The Bombay High Court has held that Section 264 of the Income Tax Act is a salutary provision which also bridges the gap and / or removes vacuum to remedy a bona fide mistake and for correction of an inadvertent situation, which may take place in the assessment proceedings.
The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan has observed that since the “record” under the provisions of section 264(1) is only the record of the proceedings before the assessing authority and as assessee did not claim any such deduction in the return of income filed by him before the assessing authority, he was not entitled to raise such question for the first time in revision proceedings under Section 264(1).
Background
The petitioner/assessee filed its return of income for the Assessment year 2019- 20 declaring income. It is the petitioner’s case that the petitioner was making a provision for bonus, ex-gratia and incentives (collectively referred as ‘bonus’) payable to employees, at the time of preparation of the financial statements.
The actual payment was dependent on various factors, and on an aggregate basis the amount could be lower or equal to the provisions made. The petitioner contends that in the previous year the petitioner Company had made provision of Rs.1,30,00,000/- in the accounts for payment of bonus, and factually paid bonus of Rs.1,18,62,953/- before the due date of filing return of income, for the assessment year 2018-19. Thus disallowed excess provision in the return of income for the assessment year 2018-19 under Section 43B of the Income Tax Act.
Arguments
The petitioner contended that while computing the income for the assessment year 2019-20, inadvertently, the excess provision of Rs 11,37,047/- was not reduced from the income which resulted in double taxation of excess provision.
Conclusion
The court opined that Section 264 is a salutary provision which also bridges the gap and / or removes vacuum to remedy a bona fide mistake and / or for correction of an inadvertent situation, which may take place in the assessment proceedings. By remedying such mistake by orders being passed under Section 264 of the Act, any illegality or injustice which would otherwise be caused to the assessee can be corrected so as to maintain a lawful course of action being followed in the course of assessment. The object of such provision also appears to be that the law would not be oblivious to any bona fide human mistake which may occur at the end of the assessee and which if otherwise permitted to remain, may lead to injustice or the provisions of law being breached.
The court while allowing the petition held that the Commissioner has certainly erred in law in rejecting the revision application filed by the petitioner merely on the ground that the petitioner had not filed a revised return.
Case Title: Bahar Infocons Pvt. Ltd. v/s Principal Commissioner of Income Tax, Mumbai-2 & Ors.
Case No.: WRIT PETITION NO. 2658 OF 2024
Date: 23 SEPTEMBER 2024
Counsel For Petitioner: Dr. K. Shivaram, Senior Advocate
Counsel For Respondent: N. C. Mohanty
