EQUITY INTELLIGENCE INDIA PVT. LTD vs. PRINCIPAL COMMISSIONER OF INCOME TAX

Orders dated 20.11.2015, Exts.P10 and P11, rejecting applications moved under Section 264 of the Income Tax Act, 1961 ('Act', for short) by the petitioner for revising return for the assessment years 2007-08 and 2009-10 respectively, are under challenge in the present writ petition.

Petitioner is Securities and Exchange Board of India (SEBI) registered Portfolio Manager since 2003 and engaged in the business of rendering portfolio management services to its clients in accordance with the guidelines and regulations issued by SEBI from time to time. It is also an assessee under the Act in filing returns. From the inception onwards, petitioner filed return showing gains from investments in shares under the head 'investments' in the balance sheet as 'capital gains' for the respective financial years, which were accepted by the Department. However, for the assessment years 2006-07, 2008-09 and 2010-11, the WP(C) NO. 7779 OF 2016 3 Department assessed such gains as 'business income', while for the assessment years 2007-08 and 2009-10, when petitioner suffered capital loss, it was assessed as 'capital gain/loss'. Assessment orders for the years 2006-07, 2008-09 and 2010-11 were assailed before the appellate authority and before this Court. Both the authorities rejected the case of the petitioner and the matter is stated to be pending before the Hon'ble Supreme Court. Realising the fact that the income on sale of shares is to be assessed under the head 'business income/loss' and not as 'capital gain', petitions for revision of assessments for the years 2007-08 and 2009-10, Exts.P6 and P7, under Section 264 of the Act were submitted along with delay condonation applications. Those were dismissed by the Commissioner as per orders dated 20.11.2015, Exts.P10 and P11, respectively, which are challenged in the present writ petition.

Learned Senior Counsel appearing on behalf of the petitioner submitted that orders of the WP(C) NO. 7779 OF 2016 4 competent authority Exts.P10 and P11 are not sustainable in the eyes of law, that at the time when petitions were considered, the law with regard to revision of orders was different than the ratio decidendi culled out in the judgment of Delhi High Court in Vijaya Gupta v. Commissioner of Income Tax and Another [(2016) 386 ITR 643 (Delhi)]. The impediment of the limitation would not also be taken against the petitioner as petitioner sought to rectify the orders taking into consideration the order passed by the assessing officer for the year 2006-07 treating it as capital gain instead of business gain.

On the other hand, learned Standing Counsel for the Income Tax Department opposed the aforementioned contentions and stated that no explanation has come forward in not submitting applications within a period of one year as provided under Section 264 of the Act, but did not dispute the fact that the Commissioner would have the power to rectify mistake by taking into WP(C) NO. 7779 OF 2016 5 consideration the provisions of Section 264. 5. I have heard the learned counsel appearing for the parties and appraised the paper book.

Section 264 of the Act reads as under: “264.Revision of other orders.—(1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Principal Commissioner or 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 Principal Commissioner or 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 Principal Commissioner or Commissioner may, if he is satisfied that the WP(C) NO. 7779 OF 2016 6 assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period. (4) The Principal Commissioner or 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 expired, 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. (5) Every application by an assessee for revision under this section shall be accompanied by a fee of five hundred rupees. (6) On every application by an assessee for revision under this sub-section, made on or after the 1st day of October, 1998, an order shall be passed within one year from the end of the financial year in which such application is made by the assessee for revision. Explanation.—In computing the period of limitation for the purposes of this sub-section,

It is a matter of record that for the assessment year 2006-07, income derived from investment of shares though was claimed in the income tax return as capital gain, but the Department treated it as a business sale. The said decision was assailed before the appellate

Commissioner, in my view, rightly rejected the applications being time barred, though on other point the reasoning given is not sustainable in view of the ratio deciendi culled out in the judgment of Delhi High Court in Vijaya Gupta (supra) regarding the powers of Commissioner. The explanation given by the petitioner for condoning