Court overturns dismissal, allows petition due to delay, directs reevaluation within 3 months.

The court set aside the order dismissing the section 264 petition due to delay, condoned the delay, and directed the third respondent to assess the petition on its merits within three months. The court emphasized the petitioner's diligent efforts to rectify the error and the need to evaluate each case based on its circumstances. The petitioner's income was argued to be exempt under relevant provisions of the Income Tax Act, and the court instructed a review of the petition's merits, allowing the writ petition with no costs awarded.

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Issues Involved:
1. Condonation of delay in filing a petition under section 264 of the Income Tax Act, 1961.
2. Examination of merits of the petition under section 264 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Petition under Section 264 of the Income Tax Act, 1961:

The petitioner, a non-resident seafarer, filed a petition under section 264 of the Income Tax Act, 1961, which was dismissed by the third respondent due to a delay of nearly nine years. The petitioner’s income for the assessment year 2009-10 included Rs. 19.84 lakhs received from abroad, which was erroneously included in the return due to wrong advice from the auditor. The petitioner filed a revised return on 05.08.2011, which was rejected on 24.08.2011 under section 139(5) due to the original return being filed late. Subsequently, the petitioner filed a rectification application on 10.10.2011, which remains pending. A second rectification application was filed on 25.02.2018 following a demand notice dated 31.01.2018, which was rejected on 02.07.2018. Consequently, the petitioner filed the section 264 petition on 24.10.2018, which was dismissed solely on the ground of delay.

The court examined whether the third respondent should have condoned the delay. The petitioner argued that the delay was due to continuous and relentless efforts to rectify the error, which included filing revised returns and rectification applications. The court noted that the petitioner had taken the first step within the prescribed limitation period by filing a revised return on 05.08.2011. The court observed that the petitioner had not been lethargic but had been actively pursuing the matter.

The respondent, supported by case laws, argued that the delay could not be condoned. The court analyzed the cited cases, including the Katiji case, Viswanathan Silk Centre case, Vinay Extraction Pvt. Limited case, Nahar Exports Limited case, and Rane (Madras) case, and found them distinguishable based on the facts and circumstances of the present case.

The court concluded that the petitioner’s efforts to rectify the error were diligent and relentless, and the delay should be condoned. The court emphasized that each case must be evaluated based on its facts and circumstances, and the petitioner’s continuous efforts justified condoning the delay.

2. Examination of Merits of the Petition under Section 264 of the Income Tax Act, 1961:

The court noted that the third respondent had dismissed the section 264 petition solely on the ground of delay without examining the merits. The petitioner argued that the income of Rs. 19.84 lakhs was exempt under relevant provisions of section 5 of the Income Tax Act and cited judgments from different High Courts supporting the exemption.

The court held that the third respondent should have considered the merits of the petition. The court directed the third respondent to decide the petitioner’s application under section 264 on merits after affording an opportunity for a personal hearing.

Conclusion:

The court set aside the impugned order dated 17.01.2019 and condoned the delay in filing the section 264 petition. The matter was remitted back to the third respondent to decide the petition on merits within three months from the date of receipt of the court’s order, ensuring the decision is communicated to the petitioner under due acknowledgment. The writ petition was allowed with the above directions, and no costs were awarded. Consequently, connected miscellaneous petitions were closed.

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