ATLAS COPCO INDIA LTD vs. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 8 AND ORS

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WP/764/2022HC BombayHCBM01017996202123 October 2023Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the impugned order dated March 30, 2021, was bad in law and quashed and set it aside. The Court found that Respondent No. 2 had failed to provide a proper personal hearing to the Petitioner, which is a breach of natural justice. The Court emphasized that Section 264 of the Income Tax Act confers wide jurisdiction on the Commissioner, intended to provide relief to assessees who cannot approach appellate authorities. The Commissioner is bound to apply his mind to the merits of the case and is not limited to correcting subordinate authorities' errors. The Court noted that the Petitioner was directed to make its representation before the ITO (HQ), who was not the adjudicating authority for the Section 264 application. The High Court remanded the matter to Respondent No. 2 for de novo consideration, directing that a personal hearing be given at least five working days after issuing notice. The final order is to be reasoned and deal with all submissions, and the application is to be disposed of by January 31, 2024.

What were the facts?

The Petitioner, Atlas Copco India Ltd., filed a writ petition challenging an order dated March 30, 2021, passed by the Deputy Commissioner of Income Tax (Respondent No. 2). This order rejected the Petitioner's application filed under Section 264 of the Income Tax Act, 1961. The primary contention is that the application was rejected without affording the Petitioner a personal hearing. The Petitioner had filed an application for condonation of delay along with its Section 264 application. A notice for hearing on February 25, 2021, was issued, but the Petitioner was informed on that date that the personal hearing part of the notice was cancelled. Instead, the Petitioner's representative was asked to present its case to a subordinate officer, the ITO (HQ), who discussed the merits of the claims but did not address the issue of delay. The impugned order subsequently dismissed the revision application solely on the ground of delay.

What were the issues?

1. Whether the order dated March 30, 2021, passed by Respondent No. 2, rejecting the Petitioner's application under Section 264 of the Income Tax Act, 1961, is bad in law for being in breach of the principles of natural justice by not affording a personal hearing. Assessee's Contentions: - The Petitioner argued that the rejection of its Section 264 application without a proper personal hearing, especially when the hearing was initially scheduled and then cancelled, violates the principles of natural justice. The Petitioner contended that the discussion with the ITO (HQ) did not address the crucial issue of delay, which was the sole ground for rejection. The Petitioner relied on the principle that Section 264 confers wide jurisdiction and requires due consideration of the application. Revenue's Contentions: - No specific contentions were recorded for the revenue in the judgment. The judgment notes that no reply was filed by the respondents.

Which sections of the Income-tax Act were involved?

Section 264

AI-generated summary — verify with the full judgment below

1/4 425-wp-764-22.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.764 OF 2022 Atlas Copco India Ltd.

...Petitioner Versus Deputy Commissioner of Income Tax Circle-8, Mumbai & Ors. ...Respondents ---- Mr. J. D. Mistri, Senior Advocate a/w Mr. Nilesh Joshi & Mr. Sameer Dalal for Petitioner. Mr. Suresh Kumar for Respondents. ---- CORAM : K. R. SHRIRAM & NEELA GOKHALE, JJ.

DATED : 23rd OCTOBER 2023 P.C. : 1 Petition is impugning an order dated 30th March 2021 passed by respondent no.2 rejecting petitioner’s application under Section 264 of the Income Tax Act 1961 (the Act). Though, various grounds have been raised, the short point is petitioner’s application under Section 264 of the Act was rejected without giving petitioner a personal hearing. 2 Indisputably, there was a delay in filing the application under Section 264 of the Act. Petitioner had filed an application for condonation of delay as well. 3 Petitioner received a notice dated 10th February 2021 by which, petitioner was informed that the hearing in the matter was fixed on 25th February 2021 at 11.00 a.m. and petitioner was requested to join in person or through an authorised representative. Petitioner was also asked to Meera Jadhav MEERA MAHESH JADHAV Digitally signed by MEERA MAHESH JADHAV Date: 2023.10.26 11:18:18 +0530

2/4 425-wp-764-22.doc submit the written submissions, if so desired. Petitioner filed the written submissions as well. 4 On 25th February 2021, when petitioner’s representative appeared before respondent no.2, he was informed that the first part of the notice informing petitioner about the personal hearing and the date and time has been cancelled in the copy of the notice available in the record to respondent no.2, meaning thereby opportunity of personal hearing was not to be allowed. Copy of the notice where the first part stood cancelled was physically served on petitioner’s representative. Respondent no.2 did not give a personal hearing but rather asked petitioner’s representative to set out its case to his subordinate officer, i.e., ITO (HQ). It is alleged in the petition that ITO (HQ), in a perfunctory manner asked petitioner’s representative to briefly touch on the case on merits. The entire discussion in the course of hearing before the ITO (HQ) centered around the merits of the claims. No indication was ever given with respect of question of rejecting the revision application as barred by limitation. 5 Thereafter, the impugned order dated 30th March 2021 came to be passed, in which, application under Section 264 has been dismissed only on the ground of delay. Mr. Mistri states that, therefore, the order was bad, in as much as, it is in breach of the principles of natural justice. 6 No reply has been filed though, petition was served in 2021. Therefore, we will proceed on the basis that the averments contained in Meera Jadhav

3/4 425-wp-764-22.doc paragraph 14 of the petition as recorded above, has not been denied. Therefore, without going into the merits of the matter, we hereby quash and set aside the impugned order dated 30th March 2021. 7 Respondent no.2 may be advised that this court has time and again held that Section 264 confers wide jurisdiction on the Commissioner. The proceedings under Section 264 of the Act are intended to meet a situation faced by an aggrieved assessee, who is unable to approach the Appellate Authorities for relief and has no other alternate remedy available under the Act. The Commissioner is bound to apply his mind to the question whether petitioner was taxable on that income and his powers are not limited to correct the error committed by the subordinate authorities but could even be exercised where errors are committed by assessee. It would even cover situation where assessee because of an error has not put forth legitimate claim at the time of filing the return and the error is subsequently discovered and is raised for the first time in an application under Section 264 of the Act as held in Smita Rohit Gupta Vs. CIT,1 8 The powers conferred under Section 264 of the Act being wide, respondent no.2 should have considered the application under Section 264 of the Act on merits. In any event, respondent no.2 should have given a personal hearing to petitioner to explain the delay and not direct petitioner to make its representation before the ITO(HQ). The ITO(HQ) was not the adjudicating authority before whom, the application under Section 264 of 1 . Judgment dated 28th August 2023 in Writ Petition No.6964 of 2022 Meera Jadhav

4/4 425-wp-764-22.doc the Act had been filed. 9 We have no hesitation in quashing and setting aside the impugned order dated 30th March 2021 and remand the matter to respondent no.2 for denovo consideration. Respondent no.2 shall dispose the application on merits. Before passing any order, personal hearing shall be given, notice whereof shall be given atleast five working days in advance. The order to be passed shall be a reasoned order dealing with all submissions of assessee. The application under Section 264 of the Act shall be disposed by 31st January 2024. 10 Petition disposed. (NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Meera Jadhav

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