1978 (11) TMI 9 - HC - Income Tax

Summary

Issues Involved:

1. Whether the Additional Commissioner erred in dismissing the revision petition as time-barred.
2. Whether the CBDT's refusal to interfere was contrary to s. 119(2)(b) and the assurances given to the Public Accounts Committee.
3. Whether the ITO's disallowance of remuneration to directors was justified.

Summary:

1. Dismissal of Revision Petition as Time-Barred:
The petitioners challenged the order of the Addl. Commissioner dated 14th May 1971, u/s 264 of the I.T. Act, 1961, which dismissed their revision petition as hopelessly time-barred. The delay period was from 9th October 1968 to 16th November 1970. The petitioners argued that their chartered accountant's illness caused the delay, and they remained under a bona fide belief that the appeal was filed. The court noted that while sufficient cause for condonation of delay was made out, the Commissioner's harsh and technical approach did not amount to perversity.

2. CBDT's Refusal to Interfere:
The petitioners moved the CBDT, which declined to issue directions u/s 119(2)(b), despite assurances given to the Public Accounts Committee that delays would be condoned freely. The court found the CBDT's refusal startling and contrary to the moral obligations and assurances given by the Government. The court held that the CBDT's decision was perverse and an attempt to go back on the assurances given to the Public Accounts Committee.

3. ITO's Disallowance of Remuneration:
The ITO disallowed Rs. 24,000 out of the directors' remuneration for the assessment year 1967-68, similar to previous and subsequent years. The Tribunal had allowed the full remuneration for the other years, deeming it not excessive. The court noted that the company's failure to file an appeal resulted in the disallowance remaining operative for the year under consideration, leading to taxation on non-existent profits. The court emphasized that the Commissioner's refusal to condone the delay was harsh but not perverse, and thus not correctable in writ jurisdiction.

Conclusion:
The court quashed the Addl. Commissioner's order dated 14th May 1971, directing the Commissioner to condone the delay and hear the revision petition u/s 264 on merits. The court expressed hope for expeditious disposal of the revision petition by 30th April 1979. Despite making the rule absolute, the court directed the parties to bear their own costs due to the unusual circumstances of the case.