IN HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 5331/2014 Reserved on: 24th May, 2017 Date of decision: 3rd July, 2017 RITES LIMITED ..... Petitioner Through: Mr. R.P. Garg with Mr. K.N. Ahuja, Advocates. Versus COMMISSIONER OF INCOME TAX, DELHI-V ..... Respondent Through: Mr. Dileep Shivpuri, Senior standing counsel with Mr. Sanjay Kumar, Junior standing counsel. CORAM: JUSTICE S.MURALIDHAR JUSTICE CHANDER SHEKHAR JUDGMENT % 03.07.2017 Dr. S. Muralidhar, J. 1. Petitioner, Rites Limited, has filed present petition under Article 226 of Constitution challenging order dated 24th March 2014 passed by Respondent, Commissioner of Income Tax ( CIT ), rejecting its application under Section 264 of Income Tax Act, 1961 ( Act ). 2. facts in brief are that Petitioner, Rites Limited, is Government of India Undertaking engaged in business of providing technical consultancy services in India and abroad. It is stated that pursuant to recommendation of 5th Pay Commission in respect of revised salary with W.P. (C) 5331 of 2014 Page 1 of 11 effect from 1st January 1996, Petitioner made provision of wages arrears in books of Financial Year ( FY ) relevant to Assessment Year ( AY ) 1997-98 in sum of Rs. 2,50,00,000. 3. However, since relevant notification giving effect to Pay Commission recommendations was issued only on 4th March 1998, Assessing Officer ( AO ) disallowed in AY 1997-98 claim in respect of revised salary. This disallowance was upheld by CIT(A) in AY 1997- 98 confirming action of AO on ground that notification dated 4th March 1998 was relevant to AY 1998-99. Significantly, CIT(A) observed that claim could be considered in AY 1998-99. However, by time order of CIT(A) was issued, assessment for AY 1998-99 was complete, and in return filed for said AY, no claim for provision for arrears of wages was made. 4. To complete this narration it must be noticed that on 26th November 1998 Petitioner filed its return of income for AY 1998-99 declaring total income of Rs. 23,50,62,778. 5. On 14th March 2001, assessment order for AY 1998-99 was made by AO under Section 143(3) of Act at total income of Rs. 23,95,62,720. On 21st March 2001, Petitioner made application under Section 154 of Act before AO for allowing deduction in respect of revised pay. This request was rejected more than eight years thereafter on 21st October 2009 on ground that claim was not based on entries in books of accounts of AY in question and since claim was debatable. W.P. (C) 5331 of 2014 Page 2 of 11 6. By order dated 10th December 2010, CIT(A) dismissed consequent appeal filed by Petitioner holding that that claim could not be allowed by way of rectification in proceeding under Section 154 of Act. CIT(A) referred to decision of Supreme Court in Goetze India Limited v. Commissioner of Income Tax (2006) 284 ITR 323 and held that claim not made in original return could not be made subsequently during assessment proceedings by way of letter. 7. Income Tax Appellate Tribunal ( ITAT ) also dismissed further appeal filed by Petitioner against aforementioned order. In its order dated 21st October 2011, ITAT held claim to be time barred. Further, claim not made before AO could not give rise to mistake apparent on record. 8. further appeal filed by Petitioner before this Court being ITA No. 370 of 2012 was disposed of by Division Bench on 4th September 2012 as under: It is evident from above discussion that Assessee pursued wrong remedy and also omitted to make claim, by sheer inadvertence, or make any mention of notification which was material and relevant fact, in return filed on 227th August 1998. These wrong remedies have taken almost decade and led Assessee to approach this Court. Court is satisfied that question of law sought to be urged i.e. jurisdiction of income tax authorities under Section 154 does not arise in circumstances of case. However, above observations are not conclusive of matter. This Court is aware of fact that Assessee was bound to follow and implement directions as consequence of notification dated 4th March 1998. Its misfortune was that this material was not revealed to authorities at appropriate stage. W.P. (C) 5331 of 2014 Page 3 of 11 That was compounded by seeking wrong remedies i.e. through rectification, having regard to law. In those circumstances then Assessee may have to approach Commissioner of Income Tax, in respect of original assessment order framed in March, 2001 in present case under Section 264 of Act. revision application should be considered on its merits having regard to peculiar facts and circumstances of this case and fact that appellant pursued wrong remedy for period from 2001 till date, if appellant approaches CIT under Section 264 within month. Liberty to file application under Section 264 is granted. appeal is disposed of in above terms. 9. On basis of above observations, Petitioner filed application before CIT(A) under Section 264 of Act on 27th September 2012. Additional CIT Range-15 in report dated 5th February 2014 stated that there was no dispute about genuineness of claim and that there was no loss of revenue. 10. By impugned order dated 24th March 2014, CIT(A) rejected application filed by Petitioner under Section 264 of Act. CIT(A) held that Petitioner had not claimed deduction in respect of provision for wage arrears by revising return for AY 1998-99. Therefore, issue did not emanate from assessment order. reference was made by CIT(A) again to decision of Supreme Court in Goetze India (supra) and order dated 17th October 2012 of Orissa High Court in Review Petition No. 8 of 2012 arising out of Writ Petition (Civil) No. 4554 of 2011 (Orissa Rural Housing Development Corporation Ltd. v. ACIT (2014) 44 Taxman.com 341 (Orissa)). 11. This Court has heard submissions of Mr. R.P. Garg, learned counsel W.P. (C) 5331 of 2014 Page 4 of 11 for Petitioner and Mr. Dileep Shivpuri, learned Senior standing counsel for Revenue. 12. Mr. Garg submitted that entire approach of CIT(A) in impugned order was contrary to directions issued by this Court in its decision dated 4th September 2012 in ITA No. 370 of 2012. This was despite AO in its remand report dated 5th February 2014 confirming genuineness of claim and pointing out that there would be no loss of revenue if claim were to be allowed. Section 264 of Act as such did not provide for any period of limitation for making such claim. Reliance was placed inter alia on decisions in Smt. Phool Lata Somani v. Commissioner of Income Tax (2005) 276 ITR 216 (Cal), and Ramdev Exports v. Commissioner of Income Tax (2002) 120 Taxman 315 (Guj). In particular, reference was made to decision to decisions in C. Parikh & Co. v. CIT (1980) 122 ITR 610 (Guj) and Assam Roofing Limited v. CIT (2014) 43 Taxman.com 316 (Gauhati). 13. Mr. Garg submitted that there was nothing under Section 264 of Act which placed any restriction on CIT s revisional power to give relief to Assessee in case where Assessee detected genuine mistake after assessment was completed. Reference was also made to decision in Smt. Sneh Lata Jain v. CIT (2004) 192 CTR 50, Parekh Brothers v. CIT (1984) 150 ITR 105 (Ker) and CIT v. Sam Global Securities Limited (2014) 360 ITR 682 (Del). Mr. Garg sought to distinguish decision of Orissa High Court in Orissa Rural Housing Development Corporation Ltd (supra). In support of proposition that beneficial provision is to be W.P. (C) 5331 of 2014 Page 5 of 11 liberally construed, Mr. Garg placed reliance on decisions in CIT v. Naga Hills Tea Co. Limited (1973) 89 ITR 240 (SC) and Bajaj Tempo Limited v. CIT (1992) 196 ITR 188 (SC). It was submitted that matter concerning revised wages was part of assessment record. power under Section 264 was not restricted to material available on record of AO alone. Reliance was placed on decision in CIT v. Shree Manjunatheswar Packing Products & Camphor Works (1998) 231 ITR 53. 14. Mr. Shivpuri, on other hand, submitted that Section 264 was not applicable in case where assessment order had been subject matter of appeal before ITAT. Reliance was placed on decision in Hindustan Aeronautics Limited v. CIT (2000) 243 ITR 808 (SC). It was further submitted that there is no provision in Act which allows entertaining of fresh claim for deduction not made by Assessee in original return or even by filing revised return. Reliance was again placed on decision in Goetze (India) Limited (supra). He submitted that CIT was bound to function within frame work of statute. He cannot indirectly permit that which cannot be permitted directly in revisionary jurisdiction in facts and circumstances of case. Reliance was placed on decision in Orissa Rural Housing Development Corporation (supra). 15. above submissions have been considered. As regards preliminary objection on maintainability of present petition under Article 226 of Constitution when remedy of challenging decision of AO by way of appeal has been exhausted, Court is of view W.P. (C) 5331 of 2014 Page 6 of 11 that Petitioner went before CIT with petition under Section 264 of Act only pursuant to leave granted by this Court in its order dated 4th September 2012, relevant part of which has been extracted above. It is not, therefore, open to Revenue to raise preliminary objection as to maintainability. 16. impugned order of CIT appears to have ignored history of litigation leading to filing of revision petition. Petitioner has already exhausted remedies that were available to it. In light of order of this Court disposing of Petitioner's appeal in first round, CIT ought to have considered claim of Petitioner on merits. Petitioner's revision petition under Section 264 of Act ought not to have been dismissed on mere technicality. 17. In C. Parikh & Co. v. CIT (supra), Gujarat High Court observed as under: It is clear that under Section 264, Commissioner is empowered to exercise revisional powers in favour of Assessee. In exercise of this power, Commissioner may, either of his own motion or on application by Assessee, call for record of any proceeding under Act and pass such order thereon not being order prejudicial to Assessee, as thinks fit. Sub-sections (2) and (3) of s. 264 provide for limitation of one year for exercise of this revisional power, whether suo motu, or at instance of Assessee. Power is also conferred on Commissioner to condone delay in case he is satisfied that Assessee was prevented by sufficient cause from making application within prescribed period. Sub-section (4) provides that Commissioner has no power to revise any order under s. 264(1) : (i) while appeal against order is pending before AAC, and (ii) when order has been subject to appeal to Income-tax Appellate Tribunal. Subject to W.P. (C) 5331 of 2014 Page 7 of 11 above limitation, revisional powers conferred on Commissioner under s. 264 are very wide. He has discretion to grant or refuse relief and power to pass such order in revision as he may think fit. discretion which Commissioner has to exercise is undoubtedly to be exercised judicially and not arbitrarily according to his fancy. Therefore, subject to limitation prescribed in s. 264, Commissioner in exercise of his revisional power under said section may pass such order as he thinks fit which is not prejudicial to Assessee. There is nothing in s. 264 which places any restriction on Commissioner's revisional power to give relief to Assessee in case where Assessee detracts mistakes on account of which he was over-assessed after assessment was completed. We do not read any such embargo in Commissioner's power as read by Commissioner in present case. It is open to Commissioner to entertain even new ground not urged before lower authorities while exercising revisional powers. Therefore, though petitioner had not raised grounds regarding under-totalling of purchases before ITO, it was within power of Commissioner of admit such ground in revision. 18. Likewise, Kerala High Court in Parekh Brothers v. CIT (supra) observed: We hold, that even though mistake was committed by Assessee and it was detected by him after order of assessment, and order of assessment is not erroneous, none less it is open to Assessee to file revision before Commissioner under Section 264 of Act and claim appropriate relief. But it should not be forgotten that power to be exercised under Section 264 is revisionary one. limitations implicit in exercise of such power are well known. jurisdiction is discretionary; Whether in particular case, on basis of facts disclosed, Commissioner will exercise his jurisdiction and interfere in matter, is matter of discretion. It is certainly judicial discretion vested in Commissioner, to be exercised in accordance with law. We are not called upon to pronounce on scope and amplitude of revisional power. only question W.P. (C) 5331 of 2014 Page 8 of 11 mooted for our consideration in this case is whether Commissioner has got revisional jurisdiction at all, where Assessee having included income for assessment, can claim relief of weighted deduction under Section 35B of Act, for first time, in petition filed under Section 264 of Act. On that aspect of question, we have no doubt in our mind that Commissioner has jurisdiction to entertain revision petition under Section 264 of Act. 19. In Sneh Lata Jain v. CIT (supra), High Court of Jammu & Kashmir followed above decisions and observed that in its revisionary jurisdiction CIT has power to call for record of any proceedings under this Act and is also entitled to make any enquiry himself or cause any inquiry to be made and to pass such order as he thinks fit. 20. In present case, therefore, mere fact Petitioner did not make any claim in original return and also in its revised return before passing of assessment order by AO would not stand in way of CIT exercising revisionary jurisdiction to grant relief. Supreme Court in its decision in Goetze India Limited v. Commissioner of Income Tax (supra) held that while AO could not permit claim to be made after filing of return without Assessee revising it prior to assessment order, it did not impinge on scope of revisionary jurisdiction of CIT. 21. decision in Orissa Rural Housing Development Corporation (supra) is distinguishable on facts. In instant case, order of CIT(A) in first round for AY 1997-98 itself recognized that Petitioner could claim deduction for provision for arrears of revised W.P. (C) 5331 of 2014 Page 9 of 11 wages in subsequent AY 1998-99. observations in Goetze India Limited (supra) were explained by this Court in Sam Global Securities Limited (supra) where in para 8 it held that wherein deduction claimed by way of letter before Assessing Officer, was disallowed on ground that there was no provision under Act to make amendment in return without filing revised return. Appeal to Supreme Court, as decision was upheld by Tribunal and High Court, was dismissed making clear that decision was limited to power of assessing authority to entertain claim for deduction otherwise than by revised return, and did not impinge on power of Tribunal." 22. Further, in CIT v. Mithlesh Impex (2014) 46 taxman.com 30 it was clarified that decision of Supreme Court in Goetze India Limited (supra) is confined to powers of AO. However, when it comes to power of Appellate Commissioner or Tribunal, Courts have recognized their jurisdiction to entertain new ground or legal contention. 23. Consequently, Court is satisfied that in present case, CIT erred in rejecting revision application of Petitioner on ground of maintainability. CIT ought to have entertained revision petition on merits. 24. One possible consequential direction is to remand revision application of Petitioner to file of CIT for fresh decision on merits. However, considering that issue has been pending for number of years, remanding matter to CIT would only delay proceedings W.P. (C) 5331 of 2014 Page 10 of 11 further. Consequently, Court is of view that there is sufficient material on record already, which is not disputed by Revenue, to grant relief to Petitioner on merits in present petition itself. 25. Court directs that revision application filed before CIT should be treated as having been allowed on merits. Consequently, while setting aside impugned order of CIT dated 24th March 2014, Court allows revision petition filed by Petitioner before CIT and directs AO now to give effect to this order by computing tax liability of Petitioner for AY 1998-99 after allowing claim for provision made for wages arrears as per 5th Pay Commission which became effective on 1st January 1996. 26. writ petition is disposed of in above terms with no orders as to costs. S.MURALIDHAR, J CHANDER SHEKHAR, J JULY 03, 2017 Rm W.P. (C) 5331 of 2014 Page 11 of 11 Rites Limited v. Commissioner of Income-tax, Delhi-V