19 were processed under section 143 (1) of the Income Tax Act vide order dated 2nd May 2019 and a total income of Rs.3,34,66,446/- including long term capital gains of Rs.3,07,60,800/- purported to have been inadvertently shown in the return of income thereby raising a tax demand of Rs.87,40,612/-.
Procedural History
The petitioner filed her return of income for A.Y. 2018-19 on 20 July 2018. The return was processed under Section 143(1) on 2 May 2019, raising a tax demand. The petitioner filed a revision petition under Section 264 before the Principal Commissioner of Income Tax, which was rejected on 12 February 2021. The petitioner then filed the present writ petition under Article 226 of the Constitution of India before the Bombay High Court, which was heard and allowed on 8 April 2021.
Acts & Sections
- Constitution of India, 1950: Article 226
- Income Tax Act, 1961: Section 143(1), Section 143(3), Section 264
