Facts of the Case

The petitioner, Paradigm Geophysical Pty. Ltd., a non-resident company and tax resident of Australia, was engaged in providing and developing software-enabled solutions for the oil and gas industry along with annual maintenance services in relation to those solutions. For Assessment Year 2012–13, the petitioner filed its return declaring income by applying Section 44BB of the Income Tax Act, 1961.

The Assessing Officer, however, treated the receipts as Royalty / Fees for Technical Services (FTS) and passed the final assessment order under Sections 144C(3)(b) and 143(3), applying Section 44DA instead of Section 44BB, resulting in enhancement of taxable income.

The petitioner did not prefer an appeal against the assessment order for AY 2012–13 but subsequently filed a Revision Petition under Section 264 before the Commissioner, challenging the applicability of Section 44DA and seeking application of Section 44BB. The Commissioner dismissed the revision petition holding that the assessee was attempting to use Section 264 as a “back-door entry” since similar issues were already under appellate proceedings for other assessment years. The petitioner challenged this order before the Delhi High Court.

 Issues Involved

  1. Whether a Revision Petition under Section 264 of the Income Tax Act is maintainable where no appeal has been filed and the limitation period for filing appeal has expired?
  2. Whether the Commissioner can reject a revision petition merely because similar issues are pending in appeal for other assessment years?
  3. Whether Section 264 can be denied on grounds not contemplated under Section 264(4) of the Act?

 Petitioner’s Arguments

  • The petitioner argued that the Assessing Officer wrongly invoked Section 44DA and ought to have applied Section 44BB.
  • It relied upon the Supreme Court judgment in ONGC vs CIT (2015) 376 ITR 306 (SC) and CBDT Circular No. 1862 to support applicability of Section 44BB.
  • It contended that Section 264 specifically allows revision where no appeal has been filed and the limitation period for appeal has expired, provided the assessee waives the right to appeal.
  • The pendency of similar issues in other assessment years cannot bar exercise of revisionary jurisdiction.

 Respondent’s Arguments

  • The Revenue contended that the petitioner had filed appeals for other assessment years involving identical issues and deliberately chose not to file appeal for AY 2012–13.
  • It was argued that the assessee was misusing Section 264 as an alternative appellate remedy.
  • The Commissioner justified dismissal by stating that similar issues had already been examined in appellate proceedings for earlier and subsequent years.

 Court Findings / Court Order

The Delhi High Court held that the Commissioner’s reasoning was contrary to the statutory framework of Section 264. The Court observed:

  • Section 264 confers revisionary jurisdiction on the Commissioner and the same cannot be denied except in circumstances specifically provided under Section 264(4).
  • The statutory bar under Section 264 applies only where:
    • the time to file appeal has not expired, or
    • the matter is pending in appeal, or
    • the order has already been made subject matter of appeal.
  • Since no appeal had been filed for AY 2012–13 and limitation had expired, the revision petition was maintainable.
  • Each assessment year is separate and independent under tax law; pendency of appeals for other years cannot affect maintainability for a different year.
  • The Commissioner was duty-bound to pass a reasoned and speaking order on merits.

Accordingly, the High Court quashed the Commissioner’s order and remanded the matter for fresh consideration in accordance with law.

 Important Clarification by the Court

The Court clarified that:

  • Section 264 cannot be denied by importing conditions not expressly provided in the statute.
  • The Commissioner exercises quasi-judicial powers while deciding revision petitions.
  • Mere pendency of similar issues in other years does not oust jurisdiction under Section 264.
  • The Court did not express any opinion on merits regarding applicability of Section 44BB or Section 44DA, leaving the issue open for determination by the Commissioner.

 Sections Involved

  • Section 44BB, Income Tax Act, 1961
  • Section 44DA, Income Tax Act, 1961
  • Section 143(3), Income Tax Act, 1961
  • Section 144C(2), Income Tax Act, 1961
  • Section 144C(3)(b), Income Tax Act, 1961
  • Section 246A, Income Tax Act, 1961
  • Section 253, Income Tax Act, 1961
  • Section 264, Income Tax Act, 1961 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:6889-DB/PMS13112017CW60522017.pdf

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