2015 (2) TMI 714 - HC - Income Tax

Claim of deduction under section 80-IB denied - return had not been filed within the stipulated period as provided under section 80AC read with section 139 of the Act - rejection of condonation of delay - Held that - The Board, vide order dated July 27, 2009 rejecting the application seeking condonation of delay does not satisfy the test of being a reasoned and speaking order. The Board had rejected the application on the ground that appeal was pending before Commissioner of Income-tax (Appeals) which is legally unsustainable. See Kranti Associates P. Ltd. v. Masood Ahmed Khan 2010 (9) TMI 886 - SUPREME COURT OF INDIA . Accordingly matter remanded to the Central Board of Direct Taxes to decide afresh after affording an opportunity of hearing to the parties in accordance with law by passing a speaking and reasoned order. - Decided in favour of assessee by way of remand.

Summary

Issues:
Challenge to order rejecting application under section 119(2)(b) of the Income-tax Act, 1961 for condonation of delay in filing return and disallowance of deduction under section 80-IB of the Act.

Analysis:
1. The petitioner, a Hindu undivided family (HUF), filed a petition challenging the order rejecting their application under section 119(2)(b) of the Income-tax Act, 1961 for condonation of delay in filing the return. The petitioner had started a new industrial unit eligible for deductions under section 80-IB of the Act. The assessment for the financial years 2004-05 and 2005-06 was accepted, but for 2006-07, the return was filed late, leading to a disallowance of the deduction under section 80-IB by the Assessing Officer.

2. The petitioner moved an application for condonation of delay, which was rejected by the Central Board of Direct Taxes (CBDT) without providing a reasoned order. The petitioner argued that the rejection was not justified as the matter was pending before the Commissioner of Income-tax (Appeals). However, the Revenue contended that the delay could not be condoned while the matter was sub judice.

3. The High Court found the order of the CBDT rejecting the application to be legally untenable based on the principles laid down by the Supreme Court regarding the necessity of passing reasoned orders. The Court emphasized that reasons for decisions are essential for transparency, accountability, and fairness in the decision-making process, especially in quasi-judicial matters.

4. The Court highlighted that the order of the CBDT lacked a proper rationale and did not meet the standards set by the apex court. Consequently, the Court set aside the CBDT's order and remanded the matter back to the CBDT for a fresh decision after providing an opportunity for both parties to be heard, emphasizing the need for a speaking and reasoned order in accordance with the law.

5. In conclusion, the petition challenging the rejection of the application for condonation of delay and disallowance of deduction under section 80-IB of the Act was disposed of by the High Court, directing the CBDT to re-decide the matter with a reasoned order following the principles of justice, transparency, and accountability in the decision-making process.