Revision – Application for revision – Conditions precedent – No appeal filed against assessment order and expiry of time limit for filing appeal – Application for revision valid

Revision – Application for revision – Conditions precedent – No appeal filed against assessment order and expiry of time limit for filing appeal – Application for revision valid

The petitioner is an individual and for the A.Y. 2017-18 had offered in the return of income, long-term capital gains of Rs. 3,07,60,800 which had arisen on surrender of tenancy rights for that year. The assessment for A.Y. 2017-18 was completed u/s 143(3) vide assessment order dated 24th December, 2019. For A.Y. 2018-19, the petitioner had received income from house property of Rs. 12,69,954 and income from other sources of Rs. 14,35,692, making a total income of Rs. 27,05,646. After claiming deductions and set-off on account of deduction of tax at source and advance tax, the refund was determined at Rs. 34,320.

However, while filing return of income on 20th July, 2018 for the A.Y. 2018-19, the figure of long-term capital gains of Rs. 3,07,60,800 was wrongly copied by the petitioner’s accountant from the return of income filed for the A.Y. 2017-18, and the same was mistakenly included in the return for the A.Y. 2018-19. The return filed by the petitioner for the A.Y. 2018-19 was processed u/s 143(1) vide order dated 2nd May, 2019 and a total income of Rs. 3,34,66,446, including long-term capital gains of Rs. 3,07,60,800 purported to have been inadvertently shown in the return of income was determined, thereby raising a tax demand of Rs. 87,40,612. Upon perusal of the order u/s 143(1) dated 2nd May, 2019, the petitioner realised that the amount of Rs. 3,07,60,800 towards long-term capital gains had been erroneously shown in the return of income for the year under consideration.

Realising the mistake, the petitioner filed an application u/s 154 before the A.O. on 25th July, 2019 seeking to rectify the mistake of misrecording of long-term capital gains in the order u/s 143(1) as being an inadvertent error as the same had already been considered in the return for the A.Y. 2017-18, assessment in respect of which had already been completed u/s 143(3). The petitioner had not received any order of acceptance or rejection of this application. In the meantime, the petitioner also made the grievance on the e-filing portal of the Central Processing Centre on 4th October, 2019 seeking rectification of the mistake where the taxpayer was requested to transfer its rectification rights to AST, after which the petitioner filed letters dated 17th October, 2019, 20th February, 2020 and 24th November, 2020 with the A.O., requesting him to rectify the mistake u/s 154.

In order to alleviate the misery and bring to the notice of the higher authorities the delay in the disposal of the rectification application, the petitioner approached the Principal Commissioner u/s 264 on 27th January, 2021, seeking revision of the order of 2nd May, 2019 passed u/s 143(1), narrating the aforementioned facts and requesting the Principal Commissioner to direct the A.O. to recalculate tax liability for the A.Y. 2018-19 after reducing the amount of long-term capital gains from the total income of the petitioner for the said year.

However, instead of considering the application on merits, the Principal Commissioner of Income-tax-19, vide order dated 12th February, 2021, dismissed the application filed by the petitioner on the ground that the same was not maintainable on account of the alternate effective remedy of appeal and that the assessee had also not waived the right of appeal before the Commissioner of Income-tax (Appeals) as per the provisions of section 264(4).

‘i) The assessee had not filed an appeal against the order u/s 143(1) u/s 246A of the Act and the time of 30 days to file the appeal had also admittedly expired. Once such an option had been exercised, a plain reading of the section suggested that it would not then be necessary for the assessee to waive such right. That waiver would have been necessary if the time to file the appeal had not expired. The application for revision was valid.

ii) The order dated 12th February, 2021 passed by the Principal Commissioner, the respondent No. 2, is set aside. We direct respondent No. 2 to decide the application filed by the petitioner u/s 264 afresh on merits and after hearing the petitioner, pass a
reasoned / speaking order in line with the aforesaid discussion for grant of relief prayed for in the said application.

Obiter dicta: Where errors can be rectified by the authorities, the whole idea of relegating or subjecting the assessee to the appeal machinery or even discretionary jurisdiction of the High Court, is uncalled for and would be wholly avoidable. The provisions in the Income-tax Act for rectification, revision u/s 264 are meant for the benefit of the assessee and not to put him to inconvenience.’