2019 (3) TMI 143 - HC - Income Tax

Rectification of mistake - Entitlement to the relief under section 89(1) - revised application under section 154 - Particulars of the mistake proposed to be rectified - HELD THAT - Authorities while issuing the impugned notice have totally ignored the orders passed by the Income Tax Officer dated 30.08.2011 and the CIT-A order dated 01.10.2012 wherein it has been held that relief under Section 89(1) of the Act is allowable to the petitioner for which he can file a revised application under Section 154 and that it was pursuant to the aforesaid observations of the Income Tax Officer and the CIT-A that the petitioner had filed the revised application under Section 154. The respondents have also overlooked the fact that the petitioner s claim was allowed by order dated 05.12.2014 mainly in view of the previous orders dated 30.8.2011 and 1.10.2012. The authorities have also not taken into consideration the fact that in the proceedings taken up by the authorities on the revised application under Section 154 the authorities duly asked the petitioner to submit a form under Section 10-E of the Act and also sought for and received information from the Bank regarding the salary paid towards subsistence allowance pursuant to the orders passed by this Court and that it was on the basis of the aforesaid information and the document filed by the petitioner that benefit under Section 89(1) was given to the petitioner. As constrained to observe that the submissions made by the learned counsel for the respondents to the effect that the relief under Section 89(1) of the Act was barred by limitation and, therefore, could not have been allowed by the ITO, Jabalpur vide order dated 15.12.2014, does not find any mention in the particulars of the mistake that were proposed to be rectified in the notice dated 09.05.2017 and is apparently an afterthought. Income Tax authorities while passing the order dated 1.8.2017, Annexure R-6, has totally ignored and omitted to take note of the findings recorded by the Income Tax Officer in its order dated 30.8.2011 to the effect that the relief under section 89(1) of the Act, is allowable to the petitioner and for which purpose he could have filed a revised application under section 154 of the Act, which has been affirmed and confirmed by the CIT-A by order dated 1.10.2017. The authorities have simply taken note of the fact that the application under section 154 of the Act, was dismissed without taking note of the aforesaid finding and has revised the order. Very initiation of the impugned Section 154 proceedings was misconceived and uncalled for as there was no mistake in the previous orders requiring rectification in view of the admitted and undisputed fact that the petitioner is entitled to claim benefit under Section 89(1) of the Act, and that his claim thereunder is allowable. Petition allowed.

Issues Involved:
1. Validity of the notice issued under Section 154/155 of the Income Tax Act, 1961.
2. Entitlement of the petitioner to relief under Section 89(1) of the Income Tax Act.
3. Procedural lapses and non-communication of notices to the petitioner.
4. Legality of the rectification order passed during the pendency of the petition.

Detailed Analysis:

1. Validity of the notice issued under Section 154/155 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 9.5.2017 issued under Section 154/155 of the Income Tax Act, 1961, seeking rectification of the order dated 5.12.2014. The notice proposed to rectify the mistake on the grounds that the petitioner had not shown any income in the return for A.Y. 2009-10 and had not claimed relief under Section 89(1). The court found that the notice ignored previous orders dated 30.08.2011 and 01.10.2012, which had affirmed the petitioner’s entitlement to relief under Section 89(1). Therefore, the initiation of Section 154 proceedings was deemed misconceived and uncalled for, as there was no apparent mistake in the previous orders requiring rectification.

2. Entitlement of the petitioner to relief under Section 89(1) of the Income Tax Act:
The petitioner was an employee of Punjab and Sind Bank and was paid subsistence allowance for the period from 1.3.1996 to 16.4.2007, from which tax was deducted. The petitioner sought a refund of the deducted tax, arguing that the subsistence allowance was not taxable. The Income Tax Officer, in the order dated 30.08.2011, held that relief under Section 89(1) was allowable, and this was affirmed by the Commissioner of Income Tax (Appeals) on 01.10.2012. Consequently, the petitioner’s revised application under Section 154 of the Act was allowed on 5.12.2014, granting relief under Section 89(1). The court observed that this relief had attained finality and was undisputed.

3. Procedural lapses and non-communication of notices to the petitioner:
The court noted several procedural lapses, including the non-communication of the notice dated 2.8.2017 to the petitioner, which was sent to an incorrect address. The petitioner was unaware of the order dated 1.8.2017 passed under Section 154 until the respondents filed their return. The court found that the authorities had passed the order without considering the petitioner’s response to the impugned notice and in violation of interim directions issued by the court. The order dated 1.8.2017 was also found to be based on instructions from the Joint Commissioner of Income Tax, without independent application of mind.

4. Legality of the rectification order passed during the pendency of the petition:
The court observed that the rectification order dated 1.8.2017 was passed during the pendency of the petition and in contravention of the interim status quo order dated 22.8.2017. The court held that the order was not binding on the petitioner as it was passed without giving any opportunity of hearing or notice to the petitioner. The court quashed the impugned show cause notice dated 9.5.2017 and the subsequent order dated 1.8.2017, directing the Income Tax Department to pay the petitioner his dues mentioned in the order dated 5.12.2014 within two months with allowable interest.

Conclusion:
The petition was allowed, and the court directed the Income Tax Department to pay the petitioner the dues with interest, emphasizing that the initiation of Section 154 proceedings was unwarranted and the petitioner was entitled to relief under Section 89(1) of the Act. The court also highlighted the procedural lapses and non-communication of notices to the petitioner, rendering the rectification order invalid.

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