Case Note & Summary
The petitioner, Bahar Infocons Pvt. Ltd., filed three writ petitions challenging orders of the Principal Commissioner of Income Tax (PCIT) rejecting its revision applications under Section 264 of the Income Tax Act, 1961 for the Assessment Years 2019-20, 2020-21, and 2021-22. The petitioner had made provisions for bonus, ex-gratia, and incentives payable to employees. For Assessment Year 2018-19, it made a provision of Rs. 1,30,00,000 but paid only Rs. 1,18,62,953 before the due date for filing the return, resulting in an excess provision of Rs. 11,37,047 which was disallowed under Section 43B. In the subsequent Assessment Year 2019-20, the excess provision was written back by crediting to the salary account, but the petitioner inadvertently failed to reduce this amount from its returned income, leading to double taxation. Similar mistakes occurred for the other two assessment years. The petitioner realized the error while preparing its return for Assessment Year 2022-23. Since the time to file revised returns under Section 139(5) had expired, the petitioner filed revision applications under Section 264 before the PCIT, along with applications for condonation of delay. The PCIT rejected the applications solely on the ground that the petitioner should have filed revised returns. The petitioner then approached the Bombay High Court under Article 226 of the Constitution, seeking certiorari to quash the PCIT's order and mandamus to direct reduction of the excess provision from the returned income. The High Court allowed the petitions, holding that the PCIT erred in rejecting the revision applications. The court emphasized that Section 264 confers wide powers on the Commissioner to grant relief to an assessee, even after the expiry of the time limit for filing a revised return, especially to correct inadvertent mistakes resulting in over-assessment and double taxation. The court relied on decisions of the Madras High Court in Selvamuthukumar v. CIT, the Bombay High Court in Hapag Lloyd India Pvt. Ltd. v. PCIT, and the Calcutta High Court in Ena Chaudhuri v. ACIT, which held that the revisional power under Section 264 is not restricted by the time limit under Section 139(5) and can be exercised to do justice. The court set aside the impugned order and directed the PCIT to allow the reduction of the excess provision of Rs. 11,37,047 from the returned income for Assessment Year 2019-20, and similar relief for the other assessment years.
Headnote
A) Income Tax - Revisional Powers under Section 264 - Scope of Commissioner's Power - Section 264 of the Income Tax Act, 1961 - The Commissioner has wide revisional powers to grant relief to an assessee even after the time for filing a revised return under Section 139(5) has expired, particularly to correct inadvertent mistakes leading to over-assessment and double taxation. The power is not confined to erroneous orders of lower authorities but extends to any order the Commissioner thinks fit, subject to the provisions of the Act. (Paras 13-14) B) Income Tax - Double Taxation - Excess Bonus Provision - Section 43B of the Income Tax Act, 1961 - Where an assessee made a provision for bonus under Section 43B and the excess provision was disallowed in one year and written back in a subsequent year, but inadvertently not reduced from income, resulting in double taxation, the Commissioner under Section 264 can allow reduction of such excess provision from the returned income to avoid unjust enrichment of revenue. (Paras 3-8, 15) C) Income Tax - Revised Return - Time Limit - Section 139(5) of the Income Tax Act, 1961 - The time limit for filing a revised return under Section 139(5) does not bar the Commissioner from exercising revisional powers under Section 264 to grant relief, as the revisional jurisdiction is not subject to the same time restrictions and is intended to ensure that tax is collected in accordance with law. (Paras 11, 14)
Issue of Consideration
Whether the Principal Commissioner of Income Tax erred in rejecting the petitioner's revision application under Section 264 of the Income Tax Act, 1961 on the ground that the petitioner should have filed a revised return under Section 139(5), when the time for filing such revised return had expired and the petitioner sought to correct an inadvertent mistake resulting in double taxation of excess bonus provision.
Final Decision
The High Court allowed the writ petitions, set aside the impugned order dated 23 February 2024 passed by the Principal Commissioner of Income Tax, and directed the respondents to allow the reduction of the excess provision of Rs. 11,37,047 from the returned income for Assessment Year 2019-20, and similar relief for the other assessment years.
Law Points
- Revisional powers under Section 264 of the Income Tax Act
- 1961 are wide and can be exercised to grant relief even after expiry of time for filing revised return under Section 139(5)
- especially to avoid double taxation and ensure tax is collected in accordance with law.
