Facts of the Case

The Petitioner, Hargovind Pandey, was the proprietor of M/s River Banks Studios and also a Director of River Bank Studios Pvt. Ltd. (RBSPL). Under an MoU dated 1 April 2011, certain assets and liabilities of the proprietorship concern were transferred to RBSPL.

For Assessment Year 2012-13, the Petitioner filed his return of income including interest earned on Fixed Deposit Receipts (FDRs). Simultaneously, RBSPL also filed its return but did not disclose such interest income.

Subsequently, during scrutiny assessment of RBSPL under Section 143(3), the Assessing Officer added the FDR interest income to the company’s taxable income as unaccounted income. Thus, the same income stood taxed twice—once in the hands of the Petitioner and again in the hands of RBSPL.

To rectify this duplication, the Petitioner filed a revision application under Section 264 seeking deletion of the FDR interest from his personal assessment. However, the Principal Commissioner rejected the application on the ground of limitation.

 Issues Involved

  1. Whether limitation under Section 264(3) begins from the date of receipt of refund or from the date of actual receipt of intimation under Section 143(1)?
  2. Whether knowledge of processing of return without access to the actual intimation/order can trigger the limitation period?
  3. Whether the revisional authority should adopt a beneficial interpretation in matters of over-assessment?

 Petitioner’s Arguments

  • The Petitioner argued that mere receipt of refund cannot amount to communication of the intimation under Section 143(1).
  • It was submitted that without the actual intimation, the Petitioner could not know the exact contents of the assessment processing.
  • The actual intimation was communicated only on 13 April 2015 via email.
  • Therefore, the revision petition filed on 9 June 2015 was well within limitation under Section 264(3).
  • It was further argued that the same FDR interest could not be subjected to tax twice.

 Respondent’s Arguments

  • The Revenue contended that once the refund amount was credited on 25 April 2014, the Petitioner became aware that the return had been processed.
  • Therefore, limitation began from that date.
  • Since the revision petition was filed after one year, it was time-barred by 45 days.
  • Alternatively, if delay was condonable, the matter could be remanded for adjudication on merits.

 Court Findings / Observations

The Delhi High Court held that the phrase “otherwise came to know of it” under Section 264(3) must be interpreted to mean actual knowledge of the contents of the order/intimation and not merely knowledge that processing has occurred.

The Court clarified that mere receipt of refund cannot amount to communication of the intimation under Section 143(1). Until the assessee receives or obtains a copy of such intimation, the limitation period does not commence.

The Court relied upon:

  • Vijay Gupta v. CIT (386 ITR 643 Delhi HC)
  • C. Parikh & Co. v. CIT [1980] 4 Taxman 224 (Gujarat HC)

The Court emphasized that Section 264 is a beneficial provision intended to grant relief to assessees in cases of over-assessment and must be interpreted liberally.

 Court Order / Final Decision

The Delhi High Court:

  • Set aside the order of the Principal Commissioner dated 21 December 2016;
  • Held that the revision petition was not barred by limitation;
  • Restored the Petitioner’s revision application for fresh disposal on merits;
  • Directed the PCIT to adjudicate the matter in accordance with law.

 Important Clarification

The Court clarified that for Section 264 limitation purposes:

  • Mere receipt of refund does not start limitation;
  • Actual receipt of the intimation/order is essential;
  • Revisional authorities should also examine condonation of delay even without a separate application if sufficient cause exists.

This judgment strengthens taxpayer protection against procedural technicalities defeating substantive relief.

 Sections Involved

  • Section 264, Income Tax Act, 1961 (Revision by Commissioner)
  • Section 143(1), Income Tax Act, 1961 (Processing of Return)
  • Section 143(3), Income Tax Act, 1961 (Scrutiny Assessment)

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:3961-DB/SMD27072017CW47052017.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.