2020 (10) TMI 146 - HC - Income Tax

Application for a certificate u/s 197 - legality and validity of order issued by the first respondent u/s 119 - Application was rejected since the reply against the SCN could not be filed due to lockdown - Period of limitation - application of the petitioner for non-deduction of TDS and grant of certificate u/s 197 - HELD THAT - Sub-section (2) says that where any due date has been specified or prescribed or notified for payment of any amount towards tax or levy falling within the period from 20.03.2020 to 29.06.2020 or such other date after 29.06.2020 as may be notified by the central government and such amount having not been paid within such date but paid subsequently on or before 30.06.2020 or such other date after 30.06.2020 as may be notified by the central government, then it would carry a lower rate of interest with no penalty and prosecution. In our view, the said provision cannot be invoked to justify rejection of the application of the petitioner for issuance of a certificate under sub- section (1) of section 197 on the ground of being barred by limitation. On the contrary, as we have already noted earlier sub-section (1) of section 3 also provides for extension of limitation to 30.06.2020 or even beyond in case of furnishing of any reply, application, report, document, return, statement or such other record under the provisions of the Act which would cover the case of the petitioner. To make it more explicit, in that portion of sub-section (1) of section 3 preceding the first proviso, it is clarified that such extension of limitation upto 30.06.2020 or even beyond would be notwithstanding anything contained in the Specified Acts, in this case the Income Tax Act. Extension of limitation period as provided by the Ordinance would have an overriding effect over the limitation provision contained in the Income Tax Act for the financial year relevant to the assessment year 2020-21. Considering the above and having regard to the extra-ordinary situation faced by the country in view of the pandemic and the lockdown for which the Ordinance had to be promulgated, simplicitor rejection of the application of the petitioner as having been rendered infructuous either on 31.03.2020 or on 27.04.2020 cannot be justified and is wholly unsustainable in law as well as on facts. We set aside the decision of respondent No.2 dated 08.06.2020 to reject the application of the petitioner and remand the matter back to respondent No.2 for taking a fresh decision on the application of the petitioner for issuance of a certificate under sub- section (1) of section 197 of the Act for the assessment year 2020-21 on merit and in accordance with law within a period of six weeks from the date of receipt of a copy of this order. Writ petition is accordingly allowed.

Summary

Issues Involved:
1. Legality and validity of the order dated 03.04.2020 issued by the first respondent under section 119 of the Income Tax Act, 1961.
2. Quashing of the decision of respondent No.2 dated 08.06.2020 rejecting the application for a certificate under section 197 of the Income Tax Act, 1961.
3. Compliance with procedural requirements and opportunity of hearing in the rejection process.
4. Impact of the COVID-19 lockdown and related government ordinances on the procedural timelines and obligations.

Detailed Analysis:

1. Legality and Validity of the Order Dated 03.04.2020:
The petitioner challenged the legality of the order dated 03.04.2020 issued by the Central Board of Direct Taxes (CBDT) under section 119 of the Income Tax Act, 1961. The order mandated that pending applications for lower or nil rate of TDS should be disposed of by 27.04.2020, provided the applicants informed the assessing officer about the pendency of their applications via email. The petitioner argued that this order disregarded the 'Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020' issued by the Ministry of Law and Justice, which extended all procedural timelines to 30.06.2020 due to the COVID-19 pandemic.

2. Quashing of the Decision Dated 08.06.2020:
The petitioner sought to quash the decision of respondent No.2 dated 08.06.2020, which rejected his application for a certificate under section 197. The rejection was based on the petitioner's failure to respond to a notice dated 10.04.2020, calling for additional details during the lockdown period. The petitioner contended that the rejection was made without providing adequate reasons and without granting a proper opportunity for a hearing.

3. Compliance with Procedural Requirements and Opportunity of Hearing:
The petitioner argued that the rejection of his application was done without proper adjudication and without considering the materials on record. The petitioner also highlighted that the rejection occurred after the extended deadline of 27.04.2020, specifically on 08.06.2020, which was illegal. The petitioner emphasized that due to the lockdown, he could not access the necessary documents from his office or his Chartered Accountant to respond to the notice.

4. Impact of the COVID-19 Lockdown and Related Government Ordinances:
The court noted the unprecedented situation caused by the COVID-19 pandemic and the resulting lockdowns imposed by the Government of India and the Government of Maharashtra. The 'Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020' extended various procedural timelines to 30.06.2020. The court found that the CBDT's order dated 03.04.2020, which required applicants to inform the assessing officer about the pendency of their applications by 27.04.2020, placed an additional burden on the applicants during the lockdown. The court held that the Ordinance, having the effect of an Act of Parliament, should override the CBDT's order.

Conclusion:
The court concluded that the rejection of the petitioner's application as infructuous either on 31.03.2020 or on 27.04.2020 was unjustified and unsustainable in law and facts. The court set aside the decision of respondent No.2 dated 08.06.2020 and remanded the matter back to respondent No.2 for a fresh decision on the petitioner's application for a certificate under section 197 for the assessment year 2020-21. The decision was to be made on merit and in accordance with the law within six weeks from the date of receipt of the court's order. The writ petition was allowed with no order as to costs.