Geekay Security Services (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle-3(1)(2)

ORDER

1. Petition is taken up for final disposal at this stage with the consent of the learned Counsel for the parties.

2. Petitioner has challenged the order dated 27th March, 2018 passed by the Principal Commissioner of Income Tax- Respondent No.2 herein, rejecting Petitioner's Revision Petition under Section 264 of the Income-tax Act, 1961 (for short "the Act").

Brief facts are as under:-

3. For the Assessment Year 2015-16, Petitioner had filed return of income. The return was accepted under Section 143(1) of the Act, without scrutiny. The case of the Petitioner is that, Petitioner had deposited a sum of Rs. 1,06,17942/- towards employee's contribution of PF which was belated, nevertheless made before the due date of filing the return. According to the Petitioner, therefore, by virtue of law settled by this Court, such contribution would be allowable deduction. However, erroneously, Petitioner had not made such a claim in the return. Since return was not taken in scrutiny, Petitioner had no scope of persuading the Assessing Officer to allow the deduction. The Department, therefore, raised the demand of Rs. 1,28,02,720/- on the basis of the return filed by the Petitioner.

4. Petitioner filed an application for rectification under Section 154 of the Act before the Assessing Officer, in which, it was stated that the Chartered Accountant of the Petitioner-Company had filed the return, in which, erroneous disallownce in relation to the said expenditure, was made. Petitioner also placed full details of the payments of the employee's contribution to the fund.

5. The Petitioner also filed a Revision Petition before the Commissioner under Section 264 of the Act and requested that the Petitioner be granted the benefit of the expenditure since it is duly established on facts and in law. Commissioner dismissed the said Revision Petition by the impugned order, only on the ground that, the Petitioner not having claimed it in the return and not having filed revised return, cannot raise claim in Revision Petition. It is against this order of the Commissioner that this Petition is filed.

6. The issue before us, is very narrow. The question is, can the Commissioner, in case, as noted above, entertain Petitioner's claim and grant a relief in exercise of revison power under Section 264 of the Act. The issue is covered by several Judgments of the different High Courts, duly supported by the Judgment of the Supreme Court.

7-8. We may make brief reference to only couple of them. The Division Bench of the Gujarat High Court in Hitech Analystical Services v. Pr. CIT [2017] 251 Taxman 60/86 taxmann.com 164 had occasion to deal with a very similar issue. The Court noticed the Judgments of various High Courts and the Supreme Court and observed as under:—

'7:- Having heard learned Counsel for the parties and having perused the documents on record, we see no error in the view of the Commissioner when he holds that the expenditure could not have been allowed in the hands of the partners. Even the Petitioners are unable to point out any manifest error in the view of the Assessing Officer and he Commissioner since in the hands of the partners, the expenditure would be related to earning exempt income. Nevertheless, the claim of the petitioners was not confined to the expenditure being allowed in the hands of the partners. An alternative claim was put forth by the partners and the firm that at any rate such expenditure cannot be disallowed in the hands of the firm. In this regard, we may recall that even during the assessment of the partner, a stand was taken that the Assessing Officer of the firm may allow such expenditure. Therefore, after the Assessing Officer passed the order of assessment in case of the partner on 13.01.2015, the partnership firm had filed a revised computation of income before the Assessing Officer before whom the assessment of the firm was still pending. To the extent, when the Commissioner holds that such expenditure would not be allowed in the hands of the firm also, we are unable to accept the stand. We have note the three objections of the Commissioner in granting such expenditure. We may deal with these objections seriatim.

8:- The non-filing of the revised return by the firm could not have been the ground for rejection of the claim. Even if the powers of the Assessing Officer could be seen to be restricted in absence of any revised return, nothing prevented the Commissioner from examining the issue and if need be to have further enquiries made. In case of C. Parikh & Co. v. CIT [1980] 122 ITR 610/4 Taxman 224 (Guj.) , the Division Bench of this Court considered the scope of the powers of the Commissioner under Section 264 of the Act. In the said case, after the assessment was completed, the assessee discovered that a mistake had been committed in its books of account in totaling the purchases as a result of which the assessee had under-totalled the purchases and on account of this, the gross profit of the assessee had gone-up. When the Commissioner refused to allow the assessee to correct such mistake, the issue reached the High Court. The Court observed that the powers are very wide. Subject to the limitation prescribed in the section itself, the Commissioner in exercise of his revisional powers could pass such order as he thinks fit which is not prejudicial to the assessee. It was further observed that there is nothing in section 264 placing any restriction on the Commissioner's revisional powers to give relief to the assessee in a case where the assessee detects mistakes on account of which he was over-assessed, after the assessment was completed even where such over-assessment was due to a mistake detected by the assessee after completion of the assessment. The Commissioner could entertain even a new ground not urged before the lower authorities while exercising such revisional powers.

9:- In case of Parekh Bros. v. CIT [1984] 150 ITR 105/[1983] 15 Taxman 359 , the Division Bench of Kerala High Court, referring to and relying upon the judgment of this Court in case of C. Parikh & Co. (supra) observed that the powers of the Commissioner under Section 264 are wider than under section 263 and not confined to correcting the erroneous orders. It was held that deduction not claimed during assessment proceedings or appeals can be considered by CIT on an application under section 264 of the Act.

10:- In case of Digvijay Cement Co. Ltd. v. C.B. Rathi, CIT [1994] 210 ITR 797/75 Taxman 355 (Guj.) the assessee had not claimed a weighted deduction on certain expenditure before the Assessing Officer carrying a belief that no such deduction could be claimed. In the appeal before the Appellate Commissioner also, no such claim was made and therefore such claim was not examined by the Appellate Commissioner. In further appeal before the Tribunal, this question did not arise. The assessee, thereafter, filed a revision petition before the Commissioner under Section 264 of the Act claiming deduction which revision petition was rejected by the Commissioner. The High Court held that the Commissioner ought to have entertained the claim and decided it on merits. The High Court referring to and relying upon the decision of this Court in case of C. Parikh & Co. (supra) held thus:-

"In the alternative, it was submitted that the assessee not having made any claim before the Income Tax Officer, there was no order of the Income Tax Officer in this behalf and, therefore, section 364 could not have been invoked by the assessee. What was submitted was that a revision application would lie only against the order of the Income Tax Officer and if there was no order of the Income Tax Officer with respect of the claim made before the Commissioner, the revision would not be maintainable. We are concerned in this case with the order of assessment and not with any other type of order. What in fact the assessee did by filing the revision application before the Commissioner was to challenge the order of assessment on the ground that it was erroneous. It may be that the error was committed not by the Income Tax Officer but by assessee and that error was detected by the assessee later on. But that certainly cannot preclude the assessee from challenging the order of assessment on the ground that the order was erroneous inasmuch as, under the law, deduction under Section 35B ought to have been granted to the assessee. The power of revision under Section 264 cannot be restricted to such erroneous orders which have become erroneous as a result of some error committed by the Income Tax Office while passing the orders. Independently of any decision or absence of any decision on the part of the Income Tax Officer, the order of assessment can be challenged but also by the Income-tax Officer. Even in such a case, the order of assessment can be challenged by filing a revision application before the Commissioner. Therefore, even this contention raised on behalf of the Revenue deserves to be rejected."

11:- In case of Vijay Gupta v. CIT [2016] 386 ITR 643/238 Taxman 505/68 taxmann.com 131 , the Division Bench of Delhi High Court observed that the powers conferred upon a Commissioner under Section 264 are very wide. The Commissioner is bound to apply his mind to the question whether the assessee was taxable on a particular income. Section 264 uses the expression 'any order'. It would imply that the section does not limit the power to correct errors committed by the subordinate authorities but could even be exercised where errors are committed by the assessee. There is nothing in section 264 which places any restriction on the Commissioner's revisional power to give relief to the assessee in a case where the assessee detects mistakes after the assessment is completed because of which he is over-assessed. First objection of the Commissioner was therefore not valid.'

9. Similar view has also expressed by the Delhi High Court in case of Rites Ltd. v. CIT [2017] 83 taxmann.com 267 and by Madras High Court in case of Selvamuthukumar v. Commissioner Of Income Tax [2017] 394 ITR 247/246 Taxman 185/79 taxmann.com 113 .

10. Under the circumstances, we find that the Commissioner was not correct in refusing to exercise Petitioner's claim on merits. Since the Commissioner has not examined the merits of the Petitioner's case, we may place the Revision Petition back to the Commissioner for disposal on merits. We have noticed that all payments towards employee's contribution to the PF were made before the due date of the filing of the return. If that be so, surely, the Commissioner would be guided by the decision of this Court on the relevant issue namely - CIT v. Ghatge Patil Transport Ltd. [2014] 368 ITR 749/[2015] 228 Taxman 340/53 taxmann.com 141 (Bom.) .

11. Under the circumstances, the impugned order is set aside. Revision Petition is revived and placed back before the Commissioner for fresh consideration and disposal in accordance with law, bearing in mind, the observations made in this Judgment. This may be done preferably before 28th February, 2019. Petition disposed of in above terms.

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