Assessee having failed to claim exemption under s. 54F, could claim the same by way of revision under s. 264 and the revisionary authority is  bound to consider the same

High Court Of Jammu And Kashmir In The Case Of Smt. Sneh Lata Jain Vs. Commissioner Of Income Tax has held that Assessee having failed to claim exemption under s. 54F, could claim the same by way of revision under s. 264 and the revisional authority was bound to consider the same

It has further held that the CIT has much wider power under s. 264. It does not circumvent and confine the power of the revisional authority in any manner. It was established before the revisional authority that the capital gain on the sale of land was utilized for the purchase of a residential house within time and the consideration for the purchase of the house was much more than the amount of capital gain. The assessee had no liability to pay tax and was entitled to benefit under s. 54F. It is also admitted position that the petitioner had failed to claim the benefit in her return but an effort was made to overcome the mistake before the revisional authority. CIT has not disputed the sale and purchase of the house as the same is evidenced by documentary evidence duly registered before the competent authority. It is also admitted position that the petitioner had no remedy before the assessing authority after the assessment order was passed. The revisional jurisdiction was invoked within the prescribed time. The revisional authority having widest possible powers under s. 264 was required to hold an inquiry or cause any inquiry to be held and consider the question of purchase of the property and proceeded to apply the provisions of s. 54F. The reasoning given by the revisional authority is only technical. The revisional authority could not be oblivious of its duty to accept the contention of the assessee when the facts were brought to its notice about the capital gain being not chargeable to tax under law. What to say of its duty to advice the assessee the revisional authority rejected the contention of the petitioner only on technical grounds. When the substantive law confers a benefit on the assessee under a statute, it cannot be taken away by the adjudicatory authority on mere technicalities. It is settled proposition of law that no tax can be levied or recovered without authority of law. Article 265 of the Constitution of India and s. 114 of the State Constitution imposes an embargo on imposition and collection of tax if the same is without authority of law. Admittedly, on the basis of facts disclosed before the revisional authorities and this Court, the petitioner is not liable to tax on the capital gain. Once it is found that the petitioner has no tax liability, the respondents cannot be permitted to levy the tax and collect the same in contravention to Art. 265 of the Constitution of India, which provides a constitutional safeguard on levy and collection of tax. It is true that this Court is not to act as Court of Appeal while exercising the writ jurisdiction, but at the same time where the admitted facts disclosed non-exercise of jurisdiction by an adjudicatory authority and a citizen is subjected to tax not payable by him, interference by this Court is warranted. The AO is directed to reassess the taxable income of the petitioner, by taking into consideration the benefit available to her under s. 54F and pass appropriate order

The copy of the order is as under:

 

SMT. SNEH LATA JAIN vs. COMMISSIONER OF INCOME TAX

HIGH COURT OF JAMMU AND KASHMIR

Permod Kohli, J.

OWP No. 591 of 2003

Apr 2, 2004

 (2004) 192 CTR 0050
(2004) 140 TAXMAN 0156

Asst. Year 2001-02

Decision in favour of:

Assessee

Revision—Under s. 264—Exemption under s. 54F not claimed in return but claimed in revision—Assessee declaring capital gains in her return, same accepted under s. 143(1) and demand raised accordingly—No revised return filed within time—Assessee filing revision under s. 264 claiming exemption under s. 54F by producing evidence in the form of registered sale deed showing that an amount higher than the capital gains was invested in purchase of another house property within time prescribed—CIT rejecting revision petition on the ground that return filed by assessee had been accepted by the AO—Not justified—Assessee being entitled to exemption under s. 54F on the evidence produced before the revisional authority, the revisional authority ought to have considered the matter instead of rejecting the petition on technical ground—Assessee not being liable to tax, imposition of tax on her was violative of Art. 265 of the Constitution of India—AO directed to reassess the taxable income after considering the benefit allowable under s. 54F

Held

PERMOD KOHLI, J.

Judgment

This petition proceeds on certain admitted facts, which are referred to herein :

2. Petitioner filed her return of income on 3rd March, 2001, for the accounting year 2000-2001 declaring her total income at Rs. 4,37,503. The assessing authority processed the return under s. 143(1) of the IT Act on 28th March, 2002, and raised a demand of Rs. 1,10,346 inclusive of interest under ss. 234A, 234B and 234C of the IT Act. In the return the petitioner had disclosed that she owned 24.71 per cent share in the land situate at Chhani Himmat and sale of land was effected in April, 1999. The total sale price was Rs. 7,03,000. The capital gain at sale price was declared as Rs. 2,80,858. The total amount of tax payable was shown as Rs. 84,529 out of which advance tax paid was Rs. 6,000 and the tax deducted at source on various incomes Rs. 21,845. It was stated that she is unable to pay the balance amount of tax “for want of funds”.
3. The assessing authority assessed the income and tax liability as under :

(i) Total income as per return :	1,56,680
(ii) Adjustment under s. 143(1)(a)	2,80,858
Grand Total (I + II)		4,37,538
(iii) Tax on assessed income :	77,165
(iv) Surcharge	7,716
(v) Total			84,861
Interest Payable :
Under s. 234A	7610
Under s. 234B	27,660
Under s. 234C	3,880
Total		1,18,981
Less : Prepaid tax	8,635
Total Tax payable		1,10,346

On receipt of demand, the petitioner approached respondent No. 1, who is revisional authority and raised plea of non-disclosure of certain facts in the income-tax return and claimed benefits under s. 54F of the IT Act. It was pleaded before respondent No. 1 that the petitioner’s liability of tax as assessed by the assessing authority is not according to law. It was disclosed that the petitioner had sold her 1/5th share in the land at Chhani Himmat for a consideration of Rs. 2,80,858 and purchased 1/5th share in the House No. 3 B/C at Gandhi Nagar, Jammu for a consideration of Rs. 4,90,000 on 15th Oct., 1999, and accordingly she is not liable to pay any tax on the capital gain. It was further pleaded that due to mistake of her counsel the purchase of the share in the house at Gandhi Nagar, Jammu could not be mentioned and since the fact came to her notice after the assessment order was passed, she having no remedy of filing the revised return or any other course, is invoking the revisional jurisdiction of respondent No. 1.

4. Respondent No. 1 on consideration of the facts passed the impugned order dt. 3rd March, 2003, and rejected the contention of the petitioner by a speaking order and maintained the assessment order and demand of the assessing authority. The revisional authority was of the view that the petitioner having declared the taxable income, the assessing authority has rightly assessed the income and the tax liability. The contention of the petitioner that the assessing authority should have suggested filing of the revised return or issued notice under s. 143(2) or 142 is also rejected on the ground that these notices are not issued in each and every case. The revisional authority is also of the opinion that the return of income filed by the assessee under s. 139(1) having been accepted by the assessing authority, the revisional powers cannot be invoked.
5. Petitioner has relied upon a circular of the Board, dt. 10th April, 1955, which, inter alia, provide that it is one of the duties of the Department to assess the tax, particularly in a matter of claiming the relief. The revisional authority also held that the assessee filed the return beyond the prescribed period under s. 139(1) and thus was not entitled to file any revised return. It is this order which is impugned in the present petition.
6. The main contention of Mr. Z.A. Shah, learned counsel appearing for the petitioner is that the factum of sale of the land and subsequent purchase of 1/5th share in the house at Gandhi Nagar, Jammu by duly executed registered sale deed is not disputed. Petitioner having disclosed the capital gain on account of sale of land but due to lapse of her counsel the purchase of the property within the specified time could not be disclosed. It is further contended that since the filing of the revised return had become barred by time, the petitioner had no remedy except to invoke the revisional jurisdiction. Since the facts were not disputed, the revisional authority was required to exercise the revisional power and grant relief to the petitioner.
7. In response to the petition, the respondents have filed reply, Mr. D.S. Thakur, refuting the contention of the petitioner, has contended that the income-tax is a self-contained and complete code in itself which provides and prescribes the procedure and the method of making the assessment. The petitioner’s income-tax return has been accepted by the assessing authority and thus there was no occasion for the revisional authority to interfere in the same. It is further stated that the writ Court is not to exercise the appellate jurisdiction over the decision of the authority under the Act. It is only if the authorities under the Act fail to follow the procedure prescribed and the orders are otherwise perverse, the High Court can exercise its extraordinary jurisdiction. In regard to the claim of the petitioner for the benefit under s. 54F, it is stated that the benefit is admissible only where such a claim is made by the assessee in the return of income-tax but when the petitioner did not make any such claim in her return, she will not be entitled to the benefit thereof.
8. I have heard the learned counsel for the parties at length.
9. Sec. 139 of the IT Act deals with filing of return by a person of his total income in respect of which tax is assessable under the Act during the previous year. Sec. 143 of the Act deals with the assessment to be made by the assessing authority where a return has been made under s. 139 or in response to a notice under sub-s. (1) of s. 142, if any, tax or interest is found due. Sec. 54(F) provides where an assessee being an individual or HUF where the capital gain shall not be charged under s. 45, if the cost of the new asset is not less than the net consideration in respect of the original asset.
10. Based upon this provision, it has been strenuously argued by Mr. Z.A. Shah that the petitioner is not liable to pay tax under s. 54F, she having purchased the residential house of value more than the capital gain within a period of one year from the date of sale and this fact was required to be considered by the revisional authority to reduce the tax liability of the petitioner proportionally. This contention of the leaned counsel for the petitioner has been seriously contested by Mr. Thakur, who has submitted that the petitioner was required to disclose the fact of the purchase of the property in her return filed under s. 139(1) or the revised return if filed within the prescribed period. She having failed to claim the benefit within the time, is not entitled to the benefit after the expiry of the requisite period. It is also stated that the petitioner herself disclosed the capital income which has been accepted by the assessing authority as also the revisional authority. There is no procedural illegality, irregularity or perversity in the impugned order warranting any interference.
11. From the provisions of the income-tax referred to above, it is clear that the return filed by the petitioner and the taxable income disclosed by her has been accepted by the assessing authority. The assessing authority has thus not acted in any manner prejudicial to the interest of the petitioner or in contravention to the provisions of law. The petitioner had the remedy of filing a revised return provided the steps were taken within the time prescribed under s. 139. That having not been done, she allowed the assessment order to be passed and thereafter, realized the mistake which was incurable after the lapse of time. She invoked the revisional jurisdiction of respondent No. 1 under s. 264 of the IT Act which reads as under :

“264. (1) In the case of any order other than an order to which s. 263 applies passed by an authority subordinate to him, the CIT 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 CIT 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.”

12. A bare reading of section makes it abundantly clear that the CIT has discretion to invoke the revisional jurisdiction. However, once he entertains a revision he has the power to call for the record of any proceedings under this Act and is also entitled to make any inquiry himself or cause any inquiry to be made and pass such order as he thinks fit. The only impediment on the power of the revisional authority is that he will not pass any order prejudicial to the assessee. The respondent No. 1 has much wider power under s. 264. It does not circumvent and confine the power of the revisional authority in any manner. The apex Court in the case Dwarka Math vs. ITO AIR 1966 SC 81, considered the scope of the revisional jurisdiction of the CIT under the old s. 33A(2), which was worded in the same manner, and observed as under :

“Jurisdiction conferred under s. 38A of the Act prima facie is a judicial one. The other that is brought before the CIT affects the right of the assessee. That the revising authority shall give an opportunity to the parties affected to put forward their case in the manner prescribed, is implicit in revisional jurisdiction. The nature of the jurisdiction and the rights decided necessarily carry with them the duty to act judicially in disposing of the revision. The fact that the CIT cannot make an order to the prejudice of an assessee does not possibly change the character of the proceeding. Though the CIT may not change the order of the inferior authority to the prejudice of the assessee, he may not give the full relief asked for by the assessee.”

13. It was established before the revisional authority that the capital gain on the sale of land was utilized for the purchase of a residential house within time and the consideration for the purchase of the house was much more than the amount of capital gain. The assessee had no liability to pay tax and was entitled to benefit under s. 54F of the IT Act. It is also admitted position that the petitioner had failed to claim the benefit in her return but an effort was made to overcome the mistake before the revisional authority. Respondent No. 1 has not disputed the sale and purchase of the house as the same is evidenced by documentary evidence duly registered before the competent authority. It is also admitted position that the petitioner had no remedy before the assessing authority after the assessment order was passed. The revisional jurisdiction was invoked within the prescribed time. The revisional authority having widest possible powers under s. 264 was required to hold an inquiry or cause any inquiry to be held and consider the question of purchase of the property and proceeded to apply the provisions of s. 54F. The reasoning given by the revisional authority is only technical. This question was decided in similar circumstances by Gujarat High Court in Digvijay Cement Co. Ltd. vs. CIT TC 57R.467 wherein it has been held as under :

“This section empowers the CIT, either on his own motion or on an application made by the assessee to call for the record of any proceeding under the Act and pass such order thereon not being an order prejudicial to the assessee. This power has been conferred upon the Chief CIT in order to enable him to give relief to the assessee in cases of overassessment. The power is conferred to him in wide terms and as pointed out by this Court in C. Parikh & Co. vs. CIT TC 57R.716 and by the Kerala High Court in Parekh Brothers vs. CIT TC 57R. 720, this power should be exercised by the CIT subject to the limitations prescribed in that section to give relief to the assessee in case where, after assessment was completed, the assessee detects mistakes on account of which he was overassessed. That power is not confined merely to erroneous orders passed by the lower authorities.”

The High Court further observed :

“In the alternative, it was submitted that the assessee not having made any claim before the ITO, there was no order of the ITO in this, behalf and, therefore, s. 264 could not have been invoked by the assessee. What was submitted was that a revision application would lie only against the order of the ITO and if there was no order of the ITO with respect to the claim made before the CIT, the revision would not be maintainable. We are concerned in this case with the order of assessment and not with any other type of order. What in fact the assessee did by filing the revision application before the CIT was to challenge the order of assessment on the ground that it was erroneous. It may be that the error was committed not by the ITO but by the assessee and that the error was detected by the assessee later on. But that certainly cannot preclude the assessee from challenging the order of assessment on the ground that the order was erroneous inasmuch as, under the law, deduction under s. 35B ought to have been granted to the assessee. The power of revision under s. 264 cannot be restricted to such erroneous orders which have become erroneous as a result of some error committed by the ITO while passing the orders. Independently of any decision or absence of any decision on the part of the ITO the order of assessment can be challenged as erroneous if, for example, some provision was overlooked not only by the assessee but also by the ITO. Even in such a case, the order of assessment can be challenged by filing a revision application before the CIT, therefore, even this contention raised on behalf of the Revenue deserved to be rejected.”

14. In another case, Pt. Sheo Nath Sharma vs. CIT TC 57R.712, before the Allahabad High Court, the question of taxability of the income disclosed by the assessee himself came to be considered. On consideration of the facts, which are not different from the case in hand, the Court observed :

“Seems to me, however, that the order of the CIT rejecting the previous applications, on the mere ground that the petitioner had shown the income in his return is erroneous. The CIT was bound to apply his mind to the question whether the petitioner was taxable on that income. The ITO is entitled under s. 23(1) to make an assessment on the basis of the return if he is satisfied, without requiring the presence of the assessee or the production of evidence in support of the return, that the return is correct and complete. But it may be that the assessee may have committed a mistake in treating a certain receipt as taxable. The mere circumstance that he has shown that receipt as income in his return does not make him liable to tax thereon. An assessee is liable to tax only upon such receipt as can be included in his total income and is assessable under the IT Act. The law empowers the ITO to assess the income on an assessee and determine the tax payable thereon. In doing so, he may proceed on the basis that where an assessee discloses that a certain sum of money has been received by him, the fact of that receipt may be accepted without anything more as constituting an admission on the part of the assessee. That would be an admission as to a matter, and consideration of that question leads into the realm of law. If the ITO assesses an assessee upon a receipt which is not taxable in law, it is always open to the assessee to take the case in appeal or in revision thereafter. It is then for the AAC or the CIT, as the case may be, to examine the matter and determine whether, although the money has been received by the assessee, it is taxable in law. The assessee is then within his rights in requiring the appellate or the revisional authority to examine the validity of the assessment to tax of a receipt which, though admitted by him, is not taxable in law.”

In a subsequent case in O.C.M. Ltd. (London) vs. ITO TC 57R.637, a Division Bench of the Allahabad High Court relying upon Pt. Sheo Nath Prasad Sharma’s case (supra) considered the scope of the revisional jurisdiction of CIT held as under :

“The revisional powers conferred on the CIT under s. 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. The discretion which the CIT has to exercise is undoubtedly to be exercised judicially and not arbitrarily according to his fancy. Therefore, subject to the limitations prescribed in s. 264, the CIT in exercise of his revisional power under the said section may pass such order as he thinks fit which is not prejudicial to the assessee. There is nothing in s. 264 which places any restriction on the CIT’s revisional power to give relief to the assessee in a case where the assessee detects mistake on account of which he was overassessed after the assessment was completed. The CIT would not be acting de hors the IT Act, if he gives relief to the assessee in a case where it is proved to his satisfaction that there is overassessment, whether such over-assessment is due to a mistake detected by the assessee after completion of assessment or otherwise. The CIT would not be right in holding that it was not open to him to give relief to the petitioner on account of the petitioner’s own mistake which it detected after the assessment was completed. Once it is found that there was a mistake in making an assessment, the CIT had power to correct it under s. 264(1). The CIT would be wrong in not giving relief to the petitioner in respect of overassessment as a result of undertotalling of the purchases.”

Though the assessing authority was not aware of the purchase of the property by the petitioner and proceeded on the basis of the admitted facts disclosed in the return, however, the revisional authority could not be oblivious of its duty to accept the contention of the assessee when the facts were brought to its notice about the capital gain being not chargeable to tax under law. What to say of its duty to advice the assessee the revisional authority rejected the contention of the petitioner only on technical grounds. When the substantive law confers a benefit on the assessee under a statute, it cannot be taken away by the adjudicatory authority on mere technicalities. It is settled proposition of law that no tax can be levied or recovered without authority of law. Article 265 of the Constitution of India and s. 114 of the State Constitution imposes an embargo on imposition and collection of tax if the same is without authority of law. Admittedly, on the basis of facts disclosed before the revisional authorities and this Court, the petitioner is not liable to tax on the capital gain. Once it is found that the petitioner has no tax liability, the respondents cannot be permitted to levy the tax and collect the same in contravention to Art. 265 of the Constitution of India, which provides a constitutional safeguard on levy and collection of tax. It is true that this Court is not to act as Court of appeal while exercising the writ jurisdiction, but at the same time where the admitted facts disclosed non-exercise of jurisdiction by an adjudicatory authority and a citizen is subjected to tax not payable by him, interference by this Court is warranted. The respondent No. 2 is directed to reassess the taxable income of the petitioner, by taking into consideration the benefit available to her under s. 54F of the IT Act and pass appropriate order.