The Telangana High Court has said that the income tax department cannot keep tax collected twice on the same income and that the Commissioner should exercise powers u/s 264 of the Income Tax Act, 1961. The provision allows revision of an assessment to furnish relief against over-assessment, even where the mistake is committed by the taxpayer.
A Division Bench of Justices P. Sam Koshy and Narsing Rao Nandikonda observed while permitting a writ petition submitted by Premier Solar Power Tech Private Limited, which contested the rejection of its claim that Rs. 6.85 crore had been subjected to tax twice. The judges said that:
“The authorities discussed hereinabove make it clear that the source of the error, whether traceable to the assessee or to the Department, is wholly immaterial to the exercise of power under Section 264 what is material is the existence of prejudice to the assessee and the consequent duty of the Commissioner to correct it.”
The dispute emerged from liquidated damages concerning a solar power project undertaken by Premier Solar Power Tech for NLC India Limited. The company had claimed the liquidated damages as a deduction. Therefore, after reversing part of the provision, it proposed an amount of Rs. 6.85 crore to tax for AY 2021-22.
Although the assessing officer did not permit the same Rs 6.85 crore at the time of finishing the assessment for AY 2020-21. The company has paid the tax arising from the disallowance. The court discovered that, for this reason, the tax has been levied twice on the same amount.
U/s 264, Premier Solar Power Tech approached the Principal Commissioner asking to rectify the double taxation. When the application was denied, the company approached the HC.
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The HC said that Section 264 is an advantageous provision which safeguards a taxpayer against over-assessment. It said that the source of the mistake does not matter while considering relief under the provision. The crucial thing is whether the taxpayer has faced prejudice and whether the commissioner has a duty to rectify the same.
The Division Bench has said that allowing the Government to keep tax collected twice on the same amount, i.e., Rs 6.85 crore, shall lead to “unjust and undue enrichment of the exchequer at the cost of the petitioner.” It condemns the mechanical denial of the company’s claim even after furnishing submissions and reconciliation before the authority. Thus, it quashed the order of the Principal Commissioner and remanded the application u/s 264 for fresh consideration on merits within the law.
Therefore, the High Court permitted the petition with no order as to costs.
| Case Title | M/s. Premier Solar Power Tech Private Limited vs The Principal Commissioner of Income Tax |
| Case No. | Writ Petition No.21429 of 2026 |
| For Petitioner | Mr Karan Talwar |
| For Respondent | Mr Kamasuni Sudhakar Reddy |
| Telangana High Court | Read Order |
