2024 (1) TMI 1039 - HC - Income Tax

Commissioner must adopt liberal approach when condoning delay in Section 264 revision applications for substantial justice

The Bombay HC held that the Commissioner should have condoned the delay in filing revision under Section 264 of the Income Tax Act, adopting a liberal ... Condonation of delay and liberal construction of 'sufficient cause' - advancement of substantial justice over hyper technical/ pedantic limitation objections - power under Section 264 of the Income tax Act to call for records and grant relief - scope of Section 264 not limited by intimation under Section 143(1) - revisional jurisdiction to correct errors and grant refundsCondonation of delay and liberal construction of 'sufficient cause' - advancement of substantial justice over hyper technical/ pedantic limitation objections - Whether the Commissioner was justified in rejecting the application under Section 264 on the ground of substantial delay without condoning the same - HELD THAT: - The Court held that authorities empowered to condone delay must adopt a liberal, justice oriented approach and give the phrase 'sufficient cause' a broad construction so as to advance substantial justice. Judicial authorities, including the Apex Court in Collector, Land Acquisition v. Katiji and subsequent High Court precedents relied upon in the judgment, require that delay not be rejected on hyper technical grounds when no deliberate, mala fide or culpable negligence is shown and when refusal to condone would defeat a meritorious claim. The revisional power under Section 264 is coupled with a duty to act according to rules of reason and justice and the authority may, in an appropriate case, consider merits while deciding condonation. Given that the CIT(A) took many years to decide the related appeal, the Commissioner ought to have considered condoning delay and proceeded to decide the Section 264 application on merits rather than rejecting it solely for delay. The Court therefore quashed the rejection and directed the Commissioner to consider the application afresh, hear the petitioner in a personal hearing and pass a reasoned order by a stipulated date. [Paras 5, 6, 9, 11, 12]The order rejecting the Section 264 application for delay is quashed; respondent is directed to consider condoning the delay and to hear and decide the application on merits with a reasoned order.Power under Section 264 of the Income tax Act to call for records and grant relief - scope of Section 264 not limited by intimation under Section 143(1) - revisional jurisdiction to correct errors and grant refunds - Whether an intimation under Section 143(1) precludes exercise of the Commissioner's powers under Section 264 to grant relief or rectify errors - HELD THAT: - The Court, relying on earlier Division Bench and other High Court authorities, held that the powers under Section 264 are wide and are not constrained by the nature of an intimation under Section 143(1). Section 264 empowers the Commissioner to call for records of any proceedings and pass orders not prejudicial to the assessee to grant relief in cases of overassessment or where a legitimate claim was not granted earlier. The existence of an intimation under Section 143(1) does not oust the Commissioner's jurisdiction to examine whether the assessee's income was taxable or to grant relief where appropriate. Consequently, the Commissioner should apply his mind to the merits of the Section 264 application rather than treat the Section 143(1) intimation as a bar to revision. [Paras 10, 11, 12]The view that an intimation under Section 143(1) is a bar to exercise of power under Section 264 is rejected; respondent is directed to decide the Section 264 application on merits.Final Conclusion: Writ petitions allowed; impugned order dated 06.03.2019 set aside. Respondent No.2 is directed to consider the petitioner's Section 264 application afresh on merits, to give at least 7 working days' notice of a personal hearing, permit filing written submissions within three working days after the hearing, and pass a reasoned order on or before 31 May 2024. Issues Involved:1. Condonation of delay in filing the application under Section 264 of the Income Tax Act, 1961.2. Whether intimation under Section 143(1) of the Act can be considered an assessment order.Summary:Issue 1: Condonation of Delay in Filing Application under Section 264 of the Income Tax Act, 1961The petitioner challenged an order dated 6th March 2019, which rejected their application under Section 264 of the Income Tax Act, 1961, on the grounds of substantial delay and that the intimation under Section 143(1) was not an assessment order. The petitioner argued that there was no delay since the appeal was only resolved by the Commissioner of Income Tax (Appeals) [CIT(A)] after several years. The petitioner relied on the principle that 'substantial justice' should prevail over technical considerations, citing the Supreme Court's judgment in Collector, Land Acquisition vs. Mst. Katiji (1987) 167 ITR 471(SC). The court noted that the power conferred on the Commissioner under Section 264 is intended to provide relief in cases of overassessment and should be exercised liberally to advance substantial justice. The judgment highlighted that the Commissioner should not adopt a pedantic approach but should consider genuine hardship and substantial justice, as supported by various precedents including Octra Health Private Limited vs. Additional Commissioner of Income Tax and Sitaldas K. Motwani v. Director General of Income-tax (International Taxation).The court concluded that the Commissioner should have considered the delay in the context of the lengthy appeal process and should have condoned the delay to ensure substantial justice.Issue 2: Whether Intimation under Section 143(1) is an Assessment OrderThe court referred to the judgment in Smita Rohit Gupta vs. Principal Commissioner of Income Tax-1, which clarified that the processing of returns under Section 143(1) does not constitute an assessment order. The court also cited Hindustan Diamond Company Pvt. Ltd. v. CIT, emphasizing that the power under Section 264 is wide and can correct errors even if the Assessing Officer's power to make adjustments under Section 143(1) is limited. The court noted that the Commissioner should have exercised his power under Section 264 to consider the merits of the petitioner's case, as the powers under Section 264 are broad and intended to correct errors and provide relief.Conclusion:The court allowed the petition, quashing the impugned order dated 6th March 2019, and directed the Commissioner to consider the petitioner's application under Section 264 on its merits. The Commissioner was instructed to pass a reasoned order by 31st May 2024, following a personal hearing with adequate notice.The judgment in Writ Petition No. 569 of 2023 was applied to Writ Petition No. 597 of 2023, disposing of both petitions with the same directions. The court clarified that it had not made any observations on the merits of the application under Section 264 of the Act.