2002 (8) TMI 78 - HC - Income Tax

Revision - Powers Of CIT - The revisional authority is thus under an obligation to consider and adjudicate on the relevant and material contentions which may be raised by an assessee. In the present case we find that though the Director takes note of the stand of the assessee with regard to the status of each of the properties owned by the trust he has not addressed himself to the real question namely whether in the prevailing circumstances any income could accrue to the petitioner from various properties. It is evident that the impugned order is too much influenced by the past non-cooperative conduct of the petitioner be it on the merits of best judgment assessment or the quantum of income determined. At this juncture we say no more on the merits of the case lest it may cause prejudice to either side.

Summary

Issues: Challenge to order under section 264 of the Income-tax Act, 1961 for assessment year 1997-98.

Analysis:
The judgment delivered by the High Court of Delhi pertains to a challenge against an order passed by the Director of Income-tax (Exemptions) under section 264 of the Income-tax Act, 1961 for the assessment year 1997-98. The petitioner, a registered society, had not filed its income tax return for that year on the grounds of being below the taxable limit. However, the Assessing Officer assessed the income of the petitioner society at Rs. 20 lakhs and initiated penalty proceedings. Instead of appealing, the petitioner filed a revision petition under section 264, which was subsequently dismissed by the Director of Income-tax. The petitioner then approached the High Court challenging this decision.

During the hearing, the petitioner's counsel argued that the impugned order was unreasonable and arbitrary as it upheld the assessment without addressing the contentions raised. The counsel highlighted that no finding regarding the accrual of income from the society's assets was made by the revisional authority. The petitioner claimed that due to various factors, including government takeover of properties and ongoing litigations, no income was derived by the society. On the other hand, the Revenue's counsel contended that the petitioner had a history of non-cooperation with the tax authorities, leading to a best judgment assessment by the Assessing Officer based on past investments.

The High Court observed that the impugned order was non-speaking and lacked a judicial approach. It emphasized that the revisional power under section 264 should be exercised judiciously and in the interest of justice between the parties. Referring to a Supreme Court decision, the Court highlighted the judicial nature of the revisional jurisdiction and the duty to act judicially in disposing of revisions. The Court noted that the Director failed to address the crucial question of whether income could accrue to the petitioner from its properties, solely focusing on past non-cooperation. Therefore, the High Court set aside the impugned order and directed the Director to reconsider the matter afresh in accordance with the law, granting a personal hearing to the petitioner.

In conclusion, the High Court allowed the petition, disposed of the application seeking interim relief, and instructed the Director of Income-tax (Exemptions) to re-examine the case objectively, ensuring a fair consideration of all relevant contentions and granting the petitioner an opportunity to present their case effectively.