Kewal Krishan Jain V. Commissioner of Income Tax, Jalandhar and another

CWP/1818/1995

AI Insights

The case revolves around Kewal Krishan Jain, the petitioner, who sought a writ of certiorari to quash an order by the Commissioner of Income Tax, Jalandhar, which dismissed his petition for exemption from capital gains tax under Section 54B of the Income Tax Act, 1961. The petitioner had sold agricultural land and purchased new agricultural land within the same financial year, which entitled him to an exemption. However, due to personal circumstances, he failed to claim this exemption in his tax returns. The Commissioner dismissed his petition on the grounds that the exemption was not claimed in the original or revised returns. The High Court found that the Commissioner had the jurisdiction to grant relief under Section 264 of the Act, despite the petitioner's failure to claim the exemption initially, and thus quashed the Commissioner's order.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 795614 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 11-10-2013
• Assessment Year: misc
• Other Referred Cases: Sneh Lata Jain v. Commissioner of Income Tax and Anr., Rashtriya Vikas Ltd. v. CIT, C.Parikh & Co. v. Commissioner of Income Tax, Ramdev Exports v. Commissioner of Income Tax, Digvijay Cement Company Limited v. Commissioner of Income Tax and another, M.Qasim Brothers v. Commissioner of Income Tax and another, Parekh Brothers v. Commissioner of Income Tax, Kerala-II Ernakulam and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VIVEK SETHI
• Assessee Lawyers: ALOK MITTAL
• Keywords: Agricultural Land; Capital Gain Tax; Certiorari; Certiorari; Exemption; Revisionary jurisdiction
• Section: 54B; 264

Judgement Text

"Civil Writ Petition No.1818 of 1995 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Writ Petition No.1818 of 1995 Date of Order: 11 th October, 2013 Kewal Krishan Jain ...Petitioner Versus Commissioner of Income Tax, Jalandhar and another. ..Respondents CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present:Mr. Alok Mittal, Advocate for the petitioner. Mr. Vivek Sethi, Advocate, for the respondent. RAJIVE BHALLA, J. The petitioner prays for issuance of a writ of certiorari quashing order dated 24.10.1994 (Annexure P-5), passed by the Commissioner of Income Tax, Jalandhar, dismissing a petition filed under Section 264 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). Counsel for the petitioner submits that the petitioner sold agricultural land situated at Jalandhar, on 25.05.1990 and during the same financial year purchased agricultural land at village Badot, Tehsil Ganour, District Sonepat. The petitioner was, therefore, entitled to exemption from capital gain tax in terms of Section 54B of the Act. The Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -2- petitioner filed his return of income for assessment year 1991-92 on 30.08.1991. A revised return was filed on 20.01.1994 in order to include capital gains from sale of agricultural land, but inadvertently the petitioner did not claim exemption from capital gains, admittedly, available under Section 54-B of the Act. The error was occasioned as the petitioner's son was seriously ill and hospitalised and the petitioner's mother suffered a paralytic stroke. The petitioner accordingly filed a petition under Section 264 of the Act, before the Commissioner of Income Tax, Jalandhar, praying that assessment order dated 09.03.1994 be revised and exemption be granted under Section 54-B of the Act. The petition was dismissed on the ground that the petitioner did not claim exemption before the Assessing Officer, whether in the original or in the revised return. The fact that the petitioner did not raise a plea before the Assessing Officer is irrelevant as Section 264 of the Act confers jurisdiction to grant relief where on account of a bonafide error, whether by the assessee or the Assessing Officer, the assessment order is contrary to an available exemption. The revenue does not deny that the petitioner was entitled to exemption under Section 54-B of the Act. The Commissioner should have, therefore, allowed the petition. Counsel for the petitioner relies upon a judgment of the High Court of Jammu and Kashmir at Jammu in Sneh Lata Jain v. Commissioner of Income Tax and Anr., (2004) 192 CTR (J&K) 50, Allahabad High Court in Rashtriya Vikas Ltd. v. CIT, (1992) 196 ITR 694(AII), Gujarat High Court in C.Parikh & Co. v. Commissioner of Income Tax, (1980) 122 ITR 610(Guj), Ramdev Exports v. Commissioner of Income Tax, (2001) 251 ITR 873(Guj) and Digvijay Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -3- Cement Company Limited v. Commissioner of Income Tax and another, 1994 ITR, 797. Counsel for the petitioner also relies upon circular No.14(XL-35) of 1955, dated 11.04.1955 issued by the Board of Directors, to urge that officers of the department must not take advantage of ignorance of an assessee as to his rights as it is their duty to assist a tax payer in every way particularly in claiming and securing relief. Counsel for the revenue submits that power under Section 264 of the Act is limited to rectifying errors committed by an Assessing Officer. The failure of the assessee to claim exemption under Section 54-B of the Act, before the Assessing Officer, disentitles the petitioner to any relief under Section 264 of the Act. Counsel for the revenue relies upon a judgment of Jammu and Kashmir High Court in M.Qasim Brothers v. Commissioner of Income Tax and another, 1991 ITR, 675 and submits that the circular relied by the petitioner does not apply to the present case. We have heard counsel for the parties and perused the impugned order. The questions that fall for an answer are the scope and ambit of Section 264 of the Act and whether failure to claim an available exemption, before the Assessing Officer, prohibits an assessee from filing a petition or the Commissioner from exercising power under Section 264 of the Act. Chapter-XX-E of the Act contains two significant provisions, namely, Section 263 and 264. Section 263 of the Act, empowers the Commissioner to revise orders that are erroneous and prejudicial to the interest of the revenue, whereas Section 264 of the Act empowers the Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -4- Commissioner to revise other orders, i.e., orders that are prejudicial to the interest of the assessee. Section 264 of the Act, reads as follows:- “264 Revision of other orders. (1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit. (2) The Commissioner shall not of his own motion revise any order under this section if the order has been made more than one year previously. (3) In the case of an application for revision under this section by the assessee, the application must be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier. Provided that the Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause15 from making the application within that period, admit an application made after the expiry of that period. (4) The Commissioner shall not revise any order Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -5- under this section in the following cases— (a) where an appeal against the order lies to the 16 [Deputy Commissioner (Appeals)] [or to the Commissioner (Appeals)] or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal, the assessee has not waived his right of appeal; or (b) where the order is pending on an appeal before the [Deputy Commissioner (Appeals); or (c) where the order has been made the subject of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal. (5) Every application by an assessee for revision under this section shall be accompanied by a fee of [five hundred] rupees. (6) On every application by an assessee for revision under this sub- section, made on or after the 1st day of October, 1998, an order shall be passed within one year from the end of the financial year in which such application is made by the assessee for revision. Explanation.—In computing the period of limitation for the purposes of this subsection, the time taken in giving an opportunity to the Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -6- assessee to be re-heard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. (7) Notwithstanding anything contained in sub- section (6), an order in revision under sub- section (6) may be passed at any time in consequence of or to give effect to any finding or direction contained in an order of the Appellate Tribunal, [National Tax Tribunal,] the High Court or the Supreme Court.] Explanation 1.—An order by the Commissioner declining to interfere shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee. Explanation 2.—For the purposes of this section, the 24[Deputy Commissioner (Appeals)] shall be deemed to be an authority subordinate to the Commissioner.” Section 264 confers power upon a Commissioner to revise proceedings or orders subject however to restrictions, prescribed therein. A Commissioner, may either suo-motto or an application filed by an assessee, call for the record of any proceedings or order and after making “such enquiry” pass “such order” in accordance with provisions of the Act. The expressions “such enquiry” and “such order” are wide enough, to include a situation where but for a bonafide error, committed by an assessee, he would not be liable to pay tax. The prohibition, against raising a plea that has not been raised before the Assessing Officer, invoked by the revenue, applies to appeals and not Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -7- to proceedings under Section 264 of the Act. If such a prohibition were to be read into Section 264 of the Act, it would obliterate the difference between an appeal and power conferred by Section 264 of the Act. Section 264 of the Act, was enacted, to ensure that proceeding before and orders passed by Assessing Officers are passed in accordance with provisions of the Act.. To punish an assessee with payment of tax, where admittedly such a tax is not payable, would, in essence, lead to affirmation of an order that is admittedly contrary to provisions of the Act and thus without authority of law. At this stage, it would be appropriate to refer to a judgment of the High Court of Jammu and Kashmir at Jammu in Sneh Lata Jain v. Commissioner of Income Tax and Anr. (supra), where, in an identical situation, it was held that the mere fact that the assessee had not raised a plea before the Assessing Officer, does not prohibit the assessee from claiming relief under Section 264 of the Act. A similar controversy was decided by the Kerala High Court in Parekh Brothers v. Commissioner of Income Tax, Kerala-II Ernakulam and others, 1984, ITR, 105, by holding as follows:- “The revisional jurisdiction may be a part of or a species of appellate jurisdiction, and not part of original jurisdiction. On that basis, it does not follow that all powers so exercisable by the appellate authority with all limitations inherent therein as enunciated by the above Supreme Court decision will be equally applicable in construing the scope and content of the revisional power under Section 264 of the Act. We are unable to accept the plea so put forward by the counsel for the Revenue..........” Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -8- In the light of above discussions, we have no hesitation to hold that the Commissioner of Income-tax committed an error of law in holding that it is not open to him for the first time to entertain a relief of the kind pleaded by the assessee and in denying jurisdiction. We hold, that even though a mistake was committed by the assessee and it was detected by him after the order of assessment, and the order of assessment is not erroneous, none the less it is open to the assessee to file a revision before the Commissioner under Section 264 of the Act and claim appropriate relief. But it should not be forgotten that the power to be exercised under Section 264 is a revisionary one. The limitations implicit in the exercise of such power are well known. The jurisdiction is discretionary. Whether in a particular case, on the basis of facts disclosed, the Commissioner will exercise his jurisdiction and interfere in the matter, is a matter of discretion. It is certainly a judicial discretion vested in the Commissioner, to be exercised in accordance with law. We are not called upon to pronounce on the scope and amplitude of the revisional power. The only question mooted for our consideration in this case is whether the Commissioner has got revisional jurisdiction at all, where the assessee Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -9- having included the income for assessment, can claim the relief of weighted deduction under Section 35B of the Act, for the first time, in a petition filed under Section 264 of the Act. On that aspect of the question, we have no doubt in our mind that the Commissioner has jurisdiction to entertain a revision petition under Section 264 of the Act.” To similar effect, are judgments of the Allahabad High Court in Rashtriya Vikas Ltd. v. CIT, (1992) 196 ITR 694(AII), Gujarat High Court in C.Parikh & Co. v. Commissioner of Income Tax, (1980) 122 ITR 610(Guj), Ramdev Exports v. Commissioner of Income Tax, (2001) 251 ITR 873(Guj) and Digvijay Cement Company Limited v. Commissioner of Income Tax and another, 1994 ITR, 797. We, however, express our respectful disagreement with the judgment of the Jammu & Kahsmir High Court in M.Qasim Brothers v. Commissioner of Income Tax and another. Thus, we hold that a bonafide error committed by an assessee in claiming an admissible exemption, during assessment proceeding, would not prohibit the assessee from approaching the Commissioner or the Commissioner from considering a petition under Section 264 of the Act, provided other conditions contained in Section 264 are satisfied. Admittedly, the petitioner sold and purchased agricultural land in the previous year relevant to the assessment year and was entitled to exemption from capital gain under Section 54-B of the Act. The assessee filed a return of income declaring a net loss of Rs.2,29,700/-, but did not declare any capital gain. The case was taken up for Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -10- scrutiny. The assessee was asked to furnish his bank accounts. The assessee filed a revised return of income declaring a net loss of Rs.42,330/- and also declared taxable capital gain of Rs.84,714/-. The assessee, however, did not claim exemption under Section 54-B of the Act, whether in the original or in the revised return. The assessment was completed vide order dated 09.03.1994 on a net taxable income of Rs.60,330/-, and an agricultural income of Rs.2,00,000/-. It would be appropriate to point out that the revised return was ignored by the Assessing Officer as it was filed beyond the period prescribed under Section 139(5) of the Act. As referred to hereinabove, it is not denied by the revenue that the assessee had purchased agricultural land within the relevant previous year and was , therefore, statutorily entitled to claim and be granted exemption from capital gain, under Section 54B of the Act. The assessee, filed a petition under Section 264 of the Act, praying that as he had purchased agricultural land during the previous year, preceding the assessment year and was prevented by a bonafide error from claiming exemption, the exemption may be allowed under Section 54-B of the Act. The Commissioner of Income Tax, Jalandhar, placed reliance upon a judgment in M.Qasim Brothers v. Commissioner of Income Tax and another(supra) and dismissed the petition by holding that Section 264 of the Act cannot be invoked as the petitioner did not raise the plea for exemption, before the Assessing Officer whether in the original or in the revised return. The revenue does not deny that the petitioner sold and purchased land during the previous year, relevant to assessment year and but for his error is not raising such a plea, before the Assessing Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh Civil Writ Petition No.1818 of 1995 -11- Officer, was entitled to benefit, under Section 54-B of the Act. Thus, the only assertion put forth by the revenue is that as the petitioner did not rely upon the purchase of agricultural land, whether in his original or in revised return, the Commissioner has rightly refused to exercise power under Section 264 of the Act. As we have already held that power under Section 264 of the Act, is wide enough, to include rectification of a “bonafide” error committed by an assessee, while claiming exemptions, under the Act, the Commissioner should have in the exercise of his revisional power under Section 264 of the Act, decided the petition, filed by the petitioner, on merits. In view of what has been recorded hereinabove, the writ petition is allowed, the impugned order is quashed and the matter is remitted to the Commissioner of Income Tax, Jalandhar, to pass a fresh order, in accordance with law. No order as to costs. (RAJIVE BHALLA) JUDGE 11th October, 2013 (DR. BHARAT BHUSHAN PARSOON) nt JUDGE Kumar Naresh N 2013.12.10 11:29 I attest to the accuracy and integrity of this document High Court Chandigarh "