Case Note & Summary
The petitioner, Kalpesh M. Nagda, filed his return of income for Assessment Year 2003-2004 on 25 November 2003, declaring total income of Rs.48,22,312/- along with Form No.10CCAC for deduction under Section 80HHC of the Income Tax Act, 1961. The return was processed under Section 143(1) on 29 December 2003. Due to controversy and lack of clarity regarding the availability of Section 80HHC benefit, the petitioner filed a revised return on 31 October 2004, reducing export incentives of DEPB by Rs.30,09,163/-, stating that due to a Supreme Court decision and CBDT Circular, the deduction claimed earlier was reduced. The assessing officer completed the assessment under Section 143(3) on 21 October 2005, accepting the revised return and determining income at Rs.78,52,980/-. Subsequently, the Taxation Laws Amendment Act, 2005 amended Sections 28 and 80HHC with retrospective effect from 1 April 1998, providing that profit derived on sale of DEPB licence would be considered for proportionate increase of profit derived from export, making the petitioner eligible for the exemption. The petitioner filed a revision application under Section 264 before the Commissioner of Income Tax, who rejected it on the ground that the assessment order was passed in accordance with the law prevailing as on the date of assessment (21 October 2005) and thus there was no error or mistake corrigible under Section 264. The petitioner challenged this order by way of a writ petition before the Bombay High Court. The court held that the Commissioner, while exercising revisional jurisdiction under Section 264, must apply the law as it stands at the time of the revision. Since the amendment was retrospective, it is deemed to have been in force on the date of the assessment order. Therefore, the Commissioner ought to have considered the retrospective amendment and allowed the revision. The court set aside the Commissioner's order and directed him to decide the revision application afresh in accordance with law, considering the retrospective amendment.
Headnote
A) Income Tax - Revision under Section 264 - Retrospective Amendment - The Commissioner, while revising an order under Section 264 of the Income Tax Act, 1961, can take into account a retrospective amendment made after the assessment order, as the amendment is deemed to have been in force on the date of the assessment order. The Commissioner erred in rejecting the revision application on the ground that the assessment order was correct as per the law prevailing on the date of assessment. (Paras 1-4)
Issue of Consideration
Whether the Commissioner of Income Tax, while exercising revisional jurisdiction under Section 264 of the Income Tax Act, 1961, can take into account a retrospective amendment made after the order of the assessing officer.
Final Decision
The court allowed the writ petition, set aside the order of the Commissioner of Income Tax dated 23 February 2007, and directed the Commissioner to decide the revision application afresh in accordance with law, considering the retrospective amendment made by the Taxation Laws Amendment Act, 2005.
Law Points
- Revision under Section 264 of Income Tax Act
- 1961 can consider retrospective amendments
- Commissioner must apply law as it stands at time of revision
- Retrospective amendment deemed to exist on date of assessment order
