WHEN THE RECALCITRANT ITO DOES NOT DISPOSE OF SEC 154 PETITION

By Subash Agarwal, Advocate

Unfortunately, no remedy has been provided in the Income-tax Act where the A.O. fails to dispose of the petition filed u/s. 154 within the statutory period of six months as provided u/s. 154(8). It may, however, be noted that the department cannot take any coercive measure or recover any outstanding dues without first disposing of the assessee’s petition. In this regard, reference may be made to a judgement in the case of Sultan Leather Finishers (P) Ltd. vs. ACIT 191 ITR 179 (All.)

If inspite of reminders and persuasion, the A.O. is still not disposing of the rectification petition, the only legal option available to the assessee is to file a writ petition before the jurisdictional High Court. Our framers of constitution had visualized this situation and equipped the High Courts with the powers to issue a writ of “Mandamus” for securing judicial enforcement of public duties, performance of which has been wrongfully refused.

The Hon’ble Kerala High Court in the case of Smt. Rajamma vs. ITO 152 ITR 657(Ker), where the A.O. was not disposing of the rectification petition u/s. 154, held that an application for relief cannot be kept in cold storage and directed the A.O. to dispose of sec. 154 application within one month from the date of receipt of the order.

However, to avoid the cost, one option available to the assessee is to approach Income-tax Ombudsman by filing a complaint with him for non-disposal of sec. 154 petition by the A.O. However, before proceeding, one should refer to the Income Tax Ombudsman Guidelines, 2006 so that the proper procedure is followed.

MERILYN SHIPPING SINKS IN KOLKATA

According to the Ld. Advocates present in the Court-Room No. 4 of the Calcutta High Court, a division bench of Hon’ble Justice Girish Chandra Gupta & Hon’ble Justice Tarun Kr. Das passed a judgement on 3.4.2013 in the post- lunch sitting of the Court in a case overruling the majority view taken by the Special Bench of ITAT, Vishakapatnam.

It is worthwhile to note that the ITAT Special bench (Vishakapatnam) in the case of Merilyn Shipping & Transports vs. ACIT 146 TTJ 1, by a majority view, held that the disallowance u/s 40(a)(ia) was applicable only to the amounts outstanding or provisions made on the date of balance sheet on which there was a default in complying with the TDS provisions and not to the amounts actually paid.

Recently, Revenue had filed an application u/s 151 of the Code of Civil Procedure before the Hon’ble High Court of Andhra Pradesh praying that the operation of the order passed by the ITAT, Vizag Bench in the case of Merilyn Shipping may please be suspended. Pursuant to the said application, the Andhra Pradesh High Court had passed an interim suspension order.

Thereafter, there was a virtual embargo on the Special bench order in Merilyn Shipping and all the Benches of ITAT as well as authorities below were refraining from passing any order following Merilyn Shipping.

An Article titled “Despite Suspension, Special Bench verdict in Merilyn Shipping is binding” was hosted by ITAT Online on 30.01.2013 where an opinion was expressed that the salutary impact of the Special bench Judgement has not been oblitered inspite of the “Interim Suspension”.Some judgments from the Calcutta High Court & the apex court were cited for the proposition ( viz.,Pijush Kanti Chowdhury vs. State of West Bengal and Ors.,Shree Chamund Mopeds Ltd. vs. Church of South India Trust Association, Madras) .  Thereafter, the embargo was lifted and several orders were passed following the ratio of Merilyn Shipping after those judgments were cited.  

Now, the reversal of the majority view of the Merilyn Shipping by the Hon’ble Calcutta High Court will have a wider ramification all over the country. Though, technically non-jurisdictional High Court judgements are not binding over the lower authorities but Income Tax Act being an all India statute, the interpretation given by a High Court is followed by the other High Courts and other authorities unless there are compelling reasons to depart from the view. Please refer Peirce Leslie & Co. v. CIT 216 ITR 176 (Mad), CIT v. Deepak family Trust No. 1(1994) 72 Taxman 406 (Guj.);CIT v. Alcock Ashdown & Co. Ltd. (1979) 119 ITR 164 (Bom);Sarupchand Hukamchand, In re [1945] 13 ITR 245 (Bom.)]

The Hon’ble Calcutta High Court’s judgement has now sealed an important escape route out of the most mischievous provision ever made in the Income Tax Act i.e. Section 40(a)(ia). There were already five provisions in the Income Tax Act viz., sections 201(1), 201(1A), 221, 271C, 271B to ensure strict compliance of TDS provisions. These provisions are containing provisions for strict penal actions having huge financial implications as well as provision for incarceration of the defaulters. The 100% disallowance of expenditure for the technical default of non-deduction of TDS of as low as 1% of the amount paid/ payable will prove to be the final nail in the coffin of the TDS defaulters. It will mean that for a small traffic violation of crossing a red light, one will be hanged by the noose. It will also mean flogging a horse many times over even after he is dead.

However, the mandarins of the North Block, who were instrumental in bringing in such an illogical and draconian provision will now be able to nurse their “sadistic personality disorders” with a smile on their face.