2023 (7) TMI 1092 - HC - Income Tax

Application u/s 119(2)(a)/(b) requesting allowing carry forward of losses rejected - HELD THAT - Respondent No. 1 has not articulated as to why it cannot grant relief prayed for by Petitioner. Reasons introduces clarity in an order. The order howsoever brief, should indicate an application of mind all the more when the same can be further challenged. Hon ble Apex Court in Uttar Pradesh State Road Transport Corporation vs. Jagdish Prasad Gupta 2009 (3) TMI 1070 - SUPREME COURT OF INDIA has stated reasons introduce clarity in an order. The order howsoever brief, should indicate an application of mind all the more when the same could be further challenged. Therefore, without making any observations on the merits of the matter, we hereby quash and set aside the order and remand the matter back to Respondent No. 1. Respondent No. 1 shall pass a reasoned order dealing with every submissions made by Petitioner and before passing any such order, shall also give a personal hearing to Petitioner.

Summary

Issues involved:
The judgment involves the rejection of an application under Section 119(2)(a)/(b) of the Income Tax Act, 1961 for carrying forward losses of Assessment Years 1998-99 to 2004-05 amounting to Rs. 159.87 crores beyond the stipulated period of eight years.

Details of the judgment:

Issue 1: Application Rejection
The Petitioner impugned an order rejecting their application to carry forward losses beyond the stipulated period. The Petitioner, engaged in turnkey projects, faced severe losses due to non-availability of working capital funds and non-recovery from debtors. After being declared sick by BIFR, the Petitioner filed a Draft Rehabilitation Scheme seeking relief from the Income Tax Department for carrying forward accumulated business loss. The application under Section 119(2)(a)/(b) was rejected by Respondent No. 1 citing statutory limitations and lack of falling under the purview of the Act for relaxation.

Issue 2: Lack of Reasons in Rejection
The order rejecting the application did not provide clear reasons for the decision. The lack of articulation by Respondent No. 1 raised concerns about the application of mind in the decision-making process. The judgment emphasized the importance of reasons in providing clarity and enabling further challenges. Quoting previous judgments, it highlighted that reasons are essential for good administration and ensuring a fair judicial system. Due to the absence of reasons, the order was deemed unsustainable.

Conclusion
The High Court quashed the order dated 2nd March 2020 and remanded the matter back to Respondent No. 1. Respondent No. 1 was directed to pass a reasoned order considering all submissions made by the Petitioner and provide a personal hearing before making a decision. The CBDT was instructed to dispose of the application within 12 weeks. The petition was disposed of with no order as to costs.