2009 (12) TMI 294 - HC - Income Tax

Revision- petitioner is engaged in the business of mechanical fabrication and erection pursuant to orders received from customers. At times, a part of the contract is entrusted to sub-contractors. From the payments required to be made to the sub-contractors, the petitioner deducts income-tax at source wherever required in accordance with the provisions contained in section 194C of the Act and deposits the amount so deducted with the authorities. The Assessing officer issued the notice u/s 154, and the petitioner agreed to rectification. Thereafter Assessing Officer issued notice u/s 148. on enquiry petitioner found that its counsel and accountant made a mistake in filing the return. Thereafter the Assessing officer passed the in the proceeding u/s 148. while passing the order u/s 264 the Commissioner held that the revised return filed by the petitioner was bogus and not authenticate on the verification report. On a writ petition contending that the order u/s 264 by the Commissioner was not sustainable on the ground that (1) verification report was not furnished (2) authorities did not consider the revised return. Held that- (1) as the verification report not submit to the petitioner it is violation of principle of natural justice. (2) the petitioner had filed the revised return, therefore, the finding in the order that it was bogus and not authentic could not be accepted. Thus allow the petition by giving the order of fresh assessment.

Summary

Issues:
Challenge to legality and validity of orders under Income-tax Act, 1961 - Violation of natural justice - Authenticity of revised return.

Analysis:
The petitioner challenged the order passed by the Commissioner of Income-tax and the assessment order by the Assistant Commissioner, along with related notices for recovery of income-tax. The petitioner, engaged in mechanical fabrication business, deducted income tax at source from payments made to sub-contractors as required by law. An error in the annual TDS return led to discrepancies in the assessment, resulting in a notice under section 148 for certain deductions. The petitioner filed an application under section 264 of the Act against the assessment order, claiming the revised return was authentic. The verification report was not provided to the petitioner, leading to a violation of natural justice. The petitioner contended that the revised return filed was not considered in the assessment process.

The court noted that the verification report was not furnished to the petitioner, depriving her of the opportunity to address its contents, thereby violating natural justice. Regarding the revised return, it was found that the petitioner had indeed filed it, which was not disputed in the affidavit-in-opposition. The court held that the finding that the revised return was bogus based on the verification report was unacceptable. Consequently, the order passed under section 264 of the Act was set aside and quashed, along with all consequential proceedings. The Assistant Commissioner was directed to reconsider the assessment order for the relevant year, taking into account the revised return filed by the petitioner.

In conclusion, the writ petition was allowed, and no costs were imposed. The court ordered urgent provision of a certified copy of the judgment to the parties upon request.