The assessee had filed its return on self-assessment, which was processed by the Centralised Processing Centre of the Income Tax Department. An intimation under Section 143(1) and a subsequent demand notice under Section 156 were issued on the basis of the tax liability arising from the return as filed. The assessee thereafter invoked Section 264 before the Principal Commissioner of Income Tax.
The revision petition was rejected, inter alia, on the grounds of unexplained delay, the Department’s position that the tolerance limits under Section 43CA operated prospectively, and that invocation of Section 264 was effectively an attempt to revise the return after the permissible statutory period had expired. The matter subsequently reached the High Court, which remanded it for fresh consideration.
Supreme Court’s Key Finding
The Supreme Court found that the High Court’s remand was not permissible in the facts of the case. It emphasised that the issue concerning the tolerance limit had not been raised in the self-assessment return and that the assessee had also not revised the return within the time prescribed under the Act.
According to the Court, where a claim was not made in the return as originally filed, the assessee could have availed the statutory mechanism for revising the return within the permissible period. Once that opportunity was not exercised, Section 264 could not be invoked to achieve indirectly what could no longer be done directly through a revised return. The Court characterised such an exercise as an attempt to revise the return “under the garb of a revision.”
Effect of Setting Aside the High Court’s Remand
The assessee submitted that a reassessment had already been carried out pursuant to the High Court’s remand. The Supreme Court held that once the remand itself was set aside, any reassessment made pursuant to that remand would also cease to have effect because it was a dependent order.
Consequently, the assessee was held liable to pay tax on the basis of the return originally filed, upon which the intimation and demand had been raised.
Section 43CA Tolerance Limit Issue Left Open
Importantly, the Supreme Court expressly clarified that it had not decided whether the tolerance limit under Section 43CA was retrospective or prospective. The appeal was determined on the procedural issue concerning the assessee’s failure to claim the benefit in the return and the impermissibility of using Section 264 to effectively revise the return after expiry of the statutory period.
Legal Significance
The judgment reinforces the distinction between the statutory mechanism for revising an income-tax return and the revisional jurisdiction available under Section 264. A claim omitted from the return cannot, after expiry of the prescribed period for revision, ordinarily be introduced through Section 264 where doing so would amount in substance to revising the return itself.
The decision is particularly relevant for taxpayers and tax professionals dealing with claims omitted from original returns, revision petitions before the Commissioner, CPC-generated demands and disputes involving benefits that were not claimed during the return-filing process.
Case: Deputy Commissioner of Income Tax, CPC & Ors. v. M/s Om Siddhakala Associates
Court: Supreme Court of India
Civil Appeal: Civil Appeal No. 10175 of 2026
Arising From: SLP (C) No. 27302 of 2026 / Diary No. 48823 of 2025
Judgment Date: 5 August 2026
Bench: Justice J.B. Pardiwala and Justice K. Vinod Chandran
Key Provisions: Sections 143(1), 156, 264 and 43CA of the Income Tax Act, 1961
