2010 (11) TMI 350 - HC - Income Tax

Condonation of delay - Revision u/s 264 - Block assessment - circular issued by the Board of Direct Taxes No.14 (XL-35) of 1955, dated 11.4.1955 - The petitioner has also no objection for prohibitory order in respect of income pertaining two windmills to be kept in force and to be collected and adjusted by the department towards the arrears till the finality is reached in the proceedings pending in respect of block assessment years and assessment year 1995-96 - Held that - the revision filed by the petitioner under section 264 for the assessment year 1995-96 is directed to be taken up on file and to be disposed of on merits, after giving due opportunity to the petitioner for being personally heard and for producing records if any to substantiate its claim, within 4 months from the date of receipt of the copy of this order.

Issues Involved:
1. Refusal to condone the delay in filing the revision under Section 264 of the Income Tax Act for the assessment year 1995-96.
2. Attachment of 64,21,765 equity shares held by the petitioner company in M/s. Indowind Energy Limited.
3. Garnishee order on the income due from Tamil Nadu Electricity Board (TNEB) for two windmills owned by the petitioner company.

Issue-Wise Detailed Analysis:

1. Refusal to Condon the Delay in Filing Revision under Section 264:
The petitioner company filed a revision under Section 264 of the Income Tax Act for the assessment year 1995-96, along with a petition to condone the delay. The delay was attributed to the petitioner awaiting the final order from the Commissioner of Income Tax (Appeals) for the assessment years 1996-97 to 1998-99, which was passed on 27.01.2005. The revision was filed in April 2005. The revisional authority rejected the petition, stating that the cause of action arose on 31.03.1998, when the petitioner's statement was recorded, thus considering the delay as lacking bona fide.

The court found that the date 31.03.1998 could not be taken into account as the petitioner could not have known the findings likely to be rendered based on his statement. The cause of action for filing the revision arose only on 27.01.2005, when the final order for subsequent assessment years was passed. The court emphasized that the delay should be viewed liberally, considering the merits of the petitioner's claim and the principle of advancing substantial justice. The court set aside the impugned order and directed the revisional authority to dispose of the revision petition on merits within four months.

2. Attachment of 64,21,765 Equity Shares:
The petitioner challenged the garnishee order dated 31.03.2010, which attached 64,21,765 equity shares in M/s. Indowind Energy Limited for the recovery of tax arrears. The petitioner argued that the market value of the shares was approximately Rs.30 crores, which was more than sufficient to discharge the tax liabilities. The respondent contended that the value of the shares was fluctuating and estimated at Rs.20 crores.

The court found that attaching the entire shares for a tax liability of Rs.2,50,00,000 plus interest was not justified. To protect both parties' interests, the court confirmed the attachment in respect of 15 lakh shares and set aside the attachment for the remaining shares. The court held that the attachment of 15 lakh shares, along with the income from two windmills and amounts in various bank accounts, would be sufficient to discharge the entire arrears.

3. Garnishee Order on Income from TNEB:
The petitioner contested the garnishee order dated 24.11.2004, which attached the income from two windmills operated by the petitioner company. The petitioner stated that the attachment rendered the company unable to discharge its statutory liabilities. The petitioner had made several representations to stay the recovery proceedings pending the disposal of tax appeals and revisions.

The court noted that the petitioner had no objection to the income from the windmills being adjusted towards tax arrears until the finality of the pending proceedings. The court upheld the garnishee order, allowing the income from the windmills to be adjusted towards the arrears.

Conclusion:
The court ordered the following:
1. The impugned order refusing to condone the delay in filing the revision under Section 264 for the assessment year 1995-96 was set aside. The revisional authority was directed to dispose of the revision petition on merits within four months.
2. The garnishee order dated 31.03.2010 was confirmed for 15 lakh shares and set aside for the remaining shares out of 64,21,765 shares.
3. The prohibitory order dated 24.11.2004 was upheld, allowing the income from the two windmills to be adjusted towards the tax arrears until the finality of the pending proceedings.

All three writ petitions were accordingly ordered, with no costs, and the connected miscellaneous petitions were closed.

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