Smt. Sneh Lata Jain vs Commissioner of Income Tax

RULING

This petition proceeds on certain admitted facts, which are referred to herein :

Petitioner filed her return of income on 3-3-2001 for the accounting year 2000-2001 declaring her total income at Rs. 4,37,503. The assessing

authority processed the return u/s 143(1) of the Income Tax Act on 28-3-2002 and raised a demand of Rs. 1,10,346 inclusive of interest under

sections 234A: 234B and 234C of the Income Tax Act. In the return the petitioner had disclosed that she owned 24.71% share in the land situate

at Chhani Himmat and sale of land was effected in April, 1999. The total sale price was Rs. 7,03,000. The capital gain at sale price was declared

as Rs. 2,80,858. The total amount of tax payable was shown as Rs. 84,529 out of which advance tax paid was Rs. 6,000 and the tax deducted at

source on various incomes Rs. 21,845. It was stated that she is unable to pay the balance amount of tax ""for want of funds"".

The assessing authority assessed the income and tax liability as under :

(i) Total income as per return Rs. 1,56,680

(ii) Adjustment u/s 143(1)(a) Rs. 2,80,858

Grand Total (I+II) Rs. 4,37,538

(iii) Tax on assessed income : Rs. 77,165

(iv) Surcharge Rs. 7,716

(v) Total Rs. 84,861

Interest Payable :

Under section 234A Rs. 7,610

Under section 234B Rs. 27,660

Under section 234C RS. 3,880

Total Rs. 1,

18,981

Less : Pre-paid tax Rs. 8,635

Total Tax payable Rs. 1,10,346

On receipt of demand, the petitioner approached respondent No. 1, who is revisional authority and raised plea of non-disclosure of certain facts in

the Income Tax return and claimed benefits u/s 54F of the Income Tax Act. It was pleaded before respondent No. 1 that the petitioners liability of

tax as assessed by the assessing authority is not according to law. It was disclosed that the petitioner had sold her 1/5th share in the land at Chhani

Himmat for a consideration of Rs. 2,80,858 and purchased 1/5th share in the House No. 3 B/C at Gandhi Nagar, Jammu for a consideration of

Rs. 4,90,000 on 15-10-1999 and accordingly she is not liable to pay any tax on the capital gain. It was further pleaded that due to mistake of her

counsel the purchase of the share in the House at Gandhi Nagar, Jammu could not be mentioned and since the fact came to her notice after the

assessment order was passed, she having no remedy of filing the revised return or any other course is invoking the revisional jurisdiction of

respondent No. 1.

Respondent No. 1 on consideration of the facts passed the impugned order dated 3-3-2003 and rejected the contention of the petitioner by a

speaking order and maintained the assessment order and demand of the assessing authority. The revisional authority was of the view that the

petitioner having declared the taxable income, the assessing authority has rightly assessed the income and the tax liability. The contention of the

petitioner that the assessing authority should have suggested filing of the revised return or issued notice u/s 143(2) or 142 is also rejected on the

ground that these notices are not issued in each and every case. The revisional authority is also of the opinion that the return of income filed by the

assessee u/s 139(1) having been accepted by the assessing authority the revisional powers cannot be invoked.

Petitioner has relied upon a circular of the Board dated 10-4-1955, which inter alia provide that it is one of the duties of the department to

assess the tax, particularly in a matter of claiming the relief. The revisional authority also held that the assessee filed the return beyond the

prescribed period u/s 139(1) and thus was not entitled to file any revised return. It is this order which is impugned in the present petition.

The main contention of Mr. Z.A. Shah, learned counsel appearing for the petitioner is that the factum of sale of the land and subsequent

purchase of 1/5th share in the house at Gandhi Nagar, Jammu by duly executed registered sale deed is not disputed. Petitioner having disclosed the

capital gain on account of sale of land but due to lapse of her counsel the purchase of the property within the specified time could not be disclosed.

It is further contended that since the filing of the revised return had become barred by time, the petitioner had no remedy except to invoke the

revisional jurisdiction. Since the facts were not disputed the revisional authority was required to exercise the revisional power and grant relief to the

petitioner.

In response to the petition, the respondents have filed reply, Mr. D.S. Thakur, refuting the contention of the petitioner has contended that the

Income Tax is a self-contained and complete Code in itself which provides and prescribes the procedure and the method of making the

assessment. The petitioners Income Tax return has been accepted by the assessing authority and thus there was no occasion for the revisional

authority to interfere in the same. It is further stated that the writ court is not to exercise the appellate jurisdiction over the decision of the authority

under the Act. It is only if the authorities under the Act fail to follow the procedure prescribed and the orders are otherwise perverse, the High

Court can exercise its extraordinary jurisdiction. In regard to the claim of the petitioner for the benefit u/s 54F. it is stated that the benefit is

admissible only where such a claim is made by the assessee in the return of Income Tax but when the petitioner did not make any such claim in

her-n, she will not be entitled to the benefit thereof.

I have heard the learned counsel for the parties at length.

Section 139 of the Income Tax Act deals with filing of return by a person of his total income in respect of which tax is assessable under the Act

during the previous year. Section 143 of the Act deals with the assessment to be made by the assessing authority where a return has been made u/s

139 or in response to a notice under sub-section (1) of section 142, if any, tax or interest is found due. Section 54F provides where an assessee

being an individual or HUF where the capital gain shall not be charged u/s 45, if the cost of the new asset is not less than the net consideration in

respect of the original asset.

Based upon this provision, it has been strenuously argued by Mr. Z.A. Shah that the petitioner is not liable to pay tax u/s 54F, she having

purchased the residential house of value more than the capital gain within a period of one year from the date of sale and this fact was required to be

considered by the revisional authority to reduce the tax liability of the petitioner proportionally. This contention of the leaned counsel for the

petitioner has been seriously contested by Mr. Thakur, who has submitted that the petitioner was required to disclose the fact of the purchase of

the property in her return filed u/s 139(1) or the revised return if filed within the prescribed period. She having failed to claim the benefit within the

time, is not entitled to the benefit after the expiry of the requisite period. It is also stated that the petitioner herself disclosed the capital income

which has been accepted by the assessing authority as also the revisional authority. There is no procedural illegality, irregularity or perversity in the

impugned order warranting any interference.

From the provisions of the Income Tax referred to above, it is clear that the return filed by the petitioner and the taxable income disclosed by

her has been accepted by the assessing authority. The assessing authority has thus not acted in any manner prejudicial to the interest of the

petitioner, or in contravention to the provisions of law. The petitioner had the remedy of filing a revised return provided the steps were taken within

the time prescribed u/s 139. That having not been done she allowed the assessment order to be passed and thereafter realized the mistake which

was incurable after the lapse of time. She invoked the revisional jurisdiction of respondent No. 1 tinder section 264 of the Income Tax Act which

reads as under :

(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.

A bare reading of section makes it abundantly clear that the Commissioner has discretion to invoke the revisional jurisdiction. However, once

he entertains a revision he has the power to call for the record of any proceedings under this Act and is also entitled to make any inquiry himself or

cause any inquiry to be made and pass such order as he thinks fit. The only impediment on the power of the revisional authority is that he will not

pass any order prejudicial to the assessee. The respondent No. 1 has much wider power u/s 264. It does not circumvent and confine the power of

the revisional authority in any manner. The Apex Court in case Dwarka Nath Vs. Income Tax Officer, Special Circle D-ward, Kanpur and

Another, considered the scope of the revisional jurisdiction of the Commissioner of Income Tax under the old section 33A(2), which was worded

in the same manner and observed as under :

Jurisdiction conferred u/s 38A of the Act prima facie is a judicial one. The other that is brought before the Commissioner affects the right of the

assessee. That the revising authority shall give an opportunity to the parties affected to put forward their case in the manner prescribed, is implicit in

revisional jurisdiction. The nature of the jurisdiction and the rights decided necessarily carry with them the duty to act judicially in disposing of the

revision. The fact that the Commissioner cannot make an order to the prejudice of an assessee does not possibly change the character of the

proceeding. Though the Commissioner may not change the order of the inferior authority to the prejudice of the assessee, he may not give the full

relief asked for by the assessee."" (p. 81)

It was established before the revisional authority that the capital gain on the sale of land was utilized for the purchase of a residential house

within time and the consideration for the purchase of the house was much more than the amount of capital gain. The assessee had no liability to pay

tax and was entitled to benefit u/s 54F of the Income Tax Act. It is also admitted position that the petitioner had failed to claim the benefit in her

return but an effort was made to overcome the mistake before the revisional authority. Respondent No. 1 has not disputed the sale and purchase

of the house as the same is evidenced by documentary evidence duly registered before the competent authority. It is also admitted position that the

petitioner had no remedy before the assessing authority after the assessment order was passed. The revisional jurisdiction was invoked within the

prescribed time. The revisional authority having widest possible powers u/s 264 was required to hold an inquiry or cause any inquiry to be held and

consider the question of purchase of the property and proceeded to comply the provisions of section 54F. The reasoning given by the revisional

authority is only technical. This question was decided in similar circumstances by Gujarat High Court in Digvijay Cement Co. Ltd. v. CIT TC 57 R

wherein it has been held as under :

This section empowers the Commissioner, either on his own motion or on an application made by the assessee to call for the record of any

proceeding under the Act and pass such order thereon not being an order prejudicial to the assessee. This power has been conferred upon the

Chef Commissioner in order to enable him to give relief to the assessee in cases of over-assessment. The power is conferred to him in wide terms

and as pointed out by this court in C. Parikh & Co. v. CIT TC 57 R. 716 (J&K) and by the Kerala High Court in Parekh Brothers v. CIT TC 57

R. 720 (Ker), this power should be exercised by the Commissioner subject to the limitations prescribed in that section to give relief to the assessee

in case where after assessment was completed, the assessee detects mistakes on account of which he was over-assessed. That power is not

confined merely to erroneous orders passed by the lower authorities.

The High Court further observed

In the alternative, it was submitted that the assessee not having made any claim before the Income Tax Officer, there was no order of the Income

Tax Officer in this behalf and, therefore, section 264 could not have been invoked by the assessee. What was submitted was that a revision

application would lie only against the order of the Income Tax Officer and if there was no order of the Income Tax Officer with respect to the

claim made before the Commissioner, the revision would not be maintainable. We are concerned in this case with the order of assessment and not

with any other type of order. What in fact the assessee did by filing the revision application before the Commissioner was to challenge the order of

assessment on the ground that it was erroneous. It may be that the error was committed not by the Income Tax Officer but by the assessee and

that the error was detected by the assessee later on. But that certainly cannot preclude the assessee from challenging the order of assessment on

the ground that the order was erroneous inasmuch as, under the law, deduction u/s 35B ought to have been granted to the assessee. The power of

revision u/s 264 cannot be restricted to such erroneous orders which have become erroneous as a result of some error committed by the Income

Tax Officer while passing the orders. Independently of any decision or absence of any decision on the part of the Income Tax Officer the order of

assessment can be challenged as erroneous if, for example some provision was overlooked not only by the assessee but also by the Income Tax

Officer. Even in such a case, the order of assessment can be challenged by filing a revision application before the Commissioner, therefore, even

this contention raised on behalf of the revenue deserved to be rejected.

In another case Pt. Sheo Nath Sharma v. CIT TC 57 R (All), before the Allahabad High Court, the question of taxability of the income

disclosed by the assessee himself came to be considered. On consideration of the facts, which are not different from the case in hand, the court

observed-

Seems to me, however, that the order of the Commissioner rejecting the previous applications, on the mere ground that the petitioner had shown

the income in his return is erroneous. The Commissioner was bound to apply his mind to the question whether the petitioner was taxable on that

income. The Income Tax Officer is entitled u/s 23(1) to make an assessment on the basis of the return if he is satisfied, without requiring the

presence of the assessee or the production of evidence in support of the return, that the return is correct and complete. But it may be that the

assessee may have committed a mistake in treating a certain receipt as taxable. The mere circumstance that he has shown that receipt as income in

his return does not make him liable to tax thereon. An assessee is liable to tax only upon such receipt as can be included in his total income and is

assessable under the Income Tax Act. The law empowers the Income Tax Officer to assess the income on an assessee and determine the tax

payable thereon. In doing so, he may proceed on the basis that where an assessee discloses that a certain sum of money has been received by him,

the fact of that receipt may be accepted without anything more as constituting an admission on the part of the assessee. That would be an

admission as to a matter, and consideration of that question leads into the realm of law. If the Income Tax Officer assesses an assessee upon a

receipt which is not taxable in law, it is always open to the assessee to take the case in appeal or in revision the thereafter. It is then for the AAC or

the Commissioner, as the case may be, to examine the matter and determine whether, although the money has been received by the assessee, it is

taxable in law. The assessee is then within his rights in requiring the appellate or the revisional authority to examine the validity of the assessment to

tax of a receipt which, though admitted by him, is not taxable in law.

In a subsequent case in O.CM. Lts. (London) v. ITO TC 57R 32, a Division Bench of the Allahabad High Court relying upon Pt. Sheo Nath

Prasad Sharmas case (supra) considered the scope of the revisional jurisdiction of Commissioner held as under :

The revisional powers conferred on the Commissioner u/s 264 are very wide. He has the discretion to grant or refuse relief and the power to pass

such order in revision as he may think fit. The discretion which the Commissioner has to exercise is undoubtedly to be exercised judicially and not

arbitrarily according to his fancy. Therefore, subject to the limitations prescribed in section 264, the Commissioner in exercise of his revisional

power under the said section may pass such order as he thinks fit which is not prejudicial to the assessee. There is nothing in section 264 which

places any restriction on the Commissioners revisional power to give relief to the assessee in a case where the assessee detects mistake on account

of which he was over-assessed after the assessment was completed. The Commissioner would not be acting de hors the Income Tax Act, if he

gives relief to the assessee in a case where it is proved to his satisfaction that there is over-assessment. Whether such over-assessment is due to a

mistake detected by the assessee after completion of assessment or otherwise. The Commissioner would not be right in holding that it was not

open to him to give relief to the petitioner on account of the petitioners own mistake which it detected after the assessment was completed. Once it

is found that there was a mistake in making an assessment, the Commissioner had power to correct it u/s 264(1). The Commissioner would be

wrong in not giving relief to the petitioner in respect of over-assessment as a result of under totalling of the purchases.

Though the assessing authority was not aware of the purchase of the property by the petitioner and proceeded on the basis of the admitted facts

disclosed in the return. However, the revisional authority could not be oblivious of its duty to accept the contention of the assessee when the facts

were brought to its notice about the capital gain being not chargeable to tax under law. What to say of its duty to advice the assessee the revisional

authority rejected the contention of the petitioner only on technical grounds. When the substantive law confers a benefit on the assessee under a

statute, it cannot be taken away by the adjudicatory authority on mere technicalities. It is settled proposition of law that no tax can be levied or

recovered without authority of law. Article 265 of the Constitution of India and section 114 of the State Constitution imposes an embargo on

imposition and collection of tax if the same is without authority of law. Admittedly, on the basis of facts disclosed before the revisional authorities

and this Court, the petitioner is not liable to tax on the capital gain. Once it is found that the petitioner has no tax liability, the respondents cannot be

permitted to levy the tax and collect the same in contravention to article 265 of the Constitution of India, which provides a constitutional safeguard

on levy and collection of tax. It is true that this court is not to act as court of Appeal while exercising the writ jurisdiction, but at the same time

where the admitted facts disclosed non-exercise of jurisdiction by an adjudicatory authority and a citizen is subjected to tax not payable by him,

interference by this court is warranted. The respondent No. 2 is directed to reassess the taxable income of the petitioner, by taking into

consideration the benefit available to her u/s 54F of the Income Tax Act and pass appropriate order.