2025 (1) TMI 1130 - HC - Income Tax

Delay of 1585 days in filing a revised return u/s 139(5) - Denial of principles of natural justice - HELD THAT - The impugned order refusing to condone the delay visits the Petitioner with serious civil consequences. Such an order should generally be made after compliance with principles of natural justice and fair play. The fact that Section 119 (2) does not explicitly refer to any show cause notice or opportunity of hearing is not grounds for noncompliance with principles of natural justice. In the absence of any provision to the contrary such principles should be read into the unoccupied interstices of a statute. The impugned order is accordingly set aside. The matter is remanded to the CBDT for fresh consideration of the Petitioner s application for condonation of delay. Further consideration should be following the law and after giving the Petitioner an opportunity of a hearing. The CBDT or the Member to whom such function is assigned must pass a reasoned order and communicate to the Petitioner. This exercise must be completed within three months of uploading this order. All contentions on merits are however left open.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the impugned order refusing to condone a delay of 1585 days in filing a revised return under Section 139(5) of the Income Tax Act, 1961, was validly issued by the Central Board of Direct Taxes (CBDT) or its Member.
Whether the impugned order was issued in violation of the principles of natural justice due to the lack of a personal hearing for the Petitioner.
Whether the delay in filing the revised return should be condoned based on the cause shown by the Petitioner.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Impugned Order

Relevant Legal Framework and Precedents: The legal framework involves Section 119(2)(b) of the Income Tax Act, which empowers the CBDT to condone delays to avoid genuine hardship. Precedents include R. K. Madhani Prakash Engineers J V vs. Union of India and Tata Autocomp Gotion Green Energy Solutions (P.) Ltd. vs. CBDT, where similar issues regarding the authority of the officer signing the order were raised.
Court's Interpretation and Reasoning: The Court noted that the impugned order was signed by Mr. Virender Singh, Additional CIT, with an assertion that it was issued with the approval of the Member (IT), CBDT. The Court found no evidence that the Member of CBDT had personally made the order, as required.
Key Evidence and Findings: The affidavit from the Commissioner of Income Tax (Exemptions) stated that the order was approved by the Member (IT) and issued by an officer. However, there was no assertion that the Member made the order.
Application of Law to Facts: The Court applied the legal principle that orders should be made by the authority designated by law, and mere approval is insufficient.
Treatment of Competing Arguments: The Petitioner argued that the order was not made by the CBDT or its Member, while the Respondents claimed it was issued following standard procedures. The Court favored the Petitioner's argument based on precedents.
Conclusions: The Court concluded that the impugned order was not validly issued by the CBDT or its Member, warranting its setting aside.

Issue 2: Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require a fair hearing before decisions affecting rights are made. The Court referenced the need for personal hearings in cases with serious civil consequences.
Court's Interpretation and Reasoning: The Court emphasized that the impugned order had serious civil consequences and should have been preceded by a personal hearing, despite the absence of explicit statutory requirements.
Key Evidence and Findings: The Petitioner was not granted a personal hearing, and the Court found this to be a breach of natural justice.
Application of Law to Facts: The Court applied the principles of natural justice, asserting that they should be read into the statute's unoccupied interstices.
Treatment of Competing Arguments: The Petitioner argued for a personal hearing, while the Respondents claimed no such hearing was sought. The Court sided with the Petitioner, noting the importance of a personal hearing in such cases.
Conclusions: The Court concluded that the lack of a personal hearing violated the principles of natural justice, necessitating a remand for fresh consideration.

Issue 3: Condonation of Delay

Relevant Legal Framework and Precedents: Section 119(2)(b) of the IT Act allows for condonation of delay to avoid genuine hardship. The Court did not delve into the merits of this issue due to procedural defects in the impugned order.
Court's Interpretation and Reasoning: The Court did not make a determination on the merits of the delay condonation due to the procedural issues identified.
Key Evidence and Findings: The Petitioner argued for a liberal approach to condonation, while the Respondents highlighted the inordinate delay and insufficient cause.
Application of Law to Facts: The Court deferred consideration of the merits of the delay condonation to the CBDT upon remand.
Treatment of Competing Arguments: The Court left all contentions on the merits open for the CBDT to consider upon remand.
Conclusions: The Court did not make a final determination on the condonation of delay, remanding the issue to the CBDT for fresh consideration.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The fact that Section 119 (2) does not explicitly refer to any show cause notice or opportunity of hearing is not grounds for noncompliance with principles of natural justice."
Core principles established: Orders affecting rights must be made by the designated authority and should comply with principles of natural justice, including a personal hearing when serious civil consequences are involved.
Final determinations on each issue: The impugned order was set aside due to procedural defects, and the matter was remanded to the CBDT for fresh consideration with a directive to grant a personal hearing to the Petitioner.

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