IN HIGH COURT OF JUDICATURE AT MADRAS DATED 04.09.2017 Date of Reserving Order Date of Pronouncing Order 09.08.2017 04.09.2017 CORAM: HON'BLE MR.JUSTICE T.S.SIVAGNANAM W.P.No.10599 of 2017 and W.M.P.No.11537 of 2017 M/s.Bali Trading Pvt., Ltd., Rep., by its Director, Mr.Suchindra Bali, son of Late Dr.Chaman Bali, No.80, C.P., Ramaswamy Road, Alwarpet, Chennai 600 018. ..Petitioner Vs. 1.Principal Commissioner of Income-tax, Chennai -1, Room, No.702, 7th Floor, New Block, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 2.Income Tax Officer, Corporate Ward-1(2), Room No.614, 6th Floor, Wanarpathy Block, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. ..Respondents http://www.judis.nic.in 2 Prayer: Writ petition filed under Article 226 of Constitution of India praying for issuance of Writ of Certiorarified Mandamus to call for records in C.No.217/1/Pr.CIT-1/2015-16, dated 22.03.2017, on file of first respondent relating to Assessment Year 2012-13, and quash same and further direct first respondent to allow revision petition filed by petitioner. For Petitioner : Mr.M.P.Senthilkumar For Respondents : Mrs.Hema Muralikrishnan ****** ORDER petitioner challenges order passed by first respondent, dated 22.03.2017, under Section 264 of Income Tax Act, 1961, (hereinafter referred to as Act ) relating to assessment year 2012-13. 2. petitioner's case is that their main source of income is rental income offered under head income from house property . For assessment year 2012-13, petitioner filed e-return on 11.09.2012, declaring income of Rs.32,71,620/-. case was selected for scrutiny by second respondent under Section 143(2) of Act. It was pointed out http://www.judis.nic.in 3 that petitioner had in computation of income attached along with return had only admitted income from house property to tune of Rs.23,11,594/-, and income from other sources to tune of Rs,1,77,393/- and none under head business or profession . petitioner would state that at that juncture, they realized mistake in keying details and requested second respondent to rectify mistake committed. petitioner submitted during assessment proceedings that certain mistakes were committed while filling up return of income in ITR-VI and while filing e- return, which was inadvertent mistake and same being apparent on record can be rectified. second respondent completed scrutiny assessment under Section 143(3) of Act on 26.02.2015, on returned income of Rs.32,71,620/- on ground that without revised return under Section 139(4), total income cannot be reduced and that powers of Assessing Officer is limited as no alteration in returned income could be made by him in view of decision of Hon'ble Supreme Court in case of M/s.Goetze India vs. CIT, reported in 2006 284 ITR 323 (SC). Aggrieved by such order of assessment, petitioner preferred revision before first respondent under Section 264 of Act to revise order of assessment, dated 26.02.2015. This petition was dismissed by first respondent by order dated 22.03.2017, which is impugned in this Writ Petition. http://www.judis.nic.in 4 3. Mr.M.P.Senthilkumar, learned counsel appearing for petitioner submitted that first respondent failed to consider that there is absolutely no business income earned by petitioner during relevant assessment year other than income from house property and income from other sources and petitioner has furnished sufficient material to prove same. Further, first respondent ought to have appreciated that second respondent rejected request on sole ground that petitioner had not filed revised return, but for which, second respondent himself would have allowed petitioner's claim and that respondents cannot unjustly enrich themselves by taking advantage of mere clerical error committed while filing electronic income tax return, more so, when CBTD has issued circular directing officers to assist tax payers in arriving at correct income and tax. That decision of Hon'ble Supreme Court in case of M/s.Goetze India (supra), is not applicable to appellate or revisional authorities under Act and first respondent being revisional authority has vide powers including power to set aside assessment, which power had been removed from Commissioner of Appeals w.e.f., 01.06.2003. In support of his contentions, learned http://www.judis.nic.in 5 counsel relied on decisions in case of Sri Selvamuthukumar vs. Commissioner of Income-tax, Chennai-VI, reported in [2017] 79 taxmann.com 113 (Madras); Rajesh Kumar Aggarwal vs. Commissioner of Income-tax, Delhi-VIII, reported in [2017] 78 taxmann.com 265 (Delhi); Ramco Cements Ltd., vs. Deputy Commissioner of Income Tax reported in 373 ITR 146 (Mad); Commissioner of Income Tax vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust reported in (1992) 195 ITR 0825; and Commissioner of Income Tax vs. Valli Cotton Traders (P) Ltd., reported in (2007) 288 ITR 0400. 4. Mrs.Hema Muralikrishnan, learned Standing counsel for respondents submitted that since petitioner did not rectify so called mistakes of keying error either at time of filing of return or filing revised return within time allowed under Section 139(5) of Act, request of petitioner was not entertained. It is further submitted that as regards averments in para No.3 of affidavit, it is submitted that in column No.3, petitioner mentioned income receipts credited to profit and loss account considered under heads of income to tune of Rs.16,81,399/-, consequently, petitioner also admitted in column No.7 of BP expenses debited to profit and loss account considered under further heads of income to tune of Rs.24,88,967/- after allowing allowable http://www.judis.nic.in 6 depreciation under Act to tune of Rs.3,32,944/- from adjusted profit, income from business or profession arrived at Rs.17,67,595/- which was reflected in Schedule Part B T1 (Computation of Total Income) in column No.2(iv) Rs.17,67,595/-. Referring to reasons assigned in order under Section 264 of Act, impugned order, it is submitted that case of petitioner that no business income was earned, is not acceptable. It is further submitted that as per decision in case of M/s.Goetze India (supra), error in return can be rectified through revised return only and therefore, second respondent has no power to make assessment with respect to any figures that are variant with return filed by assessee. Further, claim of petitioner is on supposition that it did not earn any business income during year, but there was no proof for same. case laws relied on by petitioner is for proposition that correct tax has to be levied and collected by respondents. In instant case, income has been assessed and tax determined based on admission of petitioner himself about its income in return of income filed for assessment year 2012-13. 5. Further, it is submitted that factual position is clear that there was no conclusive evidence furnished by petitioner to establish that there was no business activity in context of claims of increased expenditure http://www.judis.nic.in 7 incurred and additions to fixed assets admitted by petitioner. Therefore, first respondent rightly held that income reported under head business income could very well be income from business. Thus, in absence of any material evidence to prove that there was no business activity and admission of income under head 'business' was pure inadvertence cannot be believed. 6. Heard learned counsels appearing for parties and perused materials placed on record. 7. questions which arise for consideration are (i) Whether Principal Commissioner of Income Tax, first respondent was right in rejecting Revision Petition filed by petitioner under Section 264 of Act against order passed by Assessing Officer, second respondent, who rejected petitioner's request to rectify assessment for assessment year 2012-2013 ? (ii) whether Assessing Officer was right in relying on M/s.Goetze India (supra), to reject request for rectification? http://www.judis.nic.in 8 (iii) What are powers of Commissioner under Section 264 of Act ? (iv) Whether, on grounds canvassed by petitioner impugned order passed by Commissioner under Section 264 of Act calls for interference? 8. To answer above questions, it is necessary to note legal position which have been neatly summarised in following decisions. In M/s.Goetze India vs. CIT, question raised was whether assesse could make claim for deduction other than by filing revised return. In said case, Assessing Officer held that there is no provision in Income Tax Act to make amendment in return of income by modifying application at assessment stage without revising return. This was affirmed by Supreme Court making it clear that issue in said case is limited to power of Assessing Authority and does not impinge on power of Income Tax Appellate Tribunal under Section 254 of Act. 9. In Sri Selvamuthukumar vs. Commissioner of Income-tax, Chennai-VI,(supra), Hon'ble Division Bench of this Court discussed power of Commissioner under Section 264 of Act. It was held that http://www.judis.nic.in 9 power under Section 264 of Act is, in fact as wide power, and one that is intended to prevent miscarriage of justice. Courts have consistently taken view that conferment of powers under Section 264 of Act is to enable Commissioner to provide relief to assessee, where law permits same. 10. In Rajesh Kumar Aggarwal vs. Commissioner of Income-tax, Delhi-VIII,(supra), question of law which arose for consideration before Hon'ble Division Bench of this Court was whether ITAT is right in rejecting additional grounds of appeal filed by appellant therein before Commissioner. After taking note of decision in case of National Thermal Power Co.Ltd., vs. CIT reported in (2012) 349 ITR 336 (Bom); Goetze (India) Ltd., (supra); National Thermal Power Co.Ltd., vs. CIT reported in (1998) 229 ITR 383; Jute Corpn., of India Ltd., vs. CIT reported in [1991] 187 ITR 688; CIT (Central, Madras vs. Indian Express (Madurai) Pvt., Ltd., reported in (1983) 140 ITR 705; and Mahalakshmi Textile Mills' case reported in [1967] 66 ITR 710(SC), it was held that Act does not contain any express provision preventing assessee from raising additional grounds in appeal and there is also no provision in Act restricting Appellate Authority to entertain such additional ground in appeal. That in absence of statutory bar, Appellate Authority is http://www.judis.nic.in 10 vested with power, which is co-terminus with that of Original Authority, to allow assessee to raise additional ground, if same is bona fide and not willful or unreasonable. 11. Thus, legal principle which emerges from above decisions are:- (i) Assessing Officer cannot entertain claim for deduction otherwise than by filing revised return. This does not impinge upon power of ITAT under Section 254 of Act. (ii) language of Section 264 provides ample power to CIT to make or cause such inquiry to be made as he thinks fit in dealing with application for revision under Section 264 of Act. (iii) Limiting power of CIT only to situation that was existing at time of making assessment is to make power of CIT under Section 263 too restrictive. (iv) Material which was not available to ITO when he made assessment could be taken into considerations by CIT after holding enquiry, though http://www.judis.nic.in 11 such material has come on record subsequent to making of assessment. (v) power under Section 264 of Act is wide power, and one that is intended to prevent miscarriage of justice. (vi) Powers under Section 264 of Act is to enable Commissioner to provide relief to assessee, where law permits same. (vii) embargo placed on assessing Officer in considering new claim would not impinge on power of appellate authority or revisional authority. (viii) phraseology adopted in Section 264 of Act is of widest amplitude, unless there is direct impediment to said power. (ix)The Supreme Court in M/s.Goetze India (supra), had no occasion to deal with power of Commissioner under Section 264 of Act. 12. Bearing in mind above legal principles, I proceed to consider factual matrix. petitioner during course of assessment http://www.judis.nic.in 12 proceedings for assessment year 2012-13, submitted representation to second respondent on 12.12.2014, stating that assessee's income is letting out of property and apart from that they do not have any income during assessment year and in income memo, entire income in profit and loss account has been offered under head house property and other sources , and there is no other income. However, while filing return, it has been inadvertently filed against business income in addition to income from house property and other sources and hence, gross total income shown as Rs.32,71,621/- in income tax return as against Rs.16,81,400/- is just keying error and requested second respondent to accept figures as appearing in income memo and complete assessment under Section 143 (3) of Act. In continuation of said representation, another letter dated 07.01.2015, was addressed to second respondent enclosing rental agreement and comparison between details filled up in income tax return for assessment year 2011-12 & 2012-13. Subsequently, by another letter dated 06.02.2015, petitioner reiterated stand taken by them in their letter dated 12.12.2014 and stated that mistake is only from data's keyed in income tax return and when mistake is apparent on record, same can be rectified. petitioner relied upon certain decisions and contended that mistakes apparent from record are patent mistakes where there cannot be two http://www.judis.nic.in 13 opinions and in their case, mistakes are apparent and there are no two opinions and requested second respondent to rectify same. second respondent after taking note of stand taken by petitioner in aforementioned communication, passed assessment order, dated 26.02.2015 and rejected petitioner's claim to rectify mistake. reasons assigned by second respondent is that if there is any keying mistake, assessee could have filed revised return, as allowed under Section 139(4) of Act, which could have been done on or before 31.03.2014. However, petitioner did not do so and asked to reduce total income during course of assessment proceedings and that being fresh claim cannot be entertained during course of assessment proceedings. In support of such stand, second respondent relied on decision of Hon'ble Supreme Court in case of M/s.Goetze India (supra). Thus, total income admitted as per return of income was determined as Rs.32,71,620/- and tax payable thereon was intimated to petitioner in form of demand. reasons assigned by second respondent is perfect and in order, so also reliance placed on M/s.Goetze India (supra). On given facts, second respondent had no jurisdiction to accede to request of petitioner in absence of revised return, which ought to have been filed on or before 31.03.2014. http://www.judis.nic.in 14 13. Against assessment order, dated 26.02.2015, petitioner filed revision under Section 264 of Act. In revision petition, petitioner reiterated stand taken before Assessing Officer, apart from furnishing other details to support stand that in return forms, business income has been keyed wrongly and requested first respondent to exercise his revisional powers. This stand was reiterated in written submissions made by Chartered Account of petitioner, dated 11.06.2015. As noted, power under Section 264 of Act, exercisable by Commissioner, is wide power to provide relief to assessee wherever law permits. It provides amble power to make or cause such enquiry to be made as he thinks fit. Materials which were not available before Assessing Officer, though has come on record subsequently could be taken into consideration by Commission. first respondent considered matter and held that stand taken by petitioner, does not stand test of scrutiny and proceeded to assign reasons in support of such conclusion. It was observed that petitioner contended that it has not earned business income for assessment year 2012-13 and receipts earned during year are from letting out of 5th floor space measuring 4174 sq.ft., in Bali Towers at Saidapet, Chennai and letting out of flat at Mumbai and if such is case, as to why petitioner has reported additions to plant and machinery during year to tune of Rs.1,96,469/- in its fixed assets http://www.judis.nic.in 15 schedule and this is beyond comprehension. Thus, fact that there has been purchase of new plant and machinery indicates that, submission that there was no business activity, is not true. To arrive at factual position, comparative analysis of return filed for earlier financial year 2010-11 relevant to assessment year 2011-12 with return filed for assessment year 2012-13 was done and this is given in tabulated format in impugned order. On comparative study, first respondent noted that expenses have been incurred for business activities also other than expenses, which would have incurred for activity of letting out of building on rent. Thus, first respondent stated that company which is claiming no business activity with no receipts other than rental receipts and interest income, have claimed expenditure on repairs to plant & machinery and this is in increasing manner will indicate factual position otherwise. Thus, on facts, first respondent found that nature of expenses indicates presence of some business activity during relevant previous year. 14. Thus, taking note of contrary stand taken by petitioner in reporting its return of income amounts, in respect of business income and expenses which have been incurred by petitioner during last two years and on other hand, making contrasting claim that there is no business activity relatable to those expenses/income and that figures http://www.judis.nic.in 16 reported in return of income are not inadvertent errors. Thus, first respondent held that petitioner has not been able to prove with evidence that there has been no business activity during impugned assessment year. That apart, first respondent noted that petitioner has come forward with theory of error being committed while filing income tax return only during scrutiny assessment proceedings, despite fact that petitioner undergo statutory financial audit as per provisions of Act and having resources to engage best professionals in field to handle its mandatory obligations under Act. Thus, first respondent has considered materials, examined correctness of stand taken by petitioner in independent manner and assigned reasons for not accepting case of petitioner. 15. In preceding paragraphs, Court has taken note of stand taken by petitioner before Assessing Officer. Admittedly, time within which petitioner could have filed revised return had expired long back and petitioner appears to have woken up after notice was issued under Section 143(1) of Act. During course of assessment proceedings, when personal hearing was offered, petitioner for first time took stand that inadvertent error had occurred while filing income tax returns for relevant year namely, 2012-13 and that error is http://www.judis.nic.in 17 keying error. Such contention was raised by petitioner stating that except income from house property and other sources , they have no other income and there is no business income and therefore, it is keying error. If such is stand taken by assessee, he is duty bound to prove that there was no other income except income under head house property and other sources . On perusal of factual position, it is clear that this was not established by petitioner before Assessing Officer or before first respondent, Revisional Authority. petitioner's case is that it is inadvertent error, mistake which is apparent and needs to be rectified. Assessing Officer after taking note of stand taken by petitioner rightly held that petitioner had time to file revised returns upto 31.03.2014 and did not do so, and only during scrutiny assessment proceedings, such plea was raised which cannot be considered and rightly relied on decision of Hon'ble Supreme Court in case of M/s.Goetze India (supra) stating that he had no jurisdiction to entertain petitioner's plea. Revisional Authority considering scope of his power under Section 264 of Act went step ahead to examine as to bonafides of stand taken by petitioner alleging that it was inadvertent keying error. On comparative analysis of returns filed for assessment year 2011-12, with that of returns filed for assessment year 2012-13, first respondent noted that for repairs to http://www.judis.nic.in 18 machinery, telephone expenses, salary and other expenses, depreciation have been incurred and debited to P&L account, which is clear indicator that business activity is being carried out by assessee. When that being factual position, assessee would not have debited expenses in its P&L account. 16. Thus, on facts, first respondent found that company, which is claiming no business activity with no other income other than rental income and interest income claiming expenditure on repairs to plant and machinery that too in increasing in manner, clearly indicates position otherwise. Further, on facts, first respondent found that assessee has not been able to prove with evidence that there has been no business activity during impugned assessment year. Thus, first respondent having done factual exercise, in exercise of his power under Section 264 and on facts, found that theory as propounded by petitioner as keying error to be not proved conclusively. In such fact situation, order passed by first respondent calls for no interference. For all above reasons, Writ Petition fails and it is dismissed. No costs. Consequently, connected Miscellaneous Petition is closed. http://www.judis.nic.in 19 04.09.2017 pbn Index:yes/no http://www.judis.nic.in 20 To 1.Principal Commissioner of Income-tax, Chennai -1, Room, No.702, 7th Floor, New Block, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 2.Income Tax Officer, Corporate Ward-1(2), Room No.614, 6th Floor, Wanarpathy Block, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. http://www.judis.nic.in 21 T.S.SIVAGNANAM, J pbn W.P.No.10599 of 2017 and W.M.P.No.11537 of 2017 04.09.2017 http://www.judis.nic.in Bali Trading Pvt. Ltd. v. Principal Commissioner of Income-tax, Chennai-1, Chennai / Income-tax Officer, Corporate Ward-1(2), Chennai