Income Tax Authority Should Refrain From Over Analysis Which Leads To Paralysis Of Justice: Bombay High Court

The Bombay High Court, while setting aside the order of the Income Tax Appellate Tribunal (ITAT), held that the authority should refrain from overanalyzing, which leads to paralysis of justice.

The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that the ITAT failed to appreciate the spirit in which the order dated August 23, 2022, was passed by the High Court condoning the delay by observing that the Income Tax Authority should consider the claim for deduction under Section 80IB(10) of the Income Tax Act for AY 2011–12 made by the petitioner in accordance with law, as if there was no delay in filing the return.

The petitioner/assessee, which had entered into a joint venture agreement with Sanghvi Premise Private Limited, for whatever reason, had not filed its return of income (ROI) for Assessment Year 2011–12. Therefore, an assessment order was passed. Petitioner was not given a deduction under Section 80IB of the Income Tax Act, 1961, because he filed a belated ROI.

The petitioner's appeal was dismissed by the Commissioner of Income Tax (Appeals) on the same ground that the petitioner did not file the ROI on time. The petitioner challenged that order of the CIT (A) by filing an appeal before the ITAT.

During the pendency of the appeal, the petitioner also filed an application under Section 119(2)(b) before the Central Board of Direct Taxes (CBDT). The CBDT rejected the petitioner's application. Against that order passed by the CBDT under Section 119(2)(b) rejecting Petitioner's application for condonation of delay in filing the ROI, Petitioner preferred a writ petition.

The petition came to be disposed of on August 23, 2022. In between, the petitioner also filed an application under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV), which is still pending. During the pendency of the writ petition before the Court, Petitioner's appeal came to be dismissed on May 4, 2022, on the ground that the ROI filed by Petitioner under Section 139(1) was well beyond the due date. The High Court, in its order dated August 23, 2022, condoned the delay by observing that the Income Tax Authority should consider the claim for deduction under Section 80IB(10) for AY 2011–12 made by the petitioner in accordance with law as if there was no delay in filing the return.

Armed with the order of the High Court, the petitioner filed a miscellaneous application under Section 254(2) before the Tribunal, seeking to recall the Tribunal's order. In an order pronounced on July 31, 2023, the Tribunal rejected the miscellaneous application by observing that the High Court states the Income Tax Authority and the ITAT are not authorities, and there was no apparent mistake in its order as required within the four corners of Section 254(2).

The court quashed the assessment order and remand the matter to the stage of the Assessing Officer, who shall pass a fresh assessment order in accordance with law by considering the claim for deduction under Section 80IB(10) for AY 2011-12 made by the petitioner as if there was no delay in filing the return.

“The AO shall pass a fresh assessment order on or before August 31, 2024, and before he passes any order, he shall give a personal hearing to the petitioner, notice of which shall be communicated at least five working days in advance. The assessment order shall be a reasoned order dealing with all submissions of the petitioner,” the court said.

Counsel For Petitioner: Sanket Bora

Counsel For Respondent: Vikas Khanchandani

Case Title: Bhatewara Associates Versus Income Tax Appellate Tribunal, Pune & Ors.

Case No.: Writ Petition No. 6089 Of 2024

Click Here To Read The Order