Court exercises discretionary power under Section 119(2)(b) of the Income Tax Act, 1961, emphasizing prevention of unjust enrichment and undue hardship to the assessee.
In a significant judgment delivered on September 7, 2026, the Delhi High Court (Division Bench comprising Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta) ruled in favor of Sojitz Asia Pte. Ltd., permitting the company to file a revised income tax return for the assessment year 2016-17 to correct an inadvertent double taxation issue. The judgment underscores the discretionary power vested in the tax authorities under Section 119(2)(b) of the Income Tax Act, 1961, and stresses that such powers must be exercised to prevent unjust enrichment of the government and avoid undue hardship to taxpayers.
The petitioner, Sojitz Asia Pte. Ltd., had earned an interest income amounting to Rs. 7,58,90,455/-, which was initially reflected in its Form 26AS for the assessment year 2016-17. The petitioner duly filed its tax return for that year, including this income. However, the deductor subsequently revised the Form 26AS, showing the same amount for the assessment year 2018-19 instead of 2016-17. Following this revision, the petitioner, relying on the updated Form 26AS, again included the same interest income in its tax return for 2018-19, unintentionally leading to payment of tax twice on the same income.
Upon realizing the mistake, the petitioner promptly filed multiple rectification applications under Section 154 of the Income Tax Act beginning in 2019, seeking correction of this double taxation. Unfortunately, these applications were either delayed or rejected by the Assessing Officer on technical grounds, including claims of lack of jurisdiction to reduce the returned income. Subsequent revision applications under Section 264 were also rejected on the grounds of prematurity and limitation.
Ultimately, the petitioner filed an application under Section 119(2)(b) of the Income Tax Act in August 2024, requesting permission to file a revised return excluding the duplicated income from the 2016-17 assessment year. This request was denied by the Commissioner of Income Tax (International Tax) in December 2025, who held that the power to accept a revised return beyond six years could only be exercised under extraordinary circumstances, which the petitioner had failed to demonstrate.
The Delhi High Court, however, took a justice-oriented approach, emphasizing that the "special circumstances" required for exercising the discretionary power under Section 119(2)(b) must be interpreted contextually and not narrowly. The Court noted that the petitioner had acted bona fide and promptly upon discovering the error, and that the double taxation occurred due to the deductor’s revision of Form 26AS without informing the petitioner. The Court observed that allowing tax payment twice on the same income amounted to unjust enrichment of the government at the petitioner’s expense.
Recognizing the hardship faced by the petitioner and the prolonged delay caused by the authorities’ non-cooperation, the Court set aside the Commissioner’s rejection order and allowed the petitioner to file a revised return for assessment year 2016-17 by October 31, 2026. The Court further directed the Assessing Officer to consider the revised return expeditiously and pass an appropriate order within three months thereafter.
This judgment clarifies the scope and application of discretionary powers under Section 119(2)(b) of the Income Tax Act, highlighting the need for tax authorities to act fairly and prevent double taxation caused by procedural anomalies. It also serves as a reminder that taxpayers should not be penalized for errors arising from third-party revisions, especially when they promptly seek rectification.
Bottom Line:
Income Tax - Tax paid on the same income for two assessment years due to deductor revising Form 26AS - Discretionary power under Section 119(2)(b) of the Income Tax Act, 1961, must be exercised in such special circumstances to prevent unjust enrichment of the revenue and undue hardship to the assessee.
Statutory provision(s):
Income Tax Act, 1961 - Sections 119(2)(b), 154, 264
