Transformers and Electricals Kerala Limited v. Deputy Commissioner of Income Tax, Circle 4 (2), Kochi and Commissioner of Income Tax-I, Kochi

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **THURSDAY, THE 11TH DAY OF AUGUST 2016/20TH SRAVANA, 1938** **WP(C).No. 9870 of 2013 (G) ---------------------------** ## **PETITIONER(S):** **-----------------------** **TRANSFORMERS AND ELECTRICALS KERALA LIMITED, ANGAMALY SOUTH P.O., ERNAKULAM-683 573, REPRESENTED BY ITS JOINT GENERAL MANAGER (FINANCE & ACCOUNTS) MR.S.V. GANAPATHI IYER.** **BY SRI.JOSEPH MARKOSE, SENIOR ADVOCATE. ADVS. SRI.V.ABRAHAM MARKOS, SRI.MATHEWS K.UTHUPPACHAN, SRI.BINU MATHEW, SRI.TERRY V.JAMES, SRI.TOM THOMAS (KAKKUZHIYIL), SRI.ABRAHAM JOSEPH MARKOS.** ## **RESPONDENT(S):** **--------------------------** **1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4 (2), KOCHI-682 018.** **2. THE COMMISSIONER OF INCOME TAX-I, CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, KOCHI-682 018.** **BY ADV. SRI.JOSE JOSEPH, SC.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 06-08-2016, THE COURT ON 11/08/2016 DELIVERED THE FOLLOWING:** rs. ## **WP(C).No. 9870 of 2013 (G)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:-** - **EXHIBIT-P1: TRUE COPY OF ACKNOWLEDGMENT OF REVISED RETURN DATED 22.03.2010.** - **EXHIBIT-P2: TRUE COPY OF ASSESSMENT ORDER DATED 29.12.2010 OF THE 1ST RESPONDENT FOR THE ASSESSMENT YEAR 2008-2009.** - **EXHIBIT-P3: TRUE COPY OF ASSESSMENT ORDER DATED 23.12.2009 FOR THE ASSESSMENT YEAR 2007-2008.** - **EXHIBIT-P4: TRUE COPY OF THE REVISION PETITION DATED 04/08/2011 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT.** - **EXHIBIT-P5: TRUE COPY OF ORDER DATED 06.03.2013 PASSED BY THE 2ND RESPONDENT FOR ASSESSMENT YEAR 2008-2009.** ## **RESPONDENT'S EXHIBITS:NIL.** ## **//TRUE COPY//** ## **P.S. TO JUDGE** rs. ## **A.M.SHAFFIQUE, J * * * * * * * * * * * *** W.P.C.No.9870 of 2013 ---------------------------------------Dated this the 11[th] day of August 2016 ## **J U D G M E N T** This writ petition is filed challenging Ext.P5 and seeking for a direction to the respondents to revise the assessment passed for the assessment year 2008-09 by allowing deduction of Rs.5,10,20,000/- towards provision for arrears of salary and wages payable to the officers and staff as per the Long Term Settlement. 2. The short facts involved in the writ petition would disclose that the petitioner is a Government company and a sick industrial unit proceeding for re-habilitation under a Scheme approved by the Board for Industrial and Financial Reconstruction (BIFR). 3. Petitioner is an assessee under the Income Tax Act, 1961 (hereinafter referred to as 'the IT Act'). In the return of income for the assessment year 2007-08, petitioner claimed a deduction of Rs.5,10,20,000/- being provision made in the accounts towards arrears of salary and wages payable to the Officers and staff as per the Long Term Settlement. While W.P.C.No.9870/2013 2 completing the assessment for the said year, the Assessing Officer disallowed the claim on the ground that cause of action for payment of arrears was not approved for the financial year 200607. It was stated that since the pay revision was approved by the Board of Directors only on 08/06/2007 and permission was obtained from the Government on 28/06/2007. Further, as on 30/06/2007, no written communication was received by the company. Therefore, the effect of the agreement did not exist as on 31/03/2007. The petitioner preferred an appeal against the said assessment order, which, according to the petitioner was pending at the relevant time. It is submitted that while filing income tax return for the assessment year 2008-09, petitioner did not claim deduction of Rs.5,10,20,000/- as, already a claim has been made in the previous assessment year and was pending adjudication. Later, petitioner was advised to make an alternate claim for the assessment year 2008-09. Petitioner therefore submitted a revision petition before the 2[nd] respondent on 04/08/2011 under Section 264 of the IT Act. The said petition was rejected as per Ext.P5 order dated 06/03/2013 on the ground that a fresh claim for deduction can be allowed only by way of filing a W.P.C.No.9870/2013 3 revised return and that apart, since the assessee had approached the Commissioner of Income Tax (Appeals) for relief against the assessment order for the assessment year 2007-08, the 2[nd] respondent refused to interfere with the order of assessment for the assessment year 2008-09 and the petition under Section 264 is rejected. 4. Learned senior counsel appearing for the petitioner submits that the 2[nd] respondent had not exercised the jurisdiction vested in it, in accordance with law. It is submitted that Section 264 permits revision of any order of assessment on any of the grounds. This is an instance where petitioner was entitled to claim deduction during the assessment year 2007-08 which was rejected only on technical grounds since the permission from Principal Secretary was obtained only on 28/06/2007, that is during the assessment year 2007-08. If the said deduction is not allowable in the year 2007-08, petitioner was entitled for claiming deduction during the year 2008-09. Since an appeal was pending against the assessment order 2007-08, deduction was not claimed for the assessment year 2008-2009. When that mistake was noticed and the time for making a revised return has expired, W.P.C.No.9870/2013 4 Ext.P4 application was filed. It is submitted that, even if no revised return is filed, still the Commissioner has power to allow the deduction as it is an amount for which deduction can be claimed either during the assessment year 2007-08 or 2008-09. It is also pointed out that the appeal against the assessment order 2007-08 filed had been dismissed as early as on 31/03/2010 as infructuous observing that the petitioner produced a copy of order under Section 154 dated 25/05/2010 which has resulted in wiping of the entire tax demand to nil. Copies of the rectification orders dated 12/01/2010 and 25/05/2010 were also placed on record. Therefore, there was no surviving income tax demand on the assessee for the assessment year 2007-08. 5. Learned counsel for the petitioner also placed reliance on the judgment in **Parekh Brothers v. Commissioner of Income Tax** _[1984 150 ITR 105]._ In that case, a Division Bench of this Court, while considering the scope and power of the Commissioner under Section 264 of the Act held that even though a mistake was committed by the assessee and it was detected by him after the order of assessment and the the order of assessment is not erroneous, still it is open for the assessee to file W.P.C.No.9870/2013 5 a revision before the Commissioner under Section 264 of the IT Act and claim appropriate relief. It is held as under _“In the light of the 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 S.264 of the Act and claim appropriate relief. But it should not be forgotten that the power to be exercised under S.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_ W.P.C.No.9870/2013 6 _our consideration in this case is whether the Commissioner has got revisional jurisdiction at all, where the assessee having included the income for assessment, can claim the relief of weighted deduction under S.35B of the Act, for the first time, in a petition filed under S.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 S.264 of the Act.”_ 6. On the other hand, learned Standing Counsel appearing for the respondents/Revenue submits that in **Goetze (India) Ltd. v. Commissioner of Income Tax** [(2006) 284 ITR 323 SC], the Apex Court, while considering the question on the power of the Tribunal under Section 254 of the IT Act, 1961 held that in order to entertain for the first time a point of law, the fact on the basis of which the issue of law can be raised before the Tribunal should be available. It is stated that when the revised return is not filed, there is no claim at all for such a deduction and it is not for the Commissioner to adjudicate upon the same. That apart, at the relevant time, no materials were produced to show that the appeal for the assessment year 2007-08 was disposed of. W.P.C.No.9870/2013 7 ## 7. Section 264(1) to (4) of the IT Act reads as under: ## _“_ _**264. Revision of other orders.**_ _(1) In the case of any order other than an order to which section 263 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 cause from making the application within that period, admit an application made after the expiry of that period._ W.P.C.No.9870/2013 8 _(4) The 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 expire, 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.”_ 8. In fact the judgment in **Goetze (India) Ltd.** (supra) was with reference to the power of the Tribunal under Section 254 of the IT Act which can have no basis for the power to be exercised by the Commissioner under Section 264 of the IT Act. Very wide powers have been conferred on the Commissioner under Section 264 of the IT Act to conduct an enquiry to be made and to pass such orders, as he thinks fit. In the impugned order, the Commissioner proceeds on the basis that the petitioner had not filed a revised return for the year 2008-09. It is pointed out W.P.C.No.9870/2013 9 by the petitioner that the time for filing a revised return had already expired and once the said period has expired, revised return cannot be filed. The question is whether, in the absence of filing a revised return, a claim for deduction for the aforesaid amount is permissible for the assessment year 2008-09. As held by a Division Bench in **Parekh Brothers** (supra), there is no limit to exercise the jurisdiction under Section 264 of the IT Act. That was also a case in which the claim was not made by the assessee in the return or at the time of arguments when the assessment was made. In such an instance, the Division Bench held that, even assuming that the assessment order was correct, still it is open for the assessee to seek the revisional jurisdiction in respect of an item which was not made by way of a mistake. Therefore, the jurisdiction of the Commissioner to pass orders even if a revised return is not filed, is very much available. 9. Then the only question is whether any deduction has been permitted during the assessment year 2007-08. As already indicated, the appellate order was passed as early as on 31/03/2010 dismissing the appeal as infructuous. Whether such deduction has been permitted during 2007-08 is not made clear. W.P.C.No.9870/2013 10 However, taking into consideration the overall facts and circumstances involved in the matter, I am of the view that the matter requires consideration. The commissioner shall hear the petitioner and if deduction has not been made for the assessment year 2007-08, it has to be considered whether the deduction could be made for the assessment year 2008-09 irrespective of the fact that the petitioner has filed any revised return. In the result, this writ petition is disposed of as under: i) Ext.P5 is set aside. ii) The 2[nd] respondent shall consider Ext.P4 revision petition filed by the petitioner and take a decision in the matter after hearing the petitioner, within a period of two months from the date of receipt of a copy of this judgment. ii) Petitioner shall place all necessary materials including the appellate order in respect of the assessment year 2007-08 before the Commissioner. (sd/-) ## **(A.M.SHAFFIQUE, JUDGE)** jsr