The Delhi High Court held that Section 264 of the Income Tax Act, 1961 can be triggered for making corrections when the assessee fails to claim amenable deduction under the Income Tax Act, 1961.
Puneet Dhanda, the petitioner/assessee, via the instant writ petition, seeks to challenge the order dated 05.03.2021 passed by the Principal Commissioner of Income Tax [“PCIT”]. The PCIT rejected the petitioner/assessee’s application preferred under Section 264 of the Income Tax Act, 1961 [“Act”]. The application was filed by the petitioner/assessee to revise the intimation issued to him under Section 143(1) of the Act.
The petitioner/assessee sought to trigger the provisions of Section 264 of the Act to enable him to claim a loss amounting to Rs.36,66,650/- concerning Future and Option contracts, which according to him, resulted in a loss as he had carried on non-speculative business during the period in issue.
The petitioner claimed that he had overlooked the fact that he could set off this loss, against the income from business and profession. PCIT, however, concluded that the power available to him under Section 264 enabled him only to revise those orders which are prejudicial to the interest of the petitioner/assessee.
It was observed by the PCIT that” since the intimation issued under Section 143(1) of the Act was not prejudicial to the interest of the assessee, he could not exercise his revisionary power under Section 264 of the Act.”
Mr Krishanan S., who appeared on behalf of the petitioner/assessee stated that PCIT has committed an error in failing to exercise his revisionary power under the provisions of Section 264 of the Act. It was argued that PCIT could exercise revisionary jurisdiction either himself or based on the application moved by the assessee in any order, other than an order to which the provisions of Section 263 applied.
Mr Gaurav Gupta, senior standing counsel, who appeared on behalf of the respondents/revenue, cannot but accept that the application needs to be re-examined on merits, given the position of law articulated by this court in the Vijay Gupta case.
The PCIT has committed a material irregularity in not exercising the jurisdiction conferred on him under Section 264 of the Act. As correctly submitted by Mr Krishanan, the PCIT was invested with the necessary revisionary powers to correct the intimation issued under Section 143(1) of the Act, even if the said intimation was a product of a mistake made by the assessee in not claiming set off concerning a loss which according to him, was available under the provisions of the Act.
A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia held that “if a particular deduction is amenable within the periphery of the Act and inadvertently an assessee has not claimed the same, Section 264 can be triggered for making such correction. “
Further held that “since the petitioner/assessee passed away during the pendency of the writ petition, necessary steps were taken for bringing the legal heirs of record. Similar steps will also be taken by Mr Krishanan to bring his legal heirs on record before the concerned statutory authorities. set aside the impugned order.”
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