DAISY vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX

The brief facts necessary for the disposal of this writ appeal are as follows: The appellant had approached this Court through the writ petition aforementioned impugning the order dated 26.5.2017 of the Principal Commissioner of Income Tax, Thiruvananthapuram, whereby an application preferred by the appellant under Section 119(2)(b) of the Income Tax Act (for short 'the Act') was rejected. It would appear that the appellant had filed a return of income for the assessment year 2012-2013 on 19.8.2015, showing 'nil' total income. The due date for filing the return was 31.7.2012 and the return was filed belatedly, since it was basically a return filed by the appellant on behalf of her late husband who had received compensation amount for the land acquired by the State under the Land Acquisition laws. The acquisition of the land was during the assessment year 2005-2006 and at the time of releasing the initial compensation amount, an amount of 5% was deducted towards the tax deducted at source (TDS) by the awarding authority. The appellant's husband had then filed a return of income for the said assessment year in which he had claimed refund of the TDS amount deducted from payments made to him by the Land Acquisition Authority. It is not in dispute that the said amount was refunded to him on 31.7.2006. 3. While the appellant's husband had challenged the Land Acquisition Award in further proceedings and stood to get enhanced compensation for the land acquired from him in an amount of ₹29,92,708/-, he had omitted to file a return for the assessment year 2012-2013 since by the said time he was hospitalised with cancer and subsequently died in December, 2014. The appellant was not aware of the requirement of filing return for claiming refund of the TDS amounts deducted from the enhanced compensation amount disbursed to her husband. She came to know of the said requirement only on 19.8.2015 on which date she filed a 'nil' return on behalf of her husband with an application for condonation of delay in terms of Section 119(2)(b) of the Act. The delay sought to be condoned was for the period from 31.7.2012 which was the last date for filing the return on behalf of the husband, till 19.8.2015 which was the date on which a 'nil' return was actually filed seeking a refund of the TDS amount in question. The application under Section 119 (2)(b) came to be considered by the Principal Commissioner of Income Tax, who, by the order dated 26.5.2017 impugned in the writ petition, rejected the application inter alia on the ground that the appellant had not established that the land in question was agricultural and further, had not produced clear evidence of the fulfillment of the conditions specified under Section 10(37)(ii) of the Act. As already noticed, this order of the Principal Commissioner was impugned by the appellant in the writ petition wherein the contention taken was that the Principal Commissioner had travelled beyond the powers conferred on him under Section 119(2)(b) of the Act while rejecting the application preferred by the appellant for condonation of delay in filing the return and seeking refund of the TDS amounts deducted from payments disbursed to the appellant's husband by way of enhanced compensation. In particular, it was pointed out that the Principal Commissioner was required only to consider whether the delay in preferring the return together with the refund claim was justified and if so, he had to condone the delay and send the refund application for consideration on merits to the assessing authority concerned.

The learned Single Judge, however, found that inasmuch as the Principal Commissioner in the order impugned in the writ petition had merely exercised his power following Ext.P10 circular dated 9.6.2015 of Central Board of Direct Taxes (for short 'the Board') and in particular, paragraph '5' thereof, which required him to ensure that the refund claim was correct and genuine and also that the case was of genuine hardship on merits, the order of the Principal Commissioner on the merits of the claim for refund did not require any interference by this Court.

Before us it is the submission of Sri. Krishnamoorthy, the learned counsel for the appellant that the learned Single Judge was not correct in law in affirming the order of the Principal Commissioner, which had gone into the merits of the claim for refund when the application under Section 119(2)(b) of the Act was merely for condonation of delay in preferring the said refund claim. Per contra, it is the submission of Sri. Christopher Abraham, the learned Standing Counsel for the Income Tax Department that the Principal Commissioner could not have been faulted for merely following the circular aforementioned while exercising his discretion in terms of Section 119(2)(b) of the Act.

On a consideration of the rival submissions, we find force in the submission of the learned counsel for the appellant Sri. Krishnamoorthy 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. At any rate, we find that the principal question as to 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. We also find that the finding of the Principal Commissioner on the merits of the refund claim is flawed since he has overlooked the fact that in respect of the same land, the assessee had, in 2006, obtained refund of the tax deducted at source (Ext.P4) from the initial compensation amounts awarded to him for acquisition of his land. 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 the learned single Judge as also Ext.P6 order that was impugned in the writ petition and direct the 1st respondent Principal Commissioner to consider the application under Section 119(2)(b) of the Act 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. The 1st respondent shall pass fresh orders in the matter after hearing the appellant within an outer time limit of two months from the date of receipt of a copy of this judgment. DR. A.K.JAYASANKARAN NAMBIAR JUDGE DR. KAUSER EDAPPAGATH JUDGE kp