2008 (8) TMI 902 - HC - Income Tax

Petition against Order passed by the CIT - Mistake application filled u/s 264 - Deduction u/s 80-IB(3) - late filing of the return - sufficient cause - condonation of delay under proviso to s. 264(3) - manufactures plastic granules - HELD THAT - The CIT has not examined the aspects of the matter which we have set out. We are of the view that there was sufficient cause for having made the application after a delay of about seven and a half months. The CIT ought to have condoned the delay. As indicated the delay was on account of a bona fide mistake and is not visited by any mala fides or any element of recklessness. The petitioner has also been able to show that the claim was not made earlier because legal advice on that account was not forthcoming. The petitioner had no reason not to have claimed it at an earlier point of time. He did not do so because the requisite advice from its tax department had not been rendered. This can certainly be treated as a sufficient cause for condonation of delay particularly in the light of the provisions of proviso to s. 264(3) as well as the provisions of s. 5 of the Limitation Act 1963. Consequently we set aside the order of the CIT and remit the matter to the CIT for a decision on merits. The writ petition stands allowed.

Summary

Issues:
Claim for deduction under section 80-IB(3) for the assessment year 2001-02; Delay in filing revision application under section 264 of the Income Tax Act, 1961.

Analysis:
The petitioner, engaged in manufacturing plastic granules, claimed deduction under section 80-IB(3) for the assessment year 2001-02. However, due to the oversight of tax auditors and the tax department, the deduction was not claimed initially as the petitioner only had a positive gross total income in the seventh year of production. The petitioner discovered this omission while preparing returns for subsequent years and promptly revised returns for 2002-03 and 2003-04. The application for revision for the assessment year 2001-02 was filed after a delay of seven and a half months, citing the genuine oversight as the reason for the delay.

The relevant provision, section 264(3), mandates that an application for revision by an assessee must be made within one year from the date of communication of the order in question. In this case, the petitioner filed the revision application after the prescribed period. However, the provision allows for condonation of delay if sufficient cause is demonstrated. The petitioner's reason for delay, the genuine oversight leading to the belated realization of the entitlement to deduction, was considered sufficient cause by the court.

The court found that the delay was not intentional or driven by malice, but a genuine mistake. The petitioner promptly rectified the error for subsequent years once it came to light. The court emphasized that the mistake was bona fide and not an attempt to evade taxes. The failure to claim the deduction earlier was attributed to the absence of proper advice from the tax department. Considering the provisions of section 264(3) and section 5 of the Limitation Act, the court held that the delay should be condoned based on the genuine reasons presented by the petitioner.

The court criticized the Commissioner of Income Tax (CIT) for dismissing the petitioner's application without considering the genuine reasons behind the delay. The court concluded that the delay should have been condoned, given the bona fide nature of the mistake and the absence of any malafide intent. Consequently, the court set aside the CIT's order and remitted the matter back to the CIT for a decision on merits, allowing the writ petition filed by the petitioner.