2013 (6) TMI 275 - HC - Income Tax

Revision u/s 264 - application for revision was rejected because it was not accompanied by the requisite fee of Rs.500/- revision in favor of assessee - held that - non-satisfaction of the requisite fee along with the application was only a curable defect and that the petitioner was not given an opportunity to cure the same. Under these circumstances, this Court finds that the decision taken by the second respondent on merits without giving an opportunity of hearing to the petitioner as to the merits involved, is not correct or sustainable.

Issues:
1. Maintainability of the revision petition under Section 264 of the Income Tax Act.
2. Denial of opportunity to cure the defect of non-satisfaction of the requisite fee.
3. Decision taken by the second respondent without giving an opportunity of hearing on merits.
4. Correct interpretation of Section 10A(2) and Section 9(1)(vii)(b) of the Income Tax Act.

Analysis:

1. The petitioner challenged the rejection of the revision petition under Section 264 of the Income Tax Act. The petitioner filed IT returns for the assessment year 2008-09 showing a net loss. The assessing authority sought to disallow certain expenses under Section 40(a)(ia) due to non-deduction of TDS on service charges paid to overseas agents. The revision petition was rejected primarily on the question of maintainability, citing non-payment of the requisite fee. The petitioner contended that the fee was paid but was not considered, leading to the submission of a fresh revision petition. The High Court found the non-satisfaction of the fee as a curable defect and directed the second respondent to reconsider the matter on merits after affording an opportunity of hearing to the petitioner.

2. The High Court noted that the defect of non-satisfaction of the fee was curable, and the petitioner should have been given an opportunity to rectify it. The Court held that the decision taken by the second respondent without allowing the petitioner to cure the defect and without hearing on merits was incorrect and unsustainable. The impugned order was set aside, and the second respondent was directed to reconsider the matter and pass appropriate orders after giving the petitioner an opportunity of hearing.

3. The petitioner's counsel argued that the observations made by the second respondent regarding the petitioner's eligibility under Section 10A(2) and the liability to effect TDS under Section 9(1)(vii)(b) were incorrect. The counsel contended that the petitioner was not given a chance to explain the factual and legal position adequately due to the focus on the fee issue. The High Court agreed that the decision made without hearing the petitioner on merits was flawed and directed a fresh consideration of the case.

4. In conclusion, the High Court found that the decision made without providing an opportunity of hearing on merits and the failure to allow the petitioner to rectify the fee issue were not in accordance with the law. The judgment set aside the impugned order and directed the second respondent to reconsider the matter expeditiously, affording the petitioner a proper hearing on the merits within three months from the date of the judgment. The writ petition was disposed of accordingly.

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