Lower Tax Deduction Application Reconsidered Due to Non-Compliance with Income Tax Rules; 30-Day Compliance Ordered.

The HC set aside the impugned orders Annexure P-5 and P-7, finding non-compliance with Rule 28-AA of the Income Tax Rules. The Court remitted the matter back to the respondent for reconsideration of the petitioner's application for a Lower Deduction of Tax Certificate under Section 197 of the Income Tax Act, directing compliance with legal requirements within 30 days, without expressing any opinion on the merits.

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Issues involved: Application under Section 197 of the Income Tax Act for Lower Deduction of Tax Certificate; Challenge to orders Annexure P-5 and P-7.

Summary:
1. The petitioner sought a Lower Deduction of Tax Certificate under Section 197 of the Income Tax Act. The contention was that an online document dated 1st April, 2023 was not submitted due to technical issues, but a communication on April 3, 2023 was made on the Traces Portal. The impugned order Annexure P-5 was challenged for being passed without considering the document submitted.

2. Criticism of Annexure P-7 was based on Rule 28-AA of the Income Tax Rules, arguing that the rejection was improper as the respondent had no authority to delve into the aspect of net profit, which is the jurisdiction of the Assessing Officer. The petitioner cited judgments highlighting the ignorance of Rule 28-AA in the decision-making process.

3. The respondents defended the impugned orders, stating that the net profit ratio was a valid consideration for issuing the certificate. They argued that the satisfaction of the Assessing Officer is crucial in determining the tax liability, including the net profit ratio.

4. The Court noted conflicting claims regarding the submission of documents on April 1st and 3rd, 2023. Since it was a disputed question of fact, the Court refrained from making findings based on these documents.

5. Referring to Rule 28-AA, the Court emphasized its mandatory nature and the need for the Assessing Officer to consider specific factors before issuing a certificate for lower tax deduction. The Court found that the impugned orders did not adhere to Rule 28-AA, leading to a faulty decision-making process.

6. Consequently, the Court set aside orders Annexure P-5 and P-7, remitting the matter back to the respondent to reconsider the petitioner's claim in accordance with the law within 30 days. The Court clarified that its decision did not express any opinion on the case's merits.

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