Equity Intelligence India Pvt. Ltd. v. Principal Commissioner of Income Tax, Kochi and The Assistant Commissioner of Income Tax Circle 1(1), Ernakulam

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **THURSDAY, THE 3[RD] DAY OF AUGUST 2023 / 12TH SRAVANA, 1945 WP(C) NO. 7779 OF 2016** ## **PETITIONER/S:** EQUITY INTELLIGENCE INDIA PVT. LTD 5TH FLOOR, AREEKAL MANSION, MANORAMA JUNCTION, PANAMPILLY NAGAR, COCHIN 682036, REP BY ITS MANAGING DIRECTOR, MR PORINJU VELIYATH BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.HARAN THOMAS GEORGE SRI.ISAAC THOMAS SRI.NOBY THOMAS CYRIAC ## **RESPONDENT/S:** 1 PRINCIPAL COMMISSIONER OF INCOME TAX C R BUILDING, I S PRESS ROAD, KOCHI 682018 2 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1), ERNAKULAM -682018 BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **WP(C) NO. 7779 OF 2016** 2 ## J U D G M E N T 1. Orders dated 20.11.2015, Exts.P10 and P11, rejecting applications moved under Section 264 of the Income Tax Act, 1961 ('Act', for short) by the petitioner for revising return for the assessment years 2007-08 and 2009-10 respectively, are under challenge in the present writ petition. 2. Petitioner is Securities and Exchange Board of India (SEBI) registered Portfolio Manager since 2003 and engaged in the business of rendering portfolio management services to its clients in accordance with the guidelines and regulations issued by SEBI from time to time. It is also an assessee under the Act in filing returns. From the inception onwards, petitioner filed return showing gains from investments in shares under the head 'investments' in the balance sheet as 'capital gains' for the respective financial years, which were accepted by the Department. However, for the assessment years 2006-07, 2008-09 and 2010-11, the **WP(C) NO. 7779 OF 2016** 3 Department assessed such gains as 'business income', while for the assessment years 2007-08 and 2009-10, when petitioner suffered capital loss, it was assessed as 'capital gain/loss'. Assessment orders for the years 2006-07, 2008-09 and 2010-11 were assailed before the appellate authority and before this Court. Both the authorities rejected the case of the petitioner and the matter is stated to be pending before the Hon'ble Supreme Court. Realising the fact that the income on sale of shares is to be assessed under the head 'business income/loss' and not as 'capital gain', petitions for revision of assessments for the years 2007-08 and 2009-10, Exts.P6 and P7, under Section 264 of the Act were submitted along with delay condonation applications. Those were dismissed by the Commissioner as per orders dated 20.11.2015, Exts.P10 and P11, respectively, which are challenged in the present writ petition. 3. Learned Senior Counsel appearing on behalf of the petitioner submitted that orders of the **WP(C) NO. 7779 OF 2016** 4 competent authority Exts.P10 and P11 are not sustainable in the eyes of law, that at the time when petitions were considered, the law with regard to revision of orders was different than the ratio decidendi culled out in the judgment of Delhi High Court in Vijaya Gupta v. Commissioner of Income Tax and Another [(2016) 386 ITR 643 (Delhi)] . The impediment of the limitation would not also be taken against the petitioner as petitioner sought to rectify the orders taking into consideration the order passed by the assessing officer for the year 2006-07 treating it as capital gain instead of business gain. 4. On the other hand, learned Standing Counsel for the Income Tax Department opposed the aforementioned contentions and stated that no explanation has come forward in not submitting applications within a period of one year as provided under Section 264 of the Act, but did not dispute the fact that the Commissioner would have the power to rectify mistake by taking into **WP(C) NO. 7779 OF 2016** 5 consideration the provisions of Section 264. 5. I have heard the learned counsel appearing for the parties and appraised the paper book. 6. Section 264 of the Act reads as under: “ 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 Principal Commissioner or 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 Principal Commissioner or 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 Principal Commissioner or Commissioner may, if he is satisfied that the **WP(C) NO. 7779 OF 2016** 6 assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period. (4) The Principal Commissioner or Commissioner shall not revise any order under this section in the following cases: (a) where an appeal against the order lies to the 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 1[st] 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 sub-section, **WP(C) NO. 7779 OF 2016** 7 the time taken in giving an opportunity to the 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 subsection (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, High Court or the Supreme Court. Explanation 1.—An order by the Principal Commissioner or 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 Deputy Commissioner (Appeals) shall be deemed to be an authority subordinate to the Principal Commissioner or Commissioner.” 7. It is a matter of record that for the assessment year 2006-07, income derived from investment of shares though was claimed in the income tax return as capital gain, but the Department treated it as a business sale. The said decision was assailed before the appellate **WP(C) NO. 7779 OF 2016** 8 authority and ultimately before this Court, but petitioner was not successful. Now, the matter, according to the contention, is stated to be pending before the Hon'ble Supreme Court. As an abundant precaution, applications Exts.P6 and P7 were submitted to the Commissioner for rectification/revision of the orders for assessment years 2007-08 and 2009-10 to treat the same as has been done for the assessment year 2006-07. Though the aforesaid applications were submitted on 12.6.2014, it was beyond the period of one year as provided under the statute. Such delay could not have been condoned, as per the plain and simple reading of Section 264 extracted above. 8. Commissioner, in my view, rightly rejected the applications being time barred, though on other point the reasoning given is not sustainable in view of the ratio deciendi culled out in the judgment of Delhi High Court in Vijaya Gupta (supra) regarding the powers of Commissioner. The explanation given by the petitioner for condoning **WP(C) NO. 7779 OF 2016** 9 the delay was also not found satisfactory as it was a subsequent cause of action. Since delay has not been explained in a proper and reasonable manner, dismissal of the applications for revision of orders for the assessment years 2007-08 and 200910, vide orders dated 20.11.2015, Exts.P10 and P11, respectively, are perfectly correct and do not call for interference. In my view, such an attempt was an afterthought realising the fact that for assessment years 2007-08 and 2009-10, return of income/gains arising from investment in equity shares was capital loss. Writ petition is bereft of merit and is accordingly dismissed. Pending interlocutory applications, if any, in the writ petition would stand dismissed. Sd/AMIT RAWAL JUDGE jg **WP(C) NO. 7779 OF 2016** 10 ## **APPENDIX OF WP(C) 7779/2016** PETITIONER EXHIBITS P1:-TRUE COPY OF INTIMATION UDER SECTION 143(1) DTD 10/3/2010 FOR AY 2007-08 P2:-TRUE COPY OF INTIMATION UNDER SECTION 143(1) DTD 4/9/2010 FOR AY 2009-10 P3:-TRUE COPY OF ASSESSMENT ORDER DTD 15/12/2011 UNDER SECTION 147 FOR AY 2006-07 P4:-TRUE COPY OF ASSESSMENT ORDER DTD 30/12/2010 UNDER SECTION 143(3) FOR AY 2008-09 P5:-TRUE COPY OF ASSESSMENT ORDER DTD 08/3/2013 UNDER SECTION 143(3) FOR AY 2010-11 P6:-TRUE COPY OF REVISION PETITION DTD 10/6/2014 FILED BY THE PETITIONER BEFORE THE IST RESPONDENT FOR AY 200708 UNDER COVERING LETTER DTD 12/6/2014 P6(a):-TRUE COPY OF DELAY CONDONATION PETITION DTD 10/6/2014 FILED BY THE PETITIONER BEFORE THE IST RESPONDENT FOR AY 2007-08 P7:-TRUE COPY OF REVISION PETITION DTD 10/6/2014 FILED BY THE PETITIONER BEFORE THE IST RESPONDENT FOR AY 200910 UNDER COVERING LETTER DTD 12/6/2014 P7(a):-TRUE COPY OF DELAY CONDANATION PETITION DTD 10/6/2014 FILED BY THE PETITIONER BEFORE THE IST RESPONDENT FOR AY 2009-10 P8:-TRUE COPY OF JUDGMENT DTD 3/7/2015 OF THIS HONOURABLE COURT IN ITA NO 280/2014 AND CONNECTED CASES 11 ## **WP(C) NO. 7779 OF 2016** P9:-TRUE COPY OF ORDER DTD 2/11/2015 OF THE HONOURABLE SUPREME COURT OF INDIA IN SLP(C)NOS 30335-30337/2015 FILED BY THE PETITIONER P10:-TRUE COPY OF ORDER UNDER SECTION 264 DTD 20/11/2015 OF THE IST RESPONDENT FOR AY 2007-08 P11:-TRUE COPY OF ORDER UNDER SECTION 264 DTD 20/11/2015 OF THE IST RESPONDENT FOR AY 2009-10