2020 (7) TMI 399 - HC - Income Tax

Rectification u/s 154 - Disallowance of deduction u/s 80P shown in the intimation u/s 143(1) issued by CPC cannot be rectified as the same will not come under the purview of rectification u/s 154 - HELD THAT - Rectification application would not have been undertaken, owing to certain technical problems i.e, the functionality of the Department. However vide impugned communication dated 5-7-2019 Ext.P5, same has been rejected in a most sketchy and mechanical manner. Even the order do not disclose affording of any other opportunity of hearing. Petitioner cannot be relegated to alternate remedy as the order prima facie is without jurisdiction. Accordingly, impugned order is quashed and matter is remitted to 1st respondent to decide the rectification application Ext.P6 afresh, in accordance with law, after affording an opportunity of being heard to the petitioner. Let this exercise be undertaken within a period of two months from the date of receipt of a certified copy of the judgment. Till such time, no coercive measures shall be taken against the petitioner.

Summary

Issues:
Challenging the rejection of a rectification application under the Income-tax Act based on technical grounds without affording natural justice, maintainability of the writ petition in light of alternative remedies available.

Analysis:
The petitioner, a Co-operative Society under the Co-operative Societies Act, filed its income tax return for the assessment year 2018-19 within the extended deadline of 28-2-2020 as per a circular issued by the Central Board of Direct Taxes. However, despite timely filing, the assessment was received after the deadline on 29-6-2019. Subsequently, a rectification application was filed on 7-11-2019, but the Income-tax Officer cited non-functionality as a reason for not deciding on the rectification, as communicated on 29-1-2020.

The petitioner contended that the rejection of the rectification application through order Ext.P7 on 5-6-2020 lacked compliance with the principles of natural justice, was devoid of reasons, and failed the test of legitimate expectation. The petitioner, represented by counsel, invoked the extraordinary jurisdiction of the High Court under Article 226, bypassing alternative remedies, due to these deficiencies in the impugned order.

Upon hearing arguments from both parties, the Court acknowledged the merit in the petitioner's submissions, particularly regarding the lack of jurisdiction and procedural irregularities in the rejection of the rectification application. The Court examined the communication dated 29-1-2020 (Ext.P5) and the impugned order dated 5-6-2020 (Ext.P7), which revealed that technical issues within the Income-tax Department hindered the rectification process. Despite acknowledging these technical challenges, the rejection of the rectification application in a summary and mechanical manner without providing an opportunity for a hearing was deemed inappropriate.

Consequently, the Court held that the petitioner should not be compelled to pursue alternative remedies given the apparent lack of jurisdiction in the impugned order. The Court quashed the order Ext.P7 dated 5-6-2020 and remitted the matter back to the Income-tax Officer to reconsider the rectification application (Ext.P6) in adherence to the law, ensuring a fair opportunity for the petitioner to be heard. The Court directed the reconsideration to be completed within two months from the date of receiving a certified copy of the judgment, with a stay on coercive measures against the petitioner during this period.