2019 (7) TMI 303 - HC - Income Tax

Condonation of delay - revision u/s 264 - filed beyond a period of one year from the date of assessment and was dismissed by the CIT, refusing to condone the delay - CIT has powers to condone the delay u/s 264(3) - issue relates to income earned outside India reported in return on wrong advice of auditor - original return was belatedly filed hence revise return was rejected by AO HELD THAT - As would be evident from the chronicle of events which have been alluded to supra with specificity, it will be clear that one year time frame for filing application / petition u/s 264 expired on 22.10.2011, as the order of assessment u/s 143(1) came to be passed on 23.10.2010. Within this one year, i.e., on 05.08.2011 itself, writ petitioner had taken the first step to have his ₹ 19.84 lakhs excluded / exempted qua said AY by filing a revised return. This revised return was rejected u/s 139 (5) on the technical ground that original return was not filed in time. Therefore, this brings to light that writ petitioner has taken his first step qua section 264 application / petition well within the one year time frame. Thereafter, post rejection of revised return, writ petitioner did not go into slumber. Further, writ petitioner filed rectification, on which no orders were passed. Without passing orders on rectification, a demand notice was issued triggering a second rectification from writ petitioner which came to be dismissed. To be noted, a demand was made on 31.1.2018, second rectification request was filed by writ petitioner on 25.2.2018, second rectification having been dismissed / rejected on 2.7.2018, writ petitioner ultimately filed a petition / application u/s 264. There is one other aspect which has weighed in the mind of this Court for acceding to the prayer of writ petitioner unlike other cases / case laws, particularly Viswanathan Silk Centre 1991 (10) TMI 7 - MADRAS HIGH COURT , as third respondent has said nothing on merits of the matter in case on hand. As section 264 petition / application has not been examined on merits, in the considered opinion of this court, by acceding to the prayer in the instant writ petition and directing third respondent to consider section 264 petition / application on merits, ends of justice would be met as it will ensure that writ petitioner's case is tested on merits. To be noted, the submission of writ petitioner that there are judgments (supporting writ petitioner's exemption plea) rendered by more than one Hon'ble High Court with regard to exemption u/s 5, which is the crux and gravamen of petitioner's section 264 petition / application in instant case, buttresses and bolsters writ petitioner's plea to have section 264 petition / application tested on merits. This Court is convinced that this is a case where the prayer of writ petitioner deserves to be acceded to. The matter is remitted back to third respondent to decide the writ petitioner's application / petition u/s 264 on merits.

Summary

Issues Involved:
1. Condonation of delay in filing a petition under section 264 of the Income Tax Act, 1961.
2. Examination of merits of the petition under section 264 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Petition under Section 264 of the Income Tax Act, 1961:

The petitioner, a non-resident seafarer, filed a petition under section 264 of the Income Tax Act, 1961, which was dismissed by the third respondent due to a delay of nearly nine years. The petitioner’s income for the assessment year 2009-10 included ?19.84 lakhs received from abroad, which was erroneously included in the return due to wrong advice from the auditor. The petitioner filed a revised return on 05.08.2011, which was rejected on 24.08.2011 under section 139(5) due to the original return being filed late. Subsequently, the petitioner filed a rectification application on 10.10.2011, which remains pending. A second rectification application was filed on 25.02.2018 following a demand notice dated 31.01.2018, which was rejected on 02.07.2018. Consequently, the petitioner filed the section 264 petition on 24.10.2018, which was dismissed solely on the ground of delay.

The court examined whether the third respondent should have condoned the delay. The petitioner argued that the delay was due to continuous and relentless efforts to rectify the error, which included filing revised returns and rectification applications. The court noted that the petitioner had taken the first step within the prescribed limitation period by filing a revised return on 05.08.2011. The court observed that the petitioner had not been lethargic but had been actively pursuing the matter.

The respondent, supported by case laws, argued that the delay could not be condoned. The court analyzed the cited cases, including the Katiji case, Viswanathan Silk Centre case, Vinay Extraction Pvt. Limited case, Nahar Exports Limited case, and Rane (Madras) case, and found them distinguishable based on the facts and circumstances of the present case.

The court concluded that the petitioner’s efforts to rectify the error were diligent and relentless, and the delay should be condoned. The court emphasized that each case must be evaluated based on its facts and circumstances, and the petitioner’s continuous efforts justified condoning the delay.

2. Examination of Merits of the Petition under Section 264 of the Income Tax Act, 1961:

The court noted that the third respondent had dismissed the section 264 petition solely on the ground of delay without examining the merits. The petitioner argued that the income of ?19.84 lakhs was exempt under relevant provisions of section 5 of the Income Tax Act and cited judgments from different High Courts supporting the exemption.

The court held that the third respondent should have considered the merits of the petition. The court directed the third respondent to decide the petitioner’s application under section 264 on merits after affording an opportunity for a personal hearing.

Conclusion:

The court set aside the impugned order dated 17.01.2019 and condoned the delay in filing the section 264 petition. The matter was remitted back to the third respondent to decide the petition on merits within three months from the date of receipt of the court’s order, ensuring the decision is communicated to the petitioner under due acknowledgment. The writ petition was allowed with the above directions, and no costs were awarded. Consequently, connected miscellaneous petitions were closed.