The Hindu Business Line : Commissioning a relief

H. P. Ranina looks at Section 264 of the I-T Act that empowers the Commissioner of Income-Tax to revise an assessment and grant relief to an assessee who has been over-assessed

SECTION 264 of the Income-Tax Act, 1961 specifically empowers the Commissioner of Income-Tax to revise an assessment and grant relief to an assessee once it is proved that he has been over-assessed.

What is required by law is that this power of revision be exercised by the Commissioner even if the assessee himself has made a mistake in filing higher taxable income, irrespective of whether a revised income-tax return is filed or not.

The authorities under the Act are obliged to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, by mistake, misconception or on not being properly instructed, is over-assessed, the Act requires the authorities to assist him and ensure that only legitimate taxes due are collected.

The Supreme Court has observed in numerous decisions, including Ramlal vs. Rewa Coalfields Ltd. (AIR 1962 S.C. 361); State of West Bengal vs. Administrator, Howrah Municipality (AIR 1972 S.C. 749); and Babutmal Raichand Oswal vs. Laxmibai R. Tarte (AIR 1975 S.C. 1297), that the State authorities should not raise technical pleas if the citizens have a lawful right, and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude that private litigants might.

Under Section 264, the Commissioner is empowered to exercise revisional powers in favour of the assessee. In the exercise of this power, the Commissioner may, either of his own or on an application by the assessee, call for the record of any proceedings under the Act and pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit.

Sub-sections 2 and 3 of Section 264 provide for limitation of one year for the exercise of this revisional power, whether suo motu or at the instance of the assessee.

Power is also conferred on the Commissioner to condone delay if he is satisfied that the assessee was prevented by sufficient cause from making the application within the prescribed period.

Sub-section 4 curbs the Commissioner's powers to revise any order under Section 264, one, while an appeal against the order is pending before the Appellate Assistant Commissioner; and, two, when the order has been subjected to an appeal to the Income-tax Appellate Tribunal.

Subject to the above limitation, the revisional powers conferred on the Commissioner under Section 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.

Therefore, subject to the limitations prescribed in Section 264, the Commissioner, in exercise of his revisional power, can pass such order as he thinks fit which is not prejudicial to the assessee.

There is nothing in Section 264 that restricts the Commissioner's revisional power to give relief to the assessee where the latter detects mistakes, post assessment, by which he was over-assessed. It is open to the Commissioner to entertain even a new ground not urged before the lower authorities while exercising his revisional powers.

The Commissioner's power of revision is subject to the following conditions:

The order should have been passed by an authority subordinate to the Commissioner. The Assessing Officer is subordinate to the Commissioner. The Deputy Commissioner of Income-tax (Appeals) is not subordinate to the Commissioner but, for the purposes of Section 264, he is deemed (under Explanation 2) to be subordinate to the Commissioner, with the result that his orders can be revised by the Commissioner under this Section.

If the Commissioner acts suo motu, he must exercise his revisional powers within a year of the date of the original order.

If the assessee moves the Commissioner under this Section, the application must be made within one year from the date on which he came to know of the impugned order.

A delayed revision petition should be accompanied by an application for condonation of delay, giving reasons for the delay. The Commissioner would condone the delay on sufficient cause being shown. A liberal approach is generally adopted.

The words `sufficient cause' should receive a liberal construction so as to advance substantial justice where no negligence, inaction or want of bona fides is imputable to the applicant.

While considering the question of condonation of delay in filing the application, the Commissioner is not altogether excluded from considering the merits of the application, and hence, when the same receipt had been taxed twice, an order refusing to condone the delay in filing the application is not justified.

Where the assessee applies within the prescribed period, the Commissioner may exercise his revisional power even after the expiry of the period, and even after the period for completing the assessment is over.

In respect of an application made by the assessee on or after October 1, 1998, the Commissioner must pass the order within one year from the end of the financial year in which such application is made, unless it is an order passed in consequence of or to give effect to any finding or direction contained in an order of a Tribunal, a High Court or the Supreme Court.

If the order is appealable, the Commissioner cannot revise it till the time within which the appeal may be made expires. However, if an appeal lies against the order to the C.I.T. (A) or to the Tribunal and the assessee waives his right of appeal, the Commissioner may revise the order even before the time for the appeal has expired.

If an appeal has been made to the Deputy C.I.T. (A) or C.I.T. (A), the revisional power cannot be exercised while the appeal in pending, but may be exercised after the appeal has been disposed of.

Once an order has been made the subject of an appeal to the C.I.T. (A) or to the Tribunal, the Commissioner's revisional power comes to an end; it cannot be exercised at all while the appeal is pending or even after it is disposed of. No order can be passed under this section which is prejudicial to the assessee.

The Commissioner may, in exercise of his revisional powers under this Section, grant relief to the assessee, but the Section in terms provides that in no case can the Commissioner pass an order prejudicial to the assessee.

The decision of the Privy Council in C.I.T. vs. The Tribune Trust (16 I.T.R. 214) is an authority for the proposition that an order made by the Commissioner under this Section can be said to be prejudicial to the assessee only when, as the result of it, he is in a different and worse position than that in which he was placed by the order under review.

If the order passed in revision does not worsen the position of the assessee, for instance, where the Commissioner merely rejects the assessee's application for relief or sustains the additions in a modified form, the order cannot be said to be prejudicial to the assessee.

This view has now been given statutory effect by Explanation 1, which says that an order by the Commissioner declining to interfere would not be deemed to be an order prejudicial to the assessee.

Again, if the Commissioner effects a reduction of income under one head and an increase under another, but on the whole reduces the assessment, his order cannot be said to be prejudicial to the assessee.

In conclusion, it may be pointed out that the power conferred on the Commissioner is very wide, though not as wide as in the case of an appeal, and has all the trappings of a judicial power.

He is competent to revise even an order passed under the Income-Tax Rules, 1962. He has the discretion to grant or refuse relief and the power to pass such order in revision as he may think fit. However, this power is not an arbitrary one to be exercised according to his fancy.

The Commissioner must act according to the rules of reason and justice, not according to private opinion; according to law, and not humour. His discretion has to be not arbitrary, vague and fanciful, but legal and regular.

He must consider the contentions raised on merits and cannot refuse to exercise his revisional powers on extraneous grounds. His power is a power coupled with a duty to exercise it in the interest of justice to the assessee.

Where the contention of the assessee requires a more careful examination and a considered decision, the Commissioner cannot dismiss an application by a cryptic order.

The Commissioner must comply with the principles of natural justice and grant the assessee an opportunity of being heard.

It is his duty to consider the relevant facts, and to revise an assessment found to be erroneous in the light of a later decision of the Supreme Court or a High Court.

(The author is a Mumbai-based advocate.)

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