2020 (2) TMI 1538 - HC - Income Tax

Revision u/s 264 - Deduction u/s 80JJAA denied - order put to jeopardy - Reopening of assessment u/s 147 initiated - as per AO since the petitioner had failed to file return before the expiry of one year from the end of the relevant assessment year, the benefit of deduction u/s 80 JJAA of the Income Tax Act, 1961 cannot be allowed - HELD THAT - In this case, the assessment which was completed on 29.12.2006 for the Assessment Year 2004-05 reopened with issue of the notice under Section 148 - Thus, the original assessment which was completed on 29.12.2006 as modified by an order dated 17.1.2007 and was put to jeopardy by the respondent. Once notice under Section 148 of the Income Tax Act, 1961 is invoked, the 2 nd respondent has wide power to reassess not only the income escaping keeping assessment but also grant reliefs that are due to an assessee. Such exercise would culminate in a fresh re-assessment order which no doubt has been eventually set aside by the Tribunal. Assessing Officer is also duty-bound to extend substantive benefits which were available and arrive at just tax to be paid. Benefits which are otherwise available to an assessee cannot be denied on the ground of technical failure of an assessee is such assessee is legitimately entitled to such substantive benefit. In this connection, it may be apt to refer to the following quotation of the Hon ble Supreme Court in the case of Commissioner of Sales Tax Vs. Auriya Chambers of Commerce 1986 (4) TMI 363 - SUPREME COURT wherein the Hon ble Court held that procedures are handmaids of justice and not mistress of law. In this case, the 2 nd respondent has not given to benefit while reassessing the income of the petitioner while passing order on 29.12.2008. It is precisely for dealing with situations like this, powers have been vested with superior officers like the respondent under Section 264 of the Income Tax Act, 1961. Though, orders have to be passed subject to provisions of the Act, the intention of the legislative is not whittle down or deny benefit which are legitimately available to an assessee. Failure to file return within the period under Section 139 of the Income Tax Act, 1961 for the purpose of claiming benefit of deduction under Section 80 AAJJ of the Income Tax Act, 1961, in my view is a more procedural formality. In my view, denial of substantive benefit cannot be justified since the assessment itself was reopened by the 2 nd respondent and the assessment already made on 29.12.2006 was put to jeopardy. If an assessee is entitled to benefit, technical failure on the part of an assessee to claim the benefit in time, should not come in the grant of substantial benefit/benefits that was/were otherwise available under the Income Tax Act, 1961 but for such technical failure. Petitioner would be entitled to the benefit of Section 80JJAA of the Income Tax Act, 1961. The 1 st respondent ought to have allowed the application filed by the petitioner under Section 264 of the Income Tax Act, 1961. WP allowed.

Summary

Issues:
1. Rejection of application under Section 264 of the Income Tax Act, 1961 for Assessment Year 2004-05.
2. Refusal to allow deduction under Section 80JJAA of the Income Tax Act, 1961.
3. Reopening of assessment and denial of benefits during reassessment.
4. Non-filing of returns within the prescribed time limit.
5. Dismissal of appeals and subsequent proceedings.
6. Interpretation of procedural formalities and substantive benefits under the Income Tax Act, 1961.

Issue 1: Rejection of Application under Section 264:
The petitioner challenged the impugned order dated 26.03.2008, where the 1st respondent dismissed the application filed under Section 264 of the Income Tax Act, 1961 for the Assessment Year 2004-05. The 1st respondent cited failure to file the return within the prescribed time limit as a reason for rejecting the deduction under Section 80JJAA.

Issue 2: Refusal to Allow Deduction under Section 80JJAA:
The petitioner sought the benefit of deduction under Section 80JJAA by filing a revised return, but the 2nd respondent refused to act on it. The impugned order dated 26.03.2008 rejected the benefits of Section 80JJAA, despite an earlier order allowing the deduction under Section 154 of the Income Tax Act, 1961.

Issue 3: Reopening of Assessment and Denial of Benefits:
The assessment for the Assessment Year 2004-05 was reopened with a notice under Section 148 of the Income Tax Act, 1961. The 2nd respondent had the power to reassess and grant due reliefs to the assessee, including benefits like deduction under Section 80JJAA. The failure to consider these benefits during reassessment was highlighted as an issue.

Issue 4: Non-filing of Returns within Prescribed Time Limit:
The petitioner's delay in filing the revised return within the limitation period under Section 139(5) was a point of contention. The court discussed the procedural formality of filing returns and emphasized that denial of substantive benefits should not be justified due to technical failures.

Issue 5: Dismissal of Appeals and Subsequent Proceedings:
The petitioner's appeals before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal were dismissed at various stages, leading to a series of legal challenges and remand proceedings. The Court reviewed these proceedings to determine the rightful entitlement to benefits under the Income Tax Act, 1961.

Issue 6: Interpretation of Procedural Formalities and Substantive Benefits:
The judgment delved into the balance between procedural formalities and substantive benefits under the Income Tax Act, 1961. It emphasized the importance of not denying legitimate benefits to an assessee based on technical failures, especially when the assessment itself was reopened, and the benefits were available.

This detailed analysis of the judgment showcases the complexities involved in tax assessments, reassessments, and the interpretation of legal provisions to ensure fair treatment for taxpayers under the Income Tax Act, 1961.