The Commissioner has a discretion to grant or refuse a relief under Section 264 of the Income Tax Act, 1961, but the power is not an arbitrary one to be exercised according to his fancy. It must be exercised on an objective consideration of the facts and circumstances of the case, that is, according to law and not according to humour.

Rastogi, J.

1. This writ petition and the income-tax reference can be disposed of by a common order. By this writ petition under article 226 of the Constitution the petitioner prays for a writ of certiorari quashing the order of the Commissioner dated 29th April, 1978, and the assessment order dated 10th February, 1967, and also prays for a writ of mandamus directing the Commissioner to rehear the revision petition and direct the ITO to include the sum of Rs. 2,30,000 in the income of the petitioner and to refund the sum of Rs. 11,500. There is a further prayer for a direction to the ITO, A-Ward, Circle I, Varanasi, to refund certain amounts.

2. The petitioners, M/s. O.C.M. Ltd. (London), is a non-resident company. It has got three subsidiary companies which are incorporated and which carry on business in India, namely, O.C.M. (India) Pvt. Ltd., Amritsar, E. Hill and Company Pvt. Ltd., Mirzapur, and the East India Carpet Company Pvt. Ltd., Amritsar. The petitioner enjoyed income in India only from one source and that was by way of dividend from these three subsidiary companies. For the assessment year 1965-66, the accounting period ended December 31, 1964, the petitioner earned the following dividend income from the aforesaid three subsidiary companies.

In its return for the assessment year 1965-66, the petitioner disclosed its dividend income from the three subsidiary companies at Rs. 2,63,300 and the income-tax deducted at source at Rs. 65,576. That return was accepted and an assessment order was made on February 10, 1966. By some inadvertence the petitioner omitted to include in the return the amount of Rs. 2,30,000 being interim dividend received from O.C.M. (India) Pvt. Ltd. Apart from this, in view of Clause 2(b)(ii) of Pt. II of the First Schedule to the Finance Act, 1965, the petitioner was not liable to pay any super-tax and that being so the deduction of super-tax at Rs. 11,500 from out of the interim dividend received from this subsidiary company as well, was not correct.

3. Subsequently, when the principal agents of the petitioner discovered the mistake noted above, they brought these facts to the notice of the ITO by letter dated 30th September, 1967, and filed a revised return along with a letter in which a request was made for revising the assessment. They also filed the interim dividend warrants relating to this amount. It appears that the ITO did not take any action and accordingly the petitioner filed a revision before the Commissioner. Pending that revision they also made an application under Section 237 of the I.T. Act before the ITO on the prescribed form for refund of Rs. 11,500. In reply, the ITO wrote back to the petitioner saying:-

"Please refer to your claim for refund for the assessment year 1965-66. Your claim cannot be accepted in view of the fact that the company is precluded in terms of Section 242 of the Income-tax Act, 1961, from seeking a review of the computation of the total income which has become final by making an application under Section 237 of the Income-tax Act, 1961."

4. The petitioner-company filed an appeal against that order before the AAC. The AAC dismissed that appeal by his order dated March 11, 1971, for two reasons: firstly, that no appeal could be filed against the aforesaid letter and, secondly, that the revised return filed by the petitioner after the completion of the assessment was of no legal effect and the ITO was justified in ignoring the same.

Still aggrieved, the petitioner took up the matter in further appeal before the Appellate Tribunal. The Tribunal as well dismissed the appeal on the view that the petitioner's claim for refund after the assessment had become final was hit by Section 242 of the Act. This order was passed on 30th July, 1973. Thereafter at the instance of the assessee the Appellate Tribunal referred the following question of law for the opinion of this court:-

"Whether, on the facts and in the circumstances of the case, the Tribunal was justi