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Article Dated 04th January, 2024

ORDERS ANALYSIS UNDER SECTION 264 BY DR B RAMASWAMY
SECTION 264 ANALYSIS

SECTION 264:

Section 264 of the Income Tax Act empowers the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner to revise certain orders. This revision can be initiated by the authority or upon application by the assessee. The authority can call for the record, conduct an inquiry, and pass an order not prejudicial to the assessee. There`s a one-year time limit for revision, with a provision for belated applications under sufficient cause.

Revision is restricted in cases where an appeal is available but not made, or the order is pending appeal. An application for revision by an assessee requires a fee of five hundred rupees. Timely processing is mandated, and orders must be passed within one year from the end of the relevant financial year. Periods for re-hearing and any stay by court order are excluded from the calculation. An order in revision may be passed at any time to give effect to findings or directions from higher authorities. Explanations clarify that an order declining to interfere is not prejudicial to the assessee, and the Deputy Commissioner (Appeals) is considered subordinate for this section`s purposes.

SCOPE OF SECTION 264:

1. Revision Authority:

- Enables the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner to revise orders.

- Applicable to orders, excluding those covered under Section 263, passed by subordinate authorities.

2. Initiation of Revision:

- Revision can be initiated either on the motion of the authority or in response to an application by the assessee.

3. Record Examination:

- Empowers the authority to call for the record of any proceeding under the Income Tax Act.

- Allows inquiry or investigation to be made into the proceedings related to the order under consideration.

4. Discretionary Orders:

- Authorizes the authority to pass orders, not prejudicial to the assessee, based on the findings of the revision.

5. Time Limitation:

- Prohibits the revision of orders made more than one year previously.

6. Application for Revision:

- Requires the assessee to file an application for revision within one year from the date of order communication or knowledge.

7. Extension Provision:

- Allows an extension of the application period if the assessee was prevented by sufficient cause, subject to satisfaction by the authority.

8. Non-Revision Cases:

- Restricts revision in cases where an appeal lies to the Deputy Commissioner (Appeals) or higher authorities, and the time for appeal has not expired.

- Bars revision when the order is pending on an appeal before the Deputy Commissioner (Appeals) or has been appealed to higher authorities.

9. Fee Requirement:

- Mandates that every application for revision by the assessee must be accompanied by a fee of five hundred rupees.

10. Timely Processing:

- Directs that orders on revision applications must be passed within one year from the end of the financial year in which the application is made.

11. Exclusion of Periods:

- Excludes the time taken for re-hearing opportunities and any period during which proceedings are stayed by court orders for computing the limitation period.

12. Flexibility in Revision Timing:

- Allows orders in revision to be passed at any time in consequence of or to give effect to findings or directions contained in higher authorities` orders.

13. Non-Interference Explanation:

- Specifies that an order declining to interfere is deemed not to be prejudicial to the assessee.

14. Position of Deputy Commissioner (Appeals):

- Deems the Deputy Commissioner (Appeals) to be an authority subordinate to the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner.

ASPECTS FAVORING THE REVENUE:

1. Time Limitation: The section imposes a time limitation on the revision process. Orders cannot be revised if more than one year has passed since their issuance, providing a reasonable timeframe for stability in tax assessments.

2. Restrictions on Ongoing Appeals: The department is protected from unnecessary revisions as the section prohibits revising orders under appeal, pending before the Deputy Commissioner (Appeals), or subject to higher appellate authorities.

3. Fee Requirement: Every application by the assessee for revision must be accompanied by a fee of five hundred rupees. This financial requirement can serve as a deterrent against frivolous or repetitive revision applications.

4. Timely Processing:The provision mandates that orders on revision applications must be passed within one year from the end of the financial year in which the application is made. This ensures a timely resolution of revision cases, promoting efficiency in the tax administration process.

5. Exclusion of Certain Periods: The section excludes the time taken for re-hearing opportunities and any period during which proceedings are stayed by court orders. This ensures a fair computation of the limitation period, considering the complexities involved in tax matters.

6. Flexibility in Revision: Notwithstanding the one-year limitation, the section allows for the passing of revision orders at any time to give effect to findings or directions from higher authorities such as the Appellate Tribunal, High Court, or Supreme Court.

7. Non-Interference Explanation: The section clarifies that an order declining to interfere is deemed not to be prejudicial to the assessee, providing a safeguard against unnecessary challenges to administrative decisions.

8. Position of Deputy Commissioner (Appeals): For the purposes of this section, the Deputy Commissioner (Appeals) is deemed to be an authority subordinate to the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner. This reinforces the hierarchical structure within the department, streamlining the revision process.

Revision of other orders.

264. (1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner 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 Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner 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 :

Provided that the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period.

(4) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner shall not revise any order under this section in the following cases—

(a) where an appeal against the order lies to the Deputy Commissioner (Appeals) or to the Joint Commissioner (Appeals) or the Commissioner (Appeals) or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the Joint Commissioner (Appeals) or the Commissioner (Appeals) or to the Appellate Tribunal, the assessee has not waived his right of appeal; or

(b) where the order is pending on an appeal before the Deputy Commissioner (Appeals); or

(c) where the order has been made the subject of an appeal to the Joint Commissioner (Appeals) or the Commissioner (Appeals) or to the Appellate Tribunal.

(5) Every application by an assessee for revision under this section shall be accompanied by a fee of five hundred rupees.

(6) On every application by an assessee for revision under this sub-section, made on or after the 1st day of October, 1998, an order shall be passed within one year from the end of the financial year in which such application is made by the assessee for revision.

Explanation.—In computing the period of limitation for the purposes of this sub-section, the time taken in giving an opportunity to the assessee to be re-heard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.

(7) Notwithstanding anything contained in sub-section (6), an order in revision under sub-section (6) may be passed at any time in consequence of or to give effect to any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.

Explanation 1.—An order by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner declining to interfere shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee.

Explanation 2.—For the purposes of this section, the Deputy Commissioner (Appeals) shall be deemed to be an authority subordinate to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

MADRAS HC ORDERS:

1. W.P.No.21515 of 2023 S. Raja Vs. The Principal Commissioner of Income Tax [2023] 200 TAXLOK.COM (IT) 579 (MAD).

The petitioner challenges the order dated 28.03.2023 issued by the Principal Commissioner of Income Tax-8, Chennai, under Section 264 of the Income Tax Act, 1961. The order rejects the petitioner`s request for the deletion of the disallowed amount of Rs.11,90,315/-, part of the interest on capital, relying on the proviso to Section 28(v) of the Act. In response, the order cites the violation of Section 40(b)(iv) by M/s. Selvam Motors, upholding the disallowance and asserting that it doesn`t alter the nature of income received by the petitioner. The respondents argue that the disallowance in the firm doesn`t affect the individual partner`s income, and therefore, the revision request lacks merit.

The petitioner relies on Section 28(v) and its proviso, which allows adjustment of income if interest is not deducted under Section 40(b). The court reviews relevant sections, emphasizing the separate entities of the firm and its partners. The court concludes that the petitioner`s attempt to revise the assessment order is not viable, considering the revised order of 30.12.2019. The writ petition is dismissed, and no costs are awarded.

Significantly, the case centers around Section 264, which empowers higher tax authorities to revise orders, providing a mechanism for addressing grievances related to other orders not covered by Section 263. The section has a scope and limitations, including a one-year time limit for revision and restrictions on revising orders under certain circumstances.

The court underscores the principle that a firm and its partners are distinct entities, rejecting the notion that disallowance in one entity grants deduction benefits to another. In conclusion, the court dismisses the writ petition, emphasizing the lack of merit in the petitioner`s attempt to revise the assessment order, considering the revised order of 30.12.2019 and the separate entities of the firm and its partners.

CONCLUSION:

In conclusion, the Madras High Court`s order in W.P.No.21515 of 2023 [2023] 200 TAXLOK.COM (IT) 579 (MAD), involving S. Raja vs. The Principal Commissioner of Income Tax, provides insight into the application of Section 264 of the Income Tax Act, 1961. The petitioner contested the rejection of a revision request under Section 264, seeking the deletion of a disallowed amount related to interest on capital. The court`s decision underscores the significance of Section 264, empowering tax authorities to revise orders, either on their own motion or in response to an assessee`s application. The case highlighted the intricacies of Section 28(v) and its proviso, emphasizing the separate legal entities of a firm and its partners.

Crucially, the court rejected the petitioner`s attempt to revise the assessment order, citing the revised order of 30.12.2019. The judgment affirms that disallowances in one entity, such as the firm M/s. Selvam Motors, do not automatically confer deduction benefits to another entity, namely the individual partner. This case serves as a valuable precedent, clarifying the scope and limitations of Section 264 and reaffirming the hierarchical structure within the tax administration. The court`s decision promotes the timely resolution of tax matters, discourages frivolous revision applications, and upholds the principle that distinct legal entities maintain separate tax implications.

Overall, the Madras High Court`s ruling in this case contributes to the jurisprudence surrounding income tax revisions and provides clarity on the interpretation of relevant sections, ensuring a fair and equitable application of tax laws.

AUTHOR & LEGAL EXPERT

CHAIRPERSON (THE PRESIDING OFFICER ) STANDING APPELLATE COMMITTEE  OF AICTE, GOVT OF INDIA.

SENIOR STANDING COUNSEL, MADRAS HIGH COURT FOR INCOME TAX DEPT, MINISTRY OF FINANCE, GOVT OF INDIA.

SENIOR STANDING COUNSEL – SUPREME COURT OF INDIA & DELHI HIGH COURT FOR EdCIL, MINISTRY OF    EDUCATION, GOVT OF INDIA.

ADDL GOVT PLEADER (AGP) MADRAS HIGH COURT, FOR GOVT OF PUDUCHERRY.

THE AUTHOR CAN BE REACHED AT MAIL: swamyjustice@gmail.com

Dr. B. Ramaswamy
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