THE COMMISSIONER OF INCOME TAX vs M/S SHARAVATHY CONDUCTORS (P) LTD.,

1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 27TH DAY OF AUGUST, 2013

PRESENT

THE HON’BLE MR. JUSTICE DILIP B. BHOSALE

AND

THE HON’BLE MRS. JUSTICE B. MANOHAR

WRIT APPEAL NO. 18021/2011 (T-IT)

BETWEEN:

The Commissioner of Income Tax., Bangalore-III, C.R. Building, Queens Road, Bangalore-1.

Assistant Commissioner of Income Tax., Circle-12(2), No. 14/3, R.P. Bhavan, Nrupathunga Road, Opp. RBI., Bangalore-1.

…APPELLANTS

(By Sri. K.V. Aravind, Advocate)

AND:

M/s. Sharavathy Conductors (P) Ltd., By its Managing Director, Sri. Kaardam Patel, S/o Late Sri S.D. Patel, Aged 41 years, No. 23, BCI Estate, 6th Main, Old Madras Road, Bangalore-560 016.

…RESPONDENT

(By Sri. Ganesh H. Kempanna, Advocate)

This Writ Appeal is filed under Section 4 of the Karnataka High Court Act praying to set aside the order dated 7.3.2011 passed in Writ Petition No. 32772/2009.

This Writ Appeal coming on for Orders this day, the Court delivered the following:

ORAL JUDGMENT (DILIP B. BHOSALE J.)

PC:

Heard the learned Counsel for the parties.

This writ appeal preferred by the revenue, is directed against the order dated 7th of March, 2011 passed by the learned Single Judge in Writ Petition No. 32772/2009 (T-IT) whereby the writ petition filed by the assessee came to be allowed. The concluding paragraph of the order passed by the learned Single Judge reads thus:

“In the circumstances, the impugned orders passed at annexures-A1 to A2 as also the order passed at annexure E by the Assessing Authority have to be set aside and accordingly, they are set aside. It is for the petitioner to file application for condonation of delay to the Commissioner of Income Tax since the revised assessment has been filed well within six

3 years from the date the original returns was filed. The Assessing Authority had only two years time to exercise his rights. However, the Commissioner has got power to condone the delay. The petitioner’s case be considered by the Commissioner for condonation of delay and to refer the matter to the Assessing Authority to consider the revised returns filed seeking for exemption which he had not claimed in the original returns filed.”

The respondent-assessee had furnished returns of income for the assessment year 1997-98 on 9.10.1997 declaring the total income of Rs.70,99,279/- after claiming deduction under Section 80IA of the Income Tax Act, 1961 (for short ‘the Act’). The returns filed by the respondent- assessee was accepted by the Assessing Officer vide order dated 27.11.1998. The assessee thereafter kept quite for 4 - 5 years and on 28th March, 2003 furnished a revised returns declaring nil income after claiming deduction under Section 80HHC of the Act. The assessee, accordingly, requested the Assessing Officer for modification of the income assessed and prayed for refund.

4 The revised return, however, was not entertained by the Assistant Commissioner of Income Tax as barred by limitation. The assessee thereafter filed revision petition under Section 264 of the Act on 29.11.2004 against the order/letter of the Assessing Officer dated 17.9.2003. The revision, however, was rejected by the Commissioner of Income Tax on the ground that the letter dated 17.9.2003 issued by the Assessing Officer was not an order so as to invoke the provisions contained in Section 264 of the Act. The assessee did not pursue the matter further. In other words, the orders passed in the proceedings arising from the application for revised returns attained finality.

The assessee, thereafter, on 28.9.2005 preferred one more revision petition under Section 264 of the Act seeking revision of the original intimation under Section 143(1)(a) of the Act dated 27.11.1998. Alongwith the revision petition, he also filed a separate application for condonation of delay in filing the revision petition under Section 264 of the Act. The delay caused in filing the revision against the order dated 27.11.1998 was of 5 years 4 months and 6 days. The Commissioner considered the

5 revision as well as the application for condonation of delay on merits and dismissed the revision petition filed by the assessee (against the order dated 27.11.1998) vide order dated 13.2.2007. He rejected the application for condonation of delay and also dismissed revision on merits. It would be relevant to reproduce paragraphs 5, 6 and 7 so as to appreciate as to what exactly was considered by the Commissioner and to know whether the findings recorded are correct. Paragraph Nos. 5, 6 and 7 read thus:

“5. As regards the delay in filing the revision petition, it is seen that the decision in the case of CIT vs. Silver And Arts Palace reported in 250 ITR 684(SC) was delivered on 18.12.2002. It is also seen that the Hon’ble Supreme Court in the above mentioned decision has only affirmed the earlier decision of Rajasthan High Court in the same case delivered on 05.12.2000 which is reported in 248 ITR 69. Even with reference to the Supreme Court’s decision, it is observed that there has been a delay of about 2 years 9 months in filing the revision petition,

6 which does not stand satisfactorily explained. The assessee is not justified in stating that immediate steps were taken to file the revision petition. Therefore, on consideration of the totality of the facts and circumstances of the case and the ratio of the decision of the Hon’ble Supreme Court in the case of J.B. Advani & Co. Pvt. Ltd. –vs- R.D. Shah 72 ITR 395 (SC), I am of the view that the inordinate delay in filing the revision petition was not due to sufficient cause within the meaning of the proviso to section 264(3) and the same is, therefore, liable to be dismissed.

It is observed from the relevant records that the assessee company has not disclosed the full facts in the present revision petition. The assessee had earlier filed a revised return on 28.3.2003 relying on the Supreme Court’s decision referred to above, showing income and claiming refund. Vide letter dated 17.09.2003, the Assessing Officer rejected the assessee’s claim in the return filed on 28.3.2003, as the same was filed beyond the statutory time

7 period. The assessee subsequently filed a revision petition under section 264 on 26.12.2003 against the letter by the Assessing Officer dated 17.09.2003, which was rejected by the CIT, Bangalore-III, vide his order dated 29.11.2004 for the reasons recorded in the order.

With reference to the Supreme Court’s decision referred to above, it is necessary to mention that the Supreme Court held inter alia, with reference to clause (aa) of the Explanation below section 80HHC(4B) that where the transactions of counter sales effected by an assessee involved customs clearance at any Custom station as defined in Customs Act, 1962 and the sales were in convertible foreign exchange, the assessee was entitled to special deduction under section 80HHC in respect of the transactions. There is nothing in the return filed by the assessee on 28.3.2003 or in the revision petitions filed on 26.12.2003 and 28.9.2005 to indicate that the concerned transactions involved clearance at any

8 customs station as defined in the Customs Act, which is an essential requirement for claiming deduction under section 80HHC. Clause (aa) of the Explanation below section 80HHC(4B) which excludes certain transactions from being considered as “export out of India” was inserted by the Finance (No.2) Act, 1991 with retrospective effect from 01.04.1986 was already in force at the relevant period of time when the original return of income for the assessment year 1997-98 was filed by the assessee company. If all the essential conditions for claiming deduction under section 80HHC including the requirement of the transactions involving clearance at any Customs station were satisfied in the assessee’s case, it was open to the assessee to claim the deduction under section 80HHC in the original return itself.”

Mr. K.V. Aaravind, learned Counsel for the appellants-revenue submitted that the sequence of events, as stated by us, was not considered by the learned Single Judge in proper perspective and he proceeded on the

9 assumption that the revision under Section 264 of the Act was filed by the assessee against the order dated 28.3.2003. By that order, the application filed by the assessee under Section 143(1)(a) of the Act, whereby he sought refund by filing revised returns, was rejected. That appears to be the reason why the learned Single Judge in the concluding paragraph of the order has observed that “It is for the petitioner to file application for condonation of delay to the Commissioner of Income Tax since the ‘revised assessment’ has been filed within six years from the date the original returns was filed”. As a matter of fact what was sought to be revised in the revision petition filed on 28.9.2005, under Section 264 of the Act, was the order dated 27.11.1998. Moreover there was also an application for condonation of delay filed along with the said revision application and the application was rejected on merits holding that no sufficient cause was shown for condoning the delay.

The learned Counsel for the respondent-assessee could not and did not dispute the factual matrix mentioned in the foregoing proceedings nor could he point

10 out as to how the order passed by the learned Single Judge is correct. He could not dispute that an application for condonation of delay was filed before the Commissioner of Income Tax along with revision under Section 264 of the Act. 7. In the circumstances, we allow the appeal and pass the following: ORDER

The order dated 7th March, 2011 passed by the learned Single Judge is set aside and the writ petition is restored to file. We request the learned Single Judge to consider the writ petition afresh on merits. All contentions, in so far as the writ petition is concerned, are kept open.

Sd/-

Judge

Sd/- Judge

Nsu/-

THE COMMISSIONER OF INCOME TAX vs. M/S SHARAVATHY CONDUCTORS (P) LTD.,