Commissioner Can Exercise Powers u/s 264 Even in Cases Where Errors are Committed by Assessee | HC

Case Details: Pramod R. Agrawal vs. PCIT - [2023] 156 taxmann.com 126 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram & Rajesh S. Patil, JJ.
  • Dharan V. Gandhi, Ms Aanchal Vyas & Darshan Gajra for the Petitioner.
  • Akhileshwar Sharma for the Respondent.

Facts of the Case

The assessee sold a flat and offered the capital gains in the return of income without considering the allowance of indexed cost of improvement with respect to renovation expenses. The Assessing Officer (AO) made an addition under section 50C by taking the stamp duty value as the full value of consideration while computing the capital gains arising from the sale of said flat. No adjustment was made to the allowances claimed from the full value of consideration to determine the capital gains.

On appeal, the CIT(A) confirmed the addition made by the AO. Subsequently, the assessee filed an application under section 154 to allow the deduction of the indexed cost of improvement being renovation expenses.

However, the application was filed on the ground that the claim was made first time in the application under section 154, and it was never brought to the notice earlier. Afterwards, the assessee filed an application under section 264, which was also rejected.

Aggrieved-assessee filed a writ petition to the Bombay High Court.

High Court Held

The Court held that the proceedings under section 264 are intended to meet a situation faced by an assessee who cannot approach the Appellate Authorities for relief and has no other alternative remedy available under the Income-tax Act.

The Commissioner is bound to apply his mind to the question of whether the assessee was taxable on that income, and his powers are not limited to correcting the error committed by the subordinate authorities but could even be exercised where the assessee commits errors. It would even cover situations where the assessee, because of an error, has not put forth a legitimate claim when filing the return and the error is subsequently discovered and raised for the first time in an application under section 264.

Accordingly, the order was to be quashed, and the matter was to be remanded to the Commissioner for denovo consideration.