2002 (8) TMI 64 - HC - Income Tax

Whether, in the facts and circumstances of the case, petitioner No. 1 is entitled to extension of time in terms of section 80HHC(2)(a) of the Income-tax Act, 1961, in respect of its claim for deduction in respect of the assessment year 1994-95. - The petitioner, in spite of service of notice under section 148 of the Act, took about sixteen months to file the return and the application under section 80HHC(2)(a) was filed much after two years from the end of the relevant assessment year. Besides, the convertible foreign exchange was brought in much beyond the period (limitation prescribed under section 153) within which the assessment under section 143/ 144 is required to be completed. The petitioner-assessee has thus disentitled himself to the grant of benefit of extension in time. - No case, in my view, has been made out by the petitioners for grant of the reliefs, as prayed for. - In the result, the writ application is liable to be and is accordingly dismissed.

Issues Involved:
1. Entitlement to extension of time under section 80HHC(2)(a) of the Income-tax Act, 1961.
2. Rejection of application for deduction under section 80HHC.
3. Consideration of due diligence and reasons beyond control for delay in realization of export proceeds.
4. Validity of the Commissioner's order and the grounds for rejection.
5. Legal precedents and their applicability to the case.

Detailed Analysis:

1. Entitlement to Extension of Time under Section 80HHC(2)(a):
The main question for consideration was whether the petitioner was entitled to an extension of time under section 80HHC(2)(a) for the assessment year 1994-95. The petitioner claimed entitlement to a deduction of Rs. 2,86,565 for exports made during the previous year 1993-94. Section 80HHC(2)(a) allows for such deductions if the sale proceeds are received in convertible foreign exchange within six months or within such further period as allowed by the Chief Commissioner or Commissioner, provided the delay was due to reasons beyond the assessee's control.

2. Rejection of Application for Deduction under Section 80HHC:
The petitioner's application for extension of time was rejected by the Commissioner of Income-tax on several grounds:
- The petitioner failed to produce any document showing an application to the Reserve Bank of India for extending the period for realization of export proceeds.
- There was no material to show that the petitioner acted with due diligence to bring the sale proceeds within the stipulated time.
- The transaction was not at arm's length as the director of the foreign buyer was also a shareholder of the petitioner.
- The income-tax return was not filed voluntarily and was delayed even after a notice under section 148.

3. Consideration of Due Diligence and Reasons Beyond Control:
The petitioner argued that the delay was due to a dispute with the foreign buyer, which led to a civil suit and a decree in their favor. The petitioner contended that the delay was beyond their control and that they could only realize the dues through execution of the decree. The court examined whether the petitioner had acted with due diligence and whether the delay was genuinely beyond their control.

4. Validity of the Commissioner's Order and Grounds for Rejection:
The court found that the Commissioner of Income-tax had valid grounds for rejecting the application:
- The petitioner did not act with due diligence and there was an unexplained delay in filing the application for extension.
- The petitioner's conduct showed a lack of due diligence and laches.
- The Commissioner's discretion under section 80HHC(2)(a) must be exercised judicially and based on objective considerations. The assessment proceedings cannot be kept pending indefinitely.

5. Legal Precedents and Their Applicability:
The court referred to several judgments to support its decision:
- In Mayor and Co. v. CIT, it was held that the power to grant extension must be exercised reasonably and not arbitrarily, with reasons recorded in writing.
- The court agreed with the views in Geekay Exim (India) Ltd. v. CIT, which held that an application for extension could be filed even after the specified period, but this did not mean the application could be filed at any time.
- The court distinguished the case from D. B. Exports (India) v. CIT, where multiple extensions were granted, and the proceedings were not likely to conclude soon.

The court concluded that the petitioner had not made out a case for the reliefs prayed for, and the writ application was dismissed. The conduct of the petitioner and the lack of due diligence were significant factors in the decision. The court emphasized that the legislative mandate was to bring foreign exchange within a reasonable time, and the petitioner's actions did not align with this requirement.

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