2016 (7) TMI 573 - HC - Income Tax

Rejection of review petition - disallow of expenditure - revision petition filed and prayed for a direction to set aside the order passed by the second respondent under Section 143(3) and to redo the assessment after verifying the details of the cheques, through which, payments have been made, bank statements and ledger copies, which came into possession of the petitioner after the assessment was completed - Held that - On a perusal of the impugned order, it is seen that the first respondent called for a report from the Assessing Officer and there is a reference to such a report of the officer dated 4.8.2015 in paragraph 4 of the impugned order. However, the first respondent has not stated anything as to what was the report submitted by the Assessing Officer and as to how it is relevant or not relevant to the grounds raised by the petitioner in the review petition. However, the first respondent proceeded solely on the basis as if the petitioner is estopped from raising such a contention. Thus in view, the reason assigned by the first respondent for rejecting the review petition is not tenable for the simple reason that the petitioner had initially accepted for disallowance, which cannot be a ground to put against the petitioner, since, subsequently i.e. 17.3.2014, the petitioner made a request to the Assessing Officer to consider other documents and allow deduction claimed as expenditure. Writ petition is allowed, the impugned order is quashed and the first respondent is directed to furnish a copy of the report of the second respondent dated 4.8.2015 to the petitioner so as enable the petitioner to put forth their objections and after affording an opportunity of personal hearing, the first respondent shall pass orders afresh on merits and in accordance with law.

Summary

Issues:
Challenge to order under Section 264 of the Income Tax Act, 1961.

Analysis:

1. Assessment and Rejection of Deduction Claim:
The petitioner challenged an order passed by the first respondent under Section 264 of the Income Tax Act, 1961, regarding the rejection of a deduction claim for expenditure towards salaries amounting to &8377; 63,88,614. The second respondent, during the assessment for the year 2011-12, disallowed this claim due to the petitioner's failure to produce vouchers for this specific amount, despite producing vouchers for the rest of the claimed deduction.

2. Petitioner's Representation and Disallowance:
The petitioner, in a subsequent representation to the second respondent, explained that some vouchers were lost during an office relocation, leading to the inability to produce them. The petitioner emphasized the genuineness of the payments and requested the deduction to be allowed. However, the second respondent still disallowed the deduction and raised a demand for payment.

3. Revision Petition and Rejection:
In response to the disallowance, the petitioner filed a revision petition under Section 264 before the first respondent, seeking to set aside the second respondent's order and requested a reassessment based on additional documents like cheques, bank statements, and ledger copies obtained post-assessment. The first respondent rejected this revision petition.

4. Judicial Review and Decision:
The High Court, upon review, found fault with the first respondent's decision, noting the lack of consideration for the additional evidence provided by the petitioner after the initial acceptance of disallowance. The court criticized the first respondent for not disclosing the report from the Assessing Officer and emphasized the importance of independently evaluating the revision petition based on the evidence presented by the petitioner during the assessment.

5. Court's Ruling and Directions:
Consequently, the High Court allowed the writ petition, quashed the impugned order, and directed the first respondent to furnish a copy of the report from the second respondent to the petitioner. The court instructed the first respondent to consider the petitioner's objections, provide a personal hearing, and issue a fresh decision based on merits and in accordance with the law, emphasizing the need for a fair and thorough assessment process.

This detailed analysis highlights the key aspects of the legal judgment, focusing on the assessment, representation, revision petition, judicial review, and the court's ruling, providing a comprehensive understanding of the case and its implications under the Income Tax Act.