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2021 (8) TMI 221 - HC - Income TaxRectification u/s 154 - Exemption/deduction u/s 10B denied - returns was filed beyond the period of limitation - petitioner had failed to claim the benefit of exemption/deduction under Section 10B as per Section 80(5) of the IT, 1961 in Income Tax Returns - petitioner was acquired to make a claim in the said Returns filed under Section 139, thus no such deductions are claimed when the Returns filed under Section 139 no deduction can be allowed - HELD THAT - Assessment Order passed by the Assessing Officer under Section 143 (1) (a) cannot be said to be an erroneous order passed by the Assessing Officer as it is based on the Returns filed by the petitioner. Assessments under IT Act, 1961 are driven based on the Returns that are filed under Section 139 of the IT Act, 1961. In Annamallais Agencies 2002 (9) TMI 62 - MADRAS HIGH COURT has accepted the proposition that for the purpose of rectification of error apparent on the face of record can be corrected. The expression record is not merely confined to error/mistake in the Assessment Order. It would include the mistake in Return and documents which accompanied the Returns as a part of the record. If there has been omission on the part of the Assessing Officer therein to take note of the contents of that record, while making his order, the mistake in the assessment can be rectified. Though the said order is dated 28.03.2008, it is the case of the petitioner that the intimation was received by the petitioner only on 18.05.2008 by which time, the time to file revised returns under Section 139(5) had already expired on 31.03.2008. Therefore, the only option available to the petitioner was to file rectification petitioner before the Assessing Officer under Section 154 of the IT Act, 1961, which the petitioner did by filing of rectification petition on 18.08.2009. Assessing Officer by an order dated 06.10.2009 rejected the same while recording that the petitioner had enclosed the revised returns by stating that the assessee had filed the return on 30.11.2006 and if there was any mistake found in the returns, the petitioner could have to filed a revised return on or before 31.03.2008. The intimation issued under Section 1431A of the IT Act, 1961 is dated 28.03.2008. It is about 3 days prior to the expiry of limitation for filing revised return on 31.03.2008. Even if the intimation dated 28.03.2008 was despatched on the said date after it was signed in all likelihood, it could not have been received by the petitioner on 31.03.2008 to file a revised returns in time. Therefore, the petitioner was entitled for rectification under Section 154 of the IT Act, 1961. Rejection of the application for rectification by the Assessing Officer under Section 154 of the IT Act, 1961 was unjustified, considering the fact that the petitioner is entitled to substantive the benefit and delay, if any, wholly attributed on account of the system. Rejection of the revision application filed by the petitioner vide order dated 08.03.2011 and vide order dated 25.02.2013 impugned herein, it is also not justified as the officers acting under the IT Department are duty bound to extend substantive benefits that are legitimately available to an assessee. Dealing with a somewhat similar case, this Court in M/s.Craftsman Automation P Ltd., Coimbatore 2020 (2) TMI 1538 - MADRAS HIGH COURT has allowed the benefit where returns was filed beyond the period of limitation prescribed under Section 139(5) of the IT Act, 1961. WP Allowed
Issues Involved:
1. Whether the petitioner was entitled to the benefit of exemption/deduction under Section 10B of the IT Act, 1961 despite failing to claim it in the original return. 2. Whether the rectification petition under Section 154 of the IT Act, 1961 was rightly dismissed by the Assessing Officer. 3. Whether the subsequent revision petitions under Section 264 of the IT Act, 1961 were rightly dismissed by the Commissioner of Income Tax. 4. The scope of judicial review under Article 226 of the Constitution of India in the context of the impugned orders. Issue-Wise Detailed Analysis: 1. Entitlement to Exemption/Deduction under Section 10B: The petitioner, engaged in providing software services, failed to claim the benefit of exemption under Section 10B while filing the Income Tax Return on 30.11.2006. As per Section 80A(5) of the IT Act, if an assessee fails to make a claim in his return of income for any deduction under Section 10B, no deduction shall be allowed. The petitioner argued that this was the first year of mandatory electronic filing, and by the time the Intimation dated 28.03.2008 was received, the period for filing a revised return had expired on 31.03.2008. 2. Dismissal of Rectification Petition under Section 154: The petitioner filed a rectification petition on 18.08.2009, which was dismissed by the Assessing Officer on 06.10.2009. The Assessing Officer noted that the petitioner had filed the return on 30.11.2006 and could have filed a revised return by 31.03.2008. However, the intimation under Section 143(1)(a) was issued on 28.03.2008, just three days before the expiry of the limitation period, making it unlikely for the petitioner to file a revised return in time. The court found that the rejection of the rectification application was unjustified, considering the delay was due to the system. 3. Dismissal of Revision Petitions under Section 264: The petitioner filed a first revision petition on 09.11.2009 and a second revision petition on 25.02.2013, both of which were dismissed. The court held that the officers of the IT Department are duty-bound to extend substantive benefits legitimately available to an assessee. The court referred to previous judgments, including Annamallais Agencies Vs Commissioner of Income-Tax and M/s.Craftsman Automation P Ltd., Coimbatore Vs The Commissioner of Income Tax-II, Coimbatore, which supported the rectification of mistakes apparent from the record. 4. Scope of Judicial Review under Article 226: The respondents argued that the petitioner had not challenged the order dated 08.03.2011 and that the writ petition was not maintainable. They also contended that the petitioner could have filed a statutory appeal against the Assessment Order. The court, however, emphasized that judicial review under Article 226 is limited to examining the legality of the decision-making process. The court found that the rejection of the rectification and revision applications was not justified and that substantive benefits should not be denied due to technical failures. Conclusion: The court allowed the writ petition, setting aside the impugned order and directing the 2nd respondent to pass appropriate orders on merits, ignoring the delay in filing the returns under Section 139(5) of the IT Act. The 2nd respondent was instructed to pass a speaking order within three months, ensuring the petitioner is heard before the order is passed. The court highlighted that benefits legitimately available to an assessee should not be denied on technical grounds, aligning with the principles of fairness and justice.
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