2013 (3) TMI 34 - HC - Income Tax

Revision u/s 264 in favor of assessee - period of limitation of one year is mandatory or directory - held that - The Finance Act (No. 2) Act, 1988, has made it obligatory on the Commissioner to pass an order under section 264 within a period of one year from the end of the financial year in which the application is made for revision. However, in computing the period of limitation, the time taken in giving an opportunity to the assessee to be reheard and any period during which any proceedings under this section are stayed by an order or injunction of any court shall be excluded. - Further, the above time shall also not apply in cases of revisionary orders to be passed in; con sequence of or to give effect to any finding or direction in an order of the Appellate Tribunal, the High Court or the Supreme Court. If a revision has not been decided by the Commissioner within the stipulated period, it does not mean that the revision stands allowed. If the provisions of section 264(6) is held to be mandatory then the failure to decide the revision within the stipulated period would cause prejudice not only to the person who has filed the revision but also to the department. It would also defeat or frustrate the leglislative intent. The legislative intent is that the revision should be decided expeditiously, if possible within the time bound period. Failure to do so would not defeat the right of the aggrieved person. Thus, the provisions are directory only. CIT directed to decide the expeditiously - in favor of assessee.

Summary

Issues:
1. Interpretation of section 264(6) of the Income Tax Act, 1961 regarding the time limit for deciding a revision application.
2. Whether the provision is mandatory or directory in nature.
3. Consequences of not deciding the revision within the stipulated period.

Analysis:
1. Interpretation of section 264(6): The petitioner filed a revision application under section 264 of the Income Tax Act, 1961, seeking a direction to the Commissioner of Income Tax to decide the revision or stay the recovery demand. The provision under section 264(6) states that an order on such revision applications should be passed within one year from the end of the financial year in which the application is made. The Central Board of Direct Taxes elaborated on this provision in Circular No. 772, emphasizing the need for timely disposal of revision applications to prevent delays in the process.

2. Mandatory vs. Directory Nature of the Provision: The main contention revolved around whether the time limit specified in section 264(6) is mandatory or directory. The petitioner argued that if the Commissioner fails to decide the revision within the stipulated period, it should be deemed as allowed. However, the respondents contended that the provision is directory and not mandatory. Various legal precedents were cited to support both arguments, including a Division Bench decision and a Supreme Court case. The Court analyzed these arguments and referred to the intent of the Legislature to determine the nature of the provision.

3. Consequences of Non-Compliance: The Court examined the consequences of holding the provision as mandatory or directory. It was emphasized that a strict interpretation of the provision as mandatory could lead to prejudice for both the petitioner and the tax department. Considering the legislative intent for expeditious disposal of revisions, the Court concluded that the provision should be construed as directory. This interpretation aimed to prevent the defeat or frustration of the legislative purpose and ensure justice for all parties involved.

In the final judgment, the Court held that section 264(6) of the Income Tax Act is directory and not mandatory. To expedite the decision-making process, the Commissioner of Income Tax was directed to decide the revision application within three months from the date of the Court's order. The writ petition was disposed of in light of this decision, emphasizing the importance of timely resolution of revision applications for all parties concerned.