2024 (11) TMI 1545 - HC - Income Tax

Mandamus petition dismissed over destroyed records, delay, and Section 201 proviso applying only from July 1, 2012

HC dismissed the petition seeking a mandamus directing the Executive Director (Finance), Airports Authority, to issue an accountant certificate for ... Seeks a mandamus directing Executive Director (Finance) Airports Authority of India to issue Accountant Certificate (Annexure-A to the Form 26A of the Income Tax Act) - certificate pertains to payments allegedly made by the Petitioner including Royalty, Rent, and other amounts as per the License Agreement granting the Petitioner the use of the Salem Airport for a period of five years -seeking relief nearly a decade after the termination of the License Agreement - as stated that physical records for the period prior to 1st April 2013 are unavailable, having been destroyed during the 2015 floods HELD THAT:- Respondents have apprised the Court that the first proviso to Section 201 of the Income Tax Act, governing the issuance of such certificates, became effective only on 1st July 2012. Consequently, the financial years 2009-10 to 2012-13, which constitute the crux of the Petitioner’s grievance, are not covered by the said provision. Thus, even on merits, the relief sought for that period is unsustainable. In light of the above, considering the fact that the relevant records have been destroyed and statutory provision is inapplicable for a significant portion of the claim, any direction to issue the certificate would be practically unenforceable. That Apart, the court cannot ignore the substantial delay in approaching the Court. Petitioner’s reliefs are barred by delay and laches and therefore, the Court is not inclined to entertain the present petition. Dismissed along with pending application(s). ISSUES PRESENTED AND CONSIDERED 1. Whether the writ petitioner is entitled to a mandamus directing issuance of an Accountant Certificate (Annexure-A to Form 26A under the Income Tax Act) for payments made under a terminated licence agreement dating 2009-2015. 2. Whether the first proviso to Section 201 of the Income Tax Act (as to issuance of such certificates) applies to payments made in financial years 2009-10 to 2012-13. 3. Whether destruction or unavailability of accounting records and bank/ledger evidence precludes issuance of Form 26A by the respondent authority or by a practising Chartered Accountant certifying inclusion of income in the respondent's tax computation. 4. Whether the petitioner's claim is barred by delay and laches so as to disentitle the petitioner to equitable relief in the form of a writ mandating issuance of Form 26A. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to mandamus for issuance of Accountant Certificate (Form 26A) Legal framework: Form 26A (Annexure-A) under the Income Tax Act is issued by a practising Chartered Accountant certifying specified matters (including whether the recipient has included particular receipts in its computation of income). A direction to issue such certificate would require that the certifying authority be able to verify the requisite facts from the respondent's accounting records. Precedent Treatment: No authority or prior case law was invoked or applied by the Court in the judgment. Interpretation and reasoning: The Court examined whether the respondent could, in practice, verify and certify that the amounts claimed by the petitioner were included as income in the respondent's tax computation. The respondent's tax cell communicated that the relevant physical and electronic accounting records for the period prior to 01.04.2013 are destroyed/unavailable (post-2015 floods) and that the legacy accounting package (AIMS) cannot retrieve records. The respondent produced partial bank-payment listings for certain dates, but confirmation that the amounts were accounted as revenue in the respondent's books for the relevant years could not be made for the bulk of the period in question. The tax cell also noted that Form 26A is issued by a practising CA and, absent the respondent's ledger/customer entries, a CA cannot verify inclusion of income in the respondent's computation of income. Ratio vs. Obiter: Ratio - A writ directing issuance of Form 26A cannot be granted where the respondent legitimately cannot verify, from its own records, whether the receipts were included in its tax computation; practical impossibility of verification defeats the mandamus. Obiter - Observations on the sufficiency of the partial bank entries provided and adjustment/recovery actions taken are ancillary factual findings. Conclusions: The Court concluded that, on the facts, a mandamus to direct issuance of Form 26A would be practically unenforceable because the respondent cannot verify inclusion of the income in its taxable income due to destruction/unavailability of records; therefore the relief sought cannot be granted. Issue 2: Applicability of first proviso to Section 201 to the disputed years (1 July 2012 effective date) Legal framework: The first proviso to Section 201 of the Income Tax Act (as amended) governs issuance of certificates in certain circumstances; its operative date is material to determining whether those statutory provisions apply to earlier financial years. Precedent Treatment: None cited or applied. Interpretation and reasoning: The Court received and accepted the respondents' contention that the first proviso to Section 201 became effective on 1 July 2012. The petitioner's grievance principally concerns financial years 2009-10 to 2012-13; thus a significant portion of the claimed period falls outside the temporal scope of the proviso. That non-applicability on the merits weakens the petitioner's entitlement to statutory relief for those years. Ratio vs. Obiter: Ratio - Where the statutory provision relied upon post-dates the period in respect of which relief is sought, the statutory ground for the relief cannot sustain the claim for that period. Obiter - None material. Conclusions: The Court held that the first proviso to Section 201 does not apply to the core years of complaint (2009-10 to 2012-13), rendering the petitioner's claim for certificates for that period unsustainable on the statutory basis invoked. Issue 3: Effect of destroyed/unavailable records on the duty and ability of the respondent/CA to issue Form 26A Legal framework: Issuance of Form 26A by a practising CA presupposes access to the respondent's ledger entries or other records necessary to certify whether the receipts formed part of the respondent's income computation; public authorities must, where possible, furnish records to enable statutory or audit certifications, but cannot certify facts that cannot be verified from their records. Precedent Treatment: No precedent was relied upon or distinguished. Interpretation and reasoning: The respondent's internal communication specified that pre-SAP-ERP records were destroyed in floods and that the legacy AIMS package cannot retrieve the data because records are not on any server. While certain payments in 2013-14 were confirmed as accounted as revenue (and no TDS was deducted), the majority of the earlier payments lack corresponding ledger verification. Given that Form 26A requires a CA's certification based on verifiable ledger entries, the absence of such records means neither the respondent nor a CA can truthfully provide the certification the petitioner seeks. The Court treated the unavailability of records as a determinative practical impediment to issuance of the certificate. Ratio vs. Obiter: Ratio - Absence or destruction of requisite accounting records that make verification impossible is a valid ground for refusing to compel issuance of a verification certificate (Form 26A) based on inclusion of receipts in the respondent's taxable income. Obiter - The Court's factual observations regarding recovery efforts, eviction, auction and adjustment of proceeds are incidental to the primary legal impediment. Conclusions: The Court concluded that destroyed/unavailable pre-2013 records preclude verification necessary for Form 26A; accordingly a mandamus compelling issuance would be impracticable and cannot be ordered. Issue 4: Delay and laches as a bar to equitable relief Legal framework: Equity doctrines of delay and laches can bar relief where a litigant unreasonably delays seeking relief to the prejudice of the opposing party or where the delay undermines the fairness or efficacy of relief (including where records have been lost or destroyed in the interim). Precedent Treatment: No authorities were cited. Interpretation and reasoning: The petition was filed nearly a decade after termination of the license agreement and after destruction of records (2015 floods). The Court observed that the petitioner's long delay in approaching the Court has resulted in practical prejudice: inability of the respondent to verify records and to issue the requisite certificate. The destruction of records and the passage of time rendered the requested equitable relief inappropriate. The Court declined to ignore the substantial delay and found that the petition was barred by delay and laches. Ratio vs. Obiter: Ratio - Substantial and unexplained delay that causes or coincides with loss of essential evidence is a valid ground for dismissal of equitable relief; laches defeats a mandamus where it renders the relief practically unenforceable. Obiter - Specific assessment of how recovery proceedings and adjustments affected the overall dues is ancillary. Conclusions: The Court dismissed the petition on the ground that the relief was barred by delay and laches, given the practical impossibility of issuing Form 26A due to destroyed records and the inapplicability of the statutory proviso for significant years of complaint.