2023 (10) TMI 1323 - HC - Income Tax

Condoning the delay in preferring the refund application - Principal Commissioner's delegated power under Section 119(2)(b) - HELD THAT - Section 119(2)(b) only empowers the Board to admit an application or claim for exemption, deduction, refund or any other relief under the Act, after the expiry of the period specified by or under the Act for making such application or claim and deal with the same on merits in accordance with law. No doubt, the Board may authorise the Principal Commissioner to exercise the said discretion on its behalf, but such authorisation cannot confer on the Principal Commissioner a greater discretion than what is contemplated under the Act in favour of the Board. In the instant case, we find that Ext.P10 circular authorises the Principal Commissioner to consider even the merits of the refund claim while exercising the delegated power under Section 119(2)(b) of the Act. This is plainly illegal for the mandate of the Act cannot be circumvented through any administrative circular issued by the Board. Whether or not there was any justifiable reason for the delay in preferring the refund application was not considered by the Principal Commissioner on merits ? - The present refund claim preferred by the appellant, whose late husband was the earlier assessee, is in respect of the tax deducted at source from the enhanced compensation amount pertaining to the same land. When the earlier refund was found admissible by considering the land in question as agricultural land, we fail to see how the very same land can cease to be agricultural land when it comes to a claim for refund of the tax deducted at source from the enhanced compensation amount paid to the assessee. At any rate, we feel that the issue on merits is something that has to be considered by the assessing authority to whom the matter must necessarily be relegated if the Principal Commissioner finds that there are justifiable reasons offered by the appellant for the delay in preferring the claim for refund. Since a decision on the merits of the delay condonation application under Section 119(2)(b) has not been taken by the Principal Commissioner, we are compelled to remit this matter to the said authority for fresh consideration, strictly in accordance with Section 119(2)(b) of the Act. We therefore allow this writ appeal by setting aside the impugned judgment of single Judge and direct the 1st respondent/Principal Commissioner to consider the application u/s 119(2)(b) preferred by the appellant afresh, solely for the purpose of determining whether or not justifiable reasons have been made out for condoning the delay in preferring the refund application.

Summary

Issues Involved:
The judgment involves issues related to the rejection of an application under Section 119(2)(b) of the Income Tax Act, the powers of the Principal Commissioner in dealing with refund claims, and the legality of considering the merits of a refund claim in such cases.

Issue 1: Rejection of Application under Section 119(2)(b) of the Income Tax Act
The appellant had filed a return of income for the assessment year 2012-2013 belatedly on behalf of her late husband, seeking a refund of the tax deducted at source (TDS) from the compensation amount received for land acquisition. The Principal Commissioner rejected the application for condonation of delay in filing the return and seeking the refund, citing lack of evidence regarding the agricultural nature of the land and fulfillment of conditions under Section 10(37)(ii) of the Act. The appellant challenged this rejection, arguing that the Principal Commissioner exceeded his powers under Section 119(2)(b) by delving into the merits of the refund claim.

Issue 2: Powers of the Principal Commissioner in Dealing with Refund Claims
The learned Single Judge upheld the Principal Commissioner's order, noting that he followed a circular from the Central Board of Direct Taxes requiring verification of the correctness and genuineness of refund claims. However, the appellant contended that the Principal Commissioner's scrutiny of the refund claim's merits was beyond the scope of Section 119(2)(b) of the Act. The court found that the circular authorizing the Principal Commissioner to consider the merits of the refund claim was illegal as it circumvented the Act's mandate, emphasizing that the assessing authority should determine the merits.

Issue 3: Legality of Considering Merits of Refund Claim
The court observed that the Principal Commissioner did not assess the justifiability of the delay in filing the refund application or consider the earlier refund obtained by the appellant's late husband for the same land. It was highlighted that if the land was considered agricultural for the earlier refund, it should remain so for the current claim. The court concluded that the matter should be remitted to the Principal Commissioner for fresh consideration solely to determine if justifiable reasons exist for condoning the delay in filing the refund application, emphasizing adherence to Section 119(2)(b) of the Act.

In conclusion, the writ appeal was allowed, setting aside the previous judgment and directing the Principal Commissioner to reconsider the application under Section 119(2)(b) to assess the justification for condoning the delay in filing the refund application within a stipulated time frame.