PUNEET DHANDA vs. PRINCIPAL COMMISSIONER OF INCOME TAX & ANR.

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W.P.(C)/5906/2022HC DelhiDLHC01043262202125 September 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MR. JUSTICE GIRISH KATHPALIA4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the PCIT had committed a material irregularity by not exercising the jurisdiction conferred upon him under Section 264 of the Income Tax Act, 1961. The court agreed with the assessee's submission that the PCIT possessed the necessary revisionary powers to correct the intimation issued under Section 143(1), even if the intimation was a result of the assessee's mistake in not claiming a permissible set-off for a loss. The reasoning was that the revenue is entitled to assess the real income of an assessee as per the Act, and Section 264 can be triggered to make corrections when a deduction is available within the Act's provisions but was inadvertently not claimed by the assessee. Consequently, the impugned order of the PCIT was set aside, and the PCIT was directed to re-examine the assessee's application and render a fresh decision. The court noted that the petitioner had passed away during the pendency of the writ petition, and steps were being taken to bring his legal heirs on record.

What were the facts?

The petitioner, Puneet Dhanda, filed a writ petition challenging an order dated March 5, 2021, passed by the Principal Commissioner of Income Tax (PCIT). The PCIT had rejected the petitioner's application under Section 264 of the Income Tax Act, 1961. This application was filed to revise an intimation issued under Section 143(1) of the Act for Assessment Year 2018-19. The petitioner sought to claim a loss of Rs. 36,66,650/- from Future and Option contracts, which he claimed to have overlooked setting off against business income. The PCIT held that his revisionary power under Section 264 was limited to orders prejudicial to the assessee, and the Section 143(1) intimation was not so.

What were the issues?

1. Whether the PCIT erred in failing to exercise his revisionary power under Section 264 of the Income Tax Act, 1961, to correct an intimation issued under Section 143(1) of the Act, where the assessee had inadvertently failed to claim a set-off for a loss. Assessee's Contentions: The petitioner argued that the PCIT committed an error by not exercising his revisionary power under Section 264. A plain reading of the provision indicates that the PCIT can revise any order, other than one covered by Section 263, based on an assessee's application. The petitioner relied on the judgments in Vijay Gupta vs. Commissioner of Income-Tax and Another [2016] 386 ITR 643 (Delhi) and Aafreen Fatima Fazal Abbas Sayed vs. Assistant Commissioner of Income-Tax and Another [2021] 434 ITR 504 (Bom.). Revenue's Contentions: The revenue, through its senior standing counsel, accepted that the application needed to be re-examined on merits, given the position of law articulated in the Vijay Gupta case.

Which sections of the Income-tax Act were involved?

Section 264,Section 143(1),Section 263

AI-generated summary — verify with the full judgment below

W.P.(C) 5906/2022 Page 1 of 4

$~8 * IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of decision: 25.09.2023

+ W.P.(C) 5906/2022 PUNEET DHANDA

..... Petitioner Through: Mr Krishnan S., Adv.

versus

PRINCIPAL COMMISSIONER OF INCOME TAX & ANR.

..... Respondents Through: Mr Gaurav Gupta, Sr Standing Counsel with Mr Shivendra Singh and Mr Puneett Singhal, Advs.

CORAM: HON'BLE MR JUSTICE RAJIV SHAKDHER HON'BLE MR JUSTICE GIRISH KATHPALIA [Physical Hearing/Hybrid Hearing (as per request)]

RAJIV SHAKDHER, J.: (ORAL)

1.

This writ petition concerns Assessment Year (AY) 2018-19. 2. 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 [in short, “PCIT”]. 3. Via the impugned order, the PCIT rejected the petitioner/assessee’s application preferred under Section 264 of the Income Tax Act, 1961 [in short, “Act”]. 3.1 This application was filed by the petitioner/assessee to revise the intimation issued to him under Section 143(1) of the Act. Digitally Signed By:TARUN RANA Signing Date:13.10.2023 16:01:29 Signature Not Verified

W.P.(C) 5906/2022 Page 2 of 4

4.

The petitioner/assessee sought to trigger the provisions of Section 264 of the Act for the purpose of enabling 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. 5. The petitioner claimed that he had overlooked the fact that he could set off this loss, against the income from business and profession. 6. 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. Taking this rationale further, PCIT also observed 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. 7. Mr Krishanan S., who appears on behalf of the petitioner/assessee says that PCIT has committed an error in failing to exercise his revisionary power under the provisions of Section 264 of the Act. According to Mr Krishanan, a plain reading of the said provision would show that PCIT could exercise revisionary jurisdiction either himself or based on the application moved by the assessee [in this case, the petitioner] in any order, other than an order to which the provisions of Section 263 applied. 7.1 It is, therefore, Mr Krishanan’s submission that since the petitioner/assessee inadvertently did not claim set off concerning future and option losses, this was an error which the PCIT could have corrected under Section 264 of the Act. 7.2 In support of the above, submission, Mr Krishanan seeks to place reliance on the judgment of a coordinate Bench of this court rendered in Digitally Signed By:TARUN RANA Signing Date:13.10.2023 16:01:29 Signature Not Verified

W.P.(C) 5906/2022 Page 3 of 4

Vijay Gupta vs. Commissioner of Income-Tax and Another [2016] 386 ITR 643 (Delhi) and the judgment of the Bombay High Court in Aafreen Fatima Fazal Abbas Sayed vs. Assistant Commissioner of Income-Tax and Another [2021] 434 ITR 504 (Bom.). 8. Mr Gaurav Gupta, learned senior standing counsel, who appears 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 Vijay Gupta case. 9. According to us, 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. 10. The rationale behind conferring such revisionary power is that the revenue ultimately is entitled to assess the real income of an assessee; albeit as per the provisions of the Act. 11. Therefore, 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. 12. At this stage, we are informed by Mr Krishanan 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. Digitally Signed By:TARUN RANA Signing Date:13.10.2023 16:01:29 Signature Not Verified

W.P.(C) 5906/2022 Page 4 of 4

13.

Thus, for the foregoing reasons, we are inclined to set aside the impugned order. 14. PCIT will re-examine the application filed by the petitioner/assessee (which is now sought to be progressed by his legal heirs), and render a decision on it afresh. 15. The writ petition is disposed of, in the aforesaid terms.

RAJIV SHAKDHER, J.

GIRISH KATHPALIA, J. SEPTEMBER 25, 2023 / pmc

Digitally Signed By:TARUN RANA Signing Date:13.10.2023 16:01:29 Signature Not Verified

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