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: Tax Paid Twice on Same Income Is by Government
In a significant ruling that underscores the principle that tax can be levied only once on a particular income, the has held that forcing an assessee to pay tax twice on the same amount amounts to “” by the . The Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta quashed an order of the that had refused to allow to file a belated revised return for , after the company inadvertently offered the same interest income of ₹7,58,90,455 to tax in two different assessment years.
The Court observed that “” cannot be confined to a predefined formula, and that paying tax twice on the same income is itself sufficient to establish for granting relief under . The decision provides important guidance on the scope of the ’s power to condone delays and allow revised returns where has occurred due to an error in Form 26AS.
The Error
The dispute arose when , a Singapore-based company, earned interest income of ₹7.58 crore. The deductor initially reflected this income in Form 26AS for , and the company accordingly included it in its return for that year and paid the applicable tax. Subsequently, the deductor revised Form 26AS and shifted the same interest income to . Acting on the revised tax statement, the company again offered the identical income to tax in its return for AY 2018-19, unaware that it had already been taxed.
It was only later that the company realised the mistake: it had effectively paid tax on the same income twice. The error was entirely attributable to the deductor’s revision of Form 26AS without notifying the assessee.
A Procedural Odyssey
Upon discovering the , the company acted with what the Court described as “.” It filed three rectification applications under in . These applications remained pending before the Assessing Officer for nearly three years. In , the Assessing Officer finally rejected the last application, holding that he lacked the power to reduce the returned gross total income.
The company then pursued revision applications under . The first was dismissed as premature because the rectification proceedings were still pending. The second, filed after the rectification rejection, was rejected on the ground of limitation. The Commissioner advised the company to seek condonation of delay under Section 119(2)(b) for filing a revised return.
Pursuant to that advice, the company filed an application under Section 119(2)(b) on , seeking permission to file a revised return for AY 2016-17 and exclude the interest income that had already been taxed in AY 2018-19. The rejected this application on , on two grounds: first, that permission to file a revised return after more than six years could be granted only in extraordinary circumstances, and second, that the company had failed to demonstrate any or satisfactorily explain the delay.
Court’s Observations on
Challenging the rejection before the , the petitioner argued that the tax authority had adopted a revenue-oriented and subjective approach instead of considering the matter from a . The company maintained that it had continuously pursued available remedies since 2019 and had not remained inactive.
The High Court found merit in these submissions. It noted that the interest income of ₹7.58 crore had indeed been offered to tax in two assessment years solely because of the deductor’s revision of Form 26AS. The Court observed that the company had filed its return for AY 2018-19 in accordance with the revised Form 26AS and only later realised the double payment.
The Bench criticised the Commissioner’s rejection on the ground that no existed. “ cannot be confined in a predefined formula or limited expression,” the Court observed. It added that “tax is required to be paid only once qua one income,” and that even the Government can charge tax only once in one assessment year on a particular income.
The Court further held that refusal to grant relief would result in “ on the part of the ,” as the petitioner would remain subjected to tax twice on the same sum of ₹7.58 crore. It also rejected the Department’s contention that the petitioner had not established , remarking that it was “preposterous” to claim that no hardship had been demonstrated when the assessee had paid tax twice on the same income.
Delay Caused by Authorities, Not Assessee
A notable aspect of the ruling is the Court’s finding on the delay. The Department had argued that the petitioner had repeatedly invoked incorrect remedies and was responsible for the delay. However, the High Court found that the company had acted with “” after discovering the mistake. It was only because of the respondents’ “ or ” that the assessee had been forced to “” for about six years.
The Court observed that the company had filed three rectification applications in 2019, all of which remained pending for years. The Commissioner’s rejection of the Section 119(2)(b) application on the ground of unexplained delay ignored the fact that the assessee had been diligently pursuing remedies, only to be met with administrative inertia.
Impact on Tax Practice
This judgment has significant implications for tax practitioners and assessees. It clarifies that the power under Section 119(2)(b) to condone delays and allow belated revised returns is not to be narrowly construed. Where has occurred due to a mistake in Form 26AS or similar errors, the authorities must take a justice-oriented approach rather than a revenue-oriented one.
The Court’s observation that “” cannot be confined to a predefined formula means that each case must be evaluated on its own facts. The fact of itself constitutes a special circumstance and , warranting relief. This should encourage assessees who discover similar errors to promptly seek rectification and, if necessary, approach the or the High Court.
Furthermore, the ruling sends a strong message to tax authorities about the consequences of delay and non-cooperation. The Court’s criticism of the “” and “” of the respondents underscores that administrative inefficiency cannot be used to defeat the legitimate claims of taxpayers.
Conclusion
The allowed the writ petition, quashed the Commissioner’s order dated , and permitted to file an online or offline revised return for on or before . The Assessing Officer was directed to verify the facts, consider the revised return in accordance with law, and pass an appropriate order within three months of its filing.
The decision reaffirms the fundamental principle that tax cannot be collected twice on the same income, and that the government cannot unjustly enrich itself at the expense of a taxpayer who has acted in good faith. It is a welcome precedent for taxpayers caught in similar procedural quagmires and a reminder to tax authorities that their discretion must be exercised fairly and reasonably.
