1. Petitioner sought double taxation relief under Section 264 of the Income Tax Act, 1961, for income taxed in two different assessment years due to timing of department orders. (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 )
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2026 Supreme(Telangana) 925
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
P.SAM KOSHY, NARSING RAO NANDIKONDA, JJ.
M/s.Premier Solar Power Tech Private Limited - Petitioner
Versus
The Principal Commissioner of Income Tax and Others - Respondents
WRIT PETITION No.21429 OF 2026
Decided On : 20-07-2026
Important Points
Section 264 of the Income Tax Act is a beneficial provision allowing the Commissioner to correct over-assessments, including those caused by the assessee's own errors. Double taxation of the same income violates Article 265 of the Constitution and must be remedied regardless of revised return deadlines.
Subject
Tax Law - Income Tax
Act Referred
Headnote
(A) Income Tax Act, 1961 - Section 264 - Revision of orders - Power of the Principal Commissioner or Commissioner to grant relief to an assessee - Scope of revisional powers - Whether the power under Section 264 extends to correcting errors committed by the assessee in the return of income - The powers conferred under Section 264 are wide and intended to prevent miscarriage of justice, covering situations where an assessee, due to an error, fails to put forth a legitimate claim in the return, which is subsequently discovered and raised in a revision application - The Commissioner is duty-bound to grant relief if over-assessment is demonstrated, regardless of whether the mistake was committed by the assessee or a subordinate authority (Paras 17, 18 and 19).
(B) Constitution of India - Article 265 - No tax shall be levied or collected except by authority of law - Levy or retention of tax twice on the same income in the hands of the same assessee is prohibited - When it is established that tax is recovered beyond the permissible limit, it constitutes an error apparent on the face of the record, and technicalities cannot create a roadblock for the assessee (Paras 20 and 23).
(C) Income Tax Act, 1961 - Section 264 versus Section 263 - Section 263 is a revenue-protective provision allowing revision where an order is erroneous and prejudicial to the interests of the Revenue - Conversely, Section 264 is a beneficial and remedial provision for the protection of the assessee, enabling the correction of orders prejudicial to the assessee - Relief under Section 264 does not depend on whether the over-assessment was caused by a voluntary act of the assessee, an involuntary disallowance by the Assessing Officer, or a combination of both (Paras 27 and 28).
Facts of the case:
An assessee offered a specific sum as income in its return for one assessment year. In a subsequent assessment order for a preceding assessment year, the same sum was disallowed and brought to tax. This resulted in the same amount being taxed twice across two different assessment years. The assessee filed an application under Section 264 seeking modification of the processed intimation for the later year to reduce the income offered. The revisional authority rejected the application on the grounds that no revised return had been filed within the prescribed time under Section 139(5), the events of disallowance and voluntary reversal were distinct, and the intimation was neither erroneous nor prejudicial as it merely accepted the returned income.
Findings of Court:
The revisional authority's rejection of the application on technical grounds was untenable. The power under Section 264 is precisely intended to provide a remedy where the limitation for filing a revised return has expired. The retention of tax collected twice on the same income results in unjust enrichment of the exchequer and violates the constitutional mandate under Article 265.
Issues: Whether the power of revision vested under Section 264 of the Act extends to granting relief to an assessee against double taxation of the same income across two assessment years, and whether such relief can be declined on the ground that the claim was not made through a revised return within the prescribed time.
Ratio Decidendi: The Court ruled that Section 264 is a beneficial provision and its application is not contingent upon the filing of a revised return. The source of the error—whether attributable to the assessee or the Department—is immaterial. Where the same sum is subjected to tax twice, it offends Article 265 of the Constitution of India, and the revisional authority is duty-bound to examine the merits of the claim to remedy the over-assessment.
Result: Writ petition allowed; impugned order set aside; matter remanded for fresh consideration on merits.
(B) Constitution of India - Article 265 - No tax shall be levied or collected except by authority of law - Levy or retention of tax twice on the same income in the hands of the same assessee is prohibited - When it is established that tax is recovered beyond the permissible limit, it constitutes an error apparent on the face of the record, and technicalities cannot create a roadblock for the assessee (Paras 20 and 23).
(C) Income Tax Act, 1961 - Section 264 versus Section 263 - Section 263 is a revenue-protective provision allowing revision where an order is erroneous and prejudicial to the interests of the Revenue - Conversely, Section 264 is a beneficial and remedial provision for the protection of the assessee, enabling the correction of orders prejudicial to the assessee - Relief under Section 264 does not depend on whether the over-assessment was caused by a voluntary act of the assessee, an involuntary disallowance by the Assessing Officer, or a combination of both (Paras 27 and 28).
Facts of the case:
An assessee offered a specific sum as income in its return for one assessment year. In a subsequent assessment order for a preceding assessment year, the same sum was disallowed and brought to tax. This resulted in the same amount being taxed twice across two different assessment years. The assessee filed an application under Section 264 seeking modification of the processed intimation for the later year to reduce the income offered. The revisional authority rejected the application on the grounds that no revised return had been filed within the prescribed time under Section 139(5), the events of disallowance and voluntary reversal were distinct, and the intimation was neither erroneous nor prejudicial as it merely accepted the returned income.
Findings of Court:
The revisional authority's rejection of the application on technical grounds was untenable. The power under Section 264 is precisely intended to provide a remedy where the limitation for filing a revised return has expired. The retention of tax collected twice on the same income results in unjust enrichment of the exchequer and violates the constitutional mandate under Article 265.
Issues: Whether the power of revision vested under Section 264 of the Act extends to granting relief to an assessee against double taxation of the same income across two assessment years, and whether such relief can be declined on the ground that the claim was not made through a revised return within the prescribed time.
Ratio Decidendi: The Court ruled that Section 264 is a beneficial provision and its application is not contingent upon the filing of a revised return. The source of the error—whether attributable to the assessee or the Department—is immaterial. Where the same sum is subjected to tax twice, it offends Article 265 of the Constitution of India, and the revisional authority is duty-bound to examine the merits of the claim to remedy the over-assessment.
Result: Writ petition allowed; impugned order set aside; matter remanded for fresh consideration on merits.
Legal Category Hierarchy
Table of Contents
2. Assessee claimed power of revision is wide enough to correct errors by assessee or department; Department contended discretionary powers under Section 264 cannot rectify voluntary errors without revised return. (Para 10 , 12 , 13 , 14 , 15 )
3. The High Court observed that revisional authority under Section 264 is remedial, intended to prevent miscarriage of justice, and constitutional mandate under Article 265 prohibits retention of tax without authority. (Para 17 , 18 , 19 , 20 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 )
4. Section 264 confers wide discretionary power on the Commissioner to correct over-assessment errors—regardless of whether the error originated from the assessee or department—to ensure legitimate tax is collected. (Para 18 , 19 , 28 )
5. The impugned order is set aside and the matter is remanded to the respondent Commissioner for de novo consideration on merits. (Para 30 , 31 )
6. Can the Commissioner rectify an assessee's own mistake in filing a return under revisionary powers of Section 264?
Yes, Section 264 confers wide jurisdiction upon the Commissioner meant to prevent miscarriage of justice. This includes correcting mistakes, even those committed by the assessee in their return of income, provided the assessment resulted in over-taxation. (Para 11 , 17 , 18 , 19 )
7. Does the requirement to file a revised return under Section 139(5) act as a bar to relief via Section 264?
No. The absence of a revised return filed within the prescribed time does not extinguish the Commissioner's authority to grant relief under Section 264 where an assessee demonstrates clear over-assessment. (Para 12 , 18 , 22 )
8. Does Article 265 of the Constitution mandate the refund of tax collected twice on the same income?
Yes. Article 265 prohibits the state from levying or collecting tax without the authority of law. Retention of tax collected twice on the same income violates this constitutional mandate and requires the authority to provide relief. (Para 13 , 20 , 23 , 28 )
ORDER :
P.Sam Koshy, J.
Heard Mr. Karan Talwar, learned counsel for the petitioner; and Mr. Kamasuni Sudhakar Reddy, learned Senior Standing Counsel for Income Tax Department appearing on behalf of the respondents.
2. The instant Writ Petition under Article 226 of the Constitution of India has been filed by the petitioner challenging the order dated 27.03.2026, passed by respondent No.1 under Section 264 of the Income Tax Act, 1961 (for short the 'Act'). The petitioner also prayed the Court to further direct the respondent No.1 to revise the intimation dated 02.11.2022 pursuant to application dated 03.04.2024 filed by the petitioner under Section 264 of the Act.
3. Vide the impugned order, the respondent No.1 declined to interfere with the intimation dated 02.11.2022 issued under Section 143(1) of the Act for the assessment year 2021-22 and rejected the petitioner's application dated 03.04.2024 under Section 264 of the Act, seeking modification of the said Intimation by reducing the income offered for the assessment year 2021-22 by Rs.6,85,02,377/-.
4. The facts of the case are that the petitioner company was engaged in the business of Engineering, Procurement and Construction of solar power projects, and had been awarded a contract for setting up of a 100 MW (AC) Grid Interactive Solar PV Power Project by M/s. NLC India Limited (for short 'NLC Limited') vide Letter of Award dated 09.02.2018, during the financial year 2017-18. The project, though scheduled for completion by 23.04.2019, was actually completed only on 09.09.2019, and the contract levied liquidated damages at the rate of 2% of the contract price per month, or part thereof, for delay in execution. Consequent upon completion, the petitioner during the financial year 2019-20, charged to its Statement of Profit & Loss an amount of Rs.16,04,12,000/- towards liquidated damages for the delay, in accordance with Accounting Standard 7 and Accounting Standard 29, and claimed the same as a deduction in its Return of Income for the assessment year 2020-21, filed on 06.11.2020. The said provision came to be reversed in subsequent years upon settlement of the claim by NLC Limited, the amounts so reversed being duly credited to the Statement of Profit & Loss and offered to tax; accordingly, during the financial year 2020-21 (relevant to the assessment year 2021-22), the petitioner reversed liquidated damages to the extent of Rs.9,79,12,000/-, a sum which included an amount of Rs.6,85,02,377/-, and offered the same to tax, filing its original Return of Income on 14.03.2022 and a revised Return on 15.03.2022, declaring a total income of Rs.1,91,27,266/-, inclusive of the said credit of Rs.9,79,12,000/-.
5. Meanwhile, the petitioner's case for the assessment year 2020-21, having been selected for scrutiny under CASS, culminated in an order dated 25.09.2022 passed by the Faceless Assessing Officer under Section 143(3) read with Section 144B of the Act, restricting the claim of Liquidated Damages to Rs.9,19,09,623/- and disallowing the balance of Rs.6,85,02,377/- under Section 28 of the Act, a disallowance that, though pertaining to the assessment year 2020-21, came to be effected only on 25.09.2022, that is well after the petitioner had already offered the very same amount to tax for the assessment year 2021-22 vide its return filed on 15.03.2022, and also well after the last date for filing a revised return for the assessment year 2020-21, being 31.05.2021, thereby foreclosing any possibility of the petitioner correcting the position for that year. The petitioner accepted the said disallowance and paid the entire tax raised thereon; being aggrieved, by the resultant double taxation of Rs.6,85,02,377/-, it filed a petition under Section 264 of the Act on 28.10.2022 for the assessment year 2021-22 before respondent No.1, seeking reduction of the income offered for that year by the said sum which application respondent No.1 rejected vide order dated 25.03.2024, solely on the ground that, a
