2020 (6) TMI 812 - HC - Income Tax

Rectification of mistake u/s 154 - petitioner submits that without complying the principles of natural justice the impugned order has been passed by rejecting the rectification application - HELD THAT - As per communication Ext.P5 dated 29.01.2020 it is clear that the rectification application would not have been undertaken owing to certain technical problems i.e the functionality of the Department. However vide impugned communication dated 05.07.2019 Ext.P5 same has been rejected in a most sketchy and mechanical manner. Even the order do not disclose affording of any other opportunity of hearing. Considering the facts and circumstances petitioner cannot be relegated to alternate remedy as the order prima facie is without jurisdiction. Accordingly impugned order Ext.P7 dated 05.06.2020 is quashed and matter is remitted to 1st respondent to decide the rectification application Ext.P6 afresh in accordance with law after affording an opportunity of being heard to the petitioner. Let this exercise be undertaken within a period of two months from the date of receipt of a certified copy of the judgment. Till such time no coercive measures shall be taken against the petitioner.

Summary

Issues:
Challenging rejection of rectification application under the Income Tax Act without complying with principles of natural justice and legitimate expectation; Maintainability of the writ petition due to alternative remedy available.

Analysis:
The petitioner, a Co-operative Society registered under the Co-operative Societies Act, challenged the rejection of its rectification application under the Income Tax Act for the assessment year 2018-19. The petitioner filed the returns within the extended timeline provided by a circular issued by the Central Board of Direct Taxes, but the assessment was received after the deadline. The rejection of the rectification application was contested on grounds of lack of natural justice principles and legitimate expectation. The impugned order was criticized for its lack of reasons and procedural fairness, prompting the petitioner to seek relief through Article 226 jurisdiction of the High Court.

The respondent, represented by Sri Christopher Abraham, raised objections regarding the maintainability of the writ petition due to the availability of alternative remedies. However, after hearing arguments from both parties and examining the relevant documents, the Court found merit in the petitioner's submissions. The Court noted that the rejection of the rectification application appeared to be based on technical issues within the Department's functionality rather than substantive grounds. The communication regarding the rejection was deemed to be inadequate and lacking in procedural fairness, as it did not provide an opportunity for the petitioner to be heard.

In light of the deficiencies observed in the handling of the rectification application, the Court concluded that the petitioner should not be directed to pursue alternative remedies. The impugned order rejecting the rectification application was quashed, and the matter was remitted back to the first respondent for a fresh decision on the rectification application. The Court directed the respondent to decide on the application afresh, following the principles of natural justice and in accordance with the law. An opportunity for the petitioner to be heard was emphasized, and a timeline of two months was set for the resolution of the matter. Additionally, the Court ordered that no coercive measures should be taken against the petitioner during this period.