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2025 (3) TMI 95 - HC - Income TaxRejecting the application seeking permission for assessment of real and actual income after condoning the delay u/s 119 - genuine hardship - HELD THAT - Division Bench of the Bombay High Court in the case of CG Power and Industrial Solutions Ltd. 2024 (5) TMI 502 - BOMBAY HIGH COURT had allowed the writ petition and had granted the relief similar to the relief sought for in the present batch of writ petitions. Reading of the facts in the said judgment passed by the Division Bench of the Bombay High Court what is clearly reflected is that the officers of the Income Tax Department were in agreement with the petitioners to their request for condoning the delay and also going in for reassessment so as to compute the correct taxable income. In view of the fact that this Bench finding the action on the part of CBDT in rejecting the petition under Section 119 of the Income Tax Act 1961 to be bad in law in the given factual matrix of the case the two questions of law framed as is enunciated stands answered accordingly - a) So far as the question whether the respondents were justified in rejecting the application u/s 119(1) of the Income Tax Act is answered in the negative holding that the rejection of the said application was bad in law and also was not sustainable factually. b) So far as the relief which has been sought for whether can be granted invoking Article 226 of the Constitution of India the same is answered in the affirmative in the view of the findings given by this Bench in the preceding paragraphs based on the judicial precedents. This Court is conscious of the fact that post re-assessment; there is a likelihood of inflated values emerging which could possibly show surplus tax having been paid potentially burdening the Revenue. However the petitioner Company has voluntarily agreed not to make any claim for refund. The petitioner Company has filed a memo in this regard dated 15.02.2024 undertaking to waive any such surplus tax having been paid which may arise after assessment. This proactive step by the petitioner Company provides additional compelling ground for allowing this petition particularly in light of there being no financial implication falling on the Revenue. This gesture on the part of the petitioner to mitigate potential financial implications also shows their commitment only with an intention of getting a fair and genuine assessment so far as the income and the expenditure of the petitioner Company for the relevant period is redone by way of reassessment. This Court finds that the petitioner-Company through its Assistant Chief Corporate Counsel (Legal) and Authorized Signatory has unequivocally agreed to waive its rights to claim any refund that may arise after adjusting any tax liability arising from the de novo assessments for Assessment Years 2002-03 to 2008-09. This waiver is comprehensive and applies to any residual refunds that may arise after setting off aggregate demands across the relevant Assessment Years u/s 245. This Court finds that this decision of the Assistant Chief Corporate Counsel (Legal) has been duly authorized by the Managing Director of the petitioner Company supported by a valid Power of Attorney dated 22.11.2013. This waiver effectively ensures that there will be no additional financial burden on the Revenue following the completion of the reassessment process.
1. ISSUES PRESENTED and CONSIDERED
The primary issues considered in this judgment include: 1) Whether the rejection of the petitioner's application under Section 119(1) of the Income Tax Act by the CBDT was justified. 2) Whether the relief sought by the petitioner could be granted by invoking the extraordinary writ jurisdiction under Article 226 of the Constitution of India. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification of Rejection under Section 119(1) Relevant Legal Framework and Precedents: Section 119 of the Income Tax Act empowers the CBDT to issue orders, instructions, or directions for the proper administration of the Act. The provision allows for relaxation of certain provisions to avoid genuine hardship. The court referenced several precedents, including judgments from the Supreme Court and High Courts, emphasizing the power of the CBDT to grant administrative relief and address genuine hardship. Court's Interpretation and Reasoning: The court found that the CBDT's rejection of the petitioner's application was arbitrary and not in alignment with the powers vested in it under Section 119. The court noted that the CBDT failed to consider the genuine hardship faced by the petitioner due to the fraudulent actions of its former management. Key Evidence and Findings: The court highlighted the fraudulent activities of the petitioner's former management, which led to inflated income figures and excess tax payments. It was established that the petitioner company was a victim of fraud, and the Board was unaware of the true financial status. Application of Law to Facts: The court applied the principles of real income and genuine hardship, determining that the petitioner was entitled to relief under Section 119 due to the fraudulent circumstances that led to incorrect tax assessments. Treatment of Competing Arguments: The respondents argued that the CBDT's decision was justified due to ongoing criminal proceedings and the finality of assessments. However, the court found these arguments unpersuasive, emphasizing the need for a fair reassessment based on actual income. Conclusions: The court concluded that the rejection of the application under Section 119 was unjustified and that the petitioner was entitled to a reassessment of its income based on revised financial statements. Issue 2: Relief under Article 226 Relevant Legal Framework and Precedents: Article 226 of the Constitution empowers High Courts to issue directions, orders, or writs to enforce fundamental rights and for any other purpose. The court referenced precedents where writ jurisdiction was invoked to correct injustices and provide relief when statutory authorities failed to act justly. Court's Interpretation and Reasoning: The court reasoned that the extraordinary jurisdiction under Article 226 was appropriate to address the injustice faced by the petitioner due to the fraudulent assessment of income. Key Evidence and Findings: The court relied on the comprehensive evidence of fraud and the subsequent financial adjustments made by the petitioner to correct its financial statements. Application of Law to Facts: The court applied the principles of justice and equity, finding that the petitioner was entitled to relief under Article 226 to ensure a fair reassessment of its tax liabilities. Treatment of Competing Arguments: The respondents contended that the relief sought was beyond the scope of the Income Tax Act and that reopening settled assessments was impermissible. The court rejected these arguments, emphasizing the need to address the genuine hardship caused by the fraud. Conclusions: The court concluded that the relief sought by the petitioner could be granted under Article 226, allowing for a reassessment of its income based on revised financial statements. 3. SIGNIFICANT HOLDINGS The court held that the rejection of the petitioner's application under Section 119 was arbitrary and illegal, and that the petitioner was entitled to a reassessment of its income for the relevant assessment years. Verbatim Quotes of Crucial Legal Reasoning: "The order dated 11.07.2011 passed by respondent No.1 as a consequence is set aside / quashed being arbitrary, illegal and violative of Section 119 of the Income Tax Act." Core Principles Established: The court established that the CBDT has the power to provide relief in cases of genuine hardship and that assessments based on fraudulent income figures can be reassessed to reflect actual income. Final Determinations on Each Issue: The court determined that the petitioner's application under Section 119 should have been granted and that the relief sought under Article 226 was justified. The court ordered a reassessment of the petitioner's income based on revised financial statements, excluding fictitious sales and interest income.
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