High Court rules in favor of Co-operative Society in Income-tax Act rectification case, citing lack of natural justice.

The High Court found in favor of the petitioner, a Co-operative Society, in a case challenging the rejection of their rectification application under the Income-tax Act. The Court held that the rejection lacked compliance with natural justice principles, reasoning, and legitimate expectations. The Court quashed the rejection order and directed the Income-tax Officer to reconsider the rectification application in accordance with the law, ensuring a fair hearing for the petitioner within two months, with a stay on coercive measures.

---

---

Issues:
Challenging the rejection of a rectification application under the Income-tax Act based on technical grounds without affording natural justice, maintainability of the writ petition in light of alternative remedies available.

Analysis:
The petitioner, a Co-operative Society under the Co-operative Societies Act, filed its income tax return for the assessment year 2018-19 within the extended deadline of 28-2-2020 as per a circular issued by the Central Board of Direct Taxes. However, despite timely filing, the assessment was received after the deadline on 29-6-2019. Subsequently, a rectification application was filed on 7-11-2019, but the Income-tax Officer cited non-functionality as a reason for not deciding on the rectification, as communicated on 29-1-2020.

The petitioner contended that the rejection of the rectification application through order Ext.P7 on 5-6-2020 lacked compliance with the principles of natural justice, was devoid of reasons, and failed the test of legitimate expectation. The petitioner, represented by counsel, invoked the extraordinary jurisdiction of the High Court under Article 226, bypassing alternative remedies, due to these deficiencies in the impugned order.

Upon hearing arguments from both parties, the Court acknowledged the merit in the petitioner's submissions, particularly regarding the lack of jurisdiction and procedural irregularities in the rejection of the rectification application. The Court examined the communication dated 29-1-2020 (Ext.P5) and the impugned order dated 5-6-2020 (Ext.P7), which revealed that technical issues within the Income-tax Department hindered the rectification process. Despite acknowledging these technical challenges, the rejection of the rectification application in a summary and mechanical manner without providing an opportunity for a hearing was deemed inappropriate.

Consequently, the Court held that the petitioner should not be compelled to pursue alternative remedies given the apparent lack of jurisdiction in the impugned order. The Court quashed the order Ext.P7 dated 5-6-2020 and remitted the matter back to the Income-tax Officer to reconsider the rectification application (Ext.P6) in adherence to the law, ensuring a fair opportunity for the petitioner to be heard. The Court directed the reconsideration to be completed within two months from the date of receiving a certified copy of the judgment, with a stay on coercive measures against the petitioner during this period.

---