Universal Packaging and Others vs Commissioner of Income Tax

M.S. Sanklecha, J.—Rule. By consent the rule is made returnable forthwith and the writ petition is heard finally. By this petition under Art. 226 of the Constitution of India, the petitioner challenges the order of the CIT dt. 26th March, 2012 passed in revision under s. 264 of the IT Act, 1961 (''the Act") as being an order in breach of natural justice.

Briefly, the facts leading to this petition are as under:

(a) The petitioner is a partnership firm engaged in the business of manufacturing corrugated paper boxes, corrugated rolls and sleeves.

(b) On 30th Oct., 2007, the petitioner filed its return of income declaring taxable income of Rs. 7.44 lacs after claiming a deduction of Rs. 5. 83 lacs being the salary paid to its working partners for the period ending on 31st March, 2007 (asst. yr. 2007-08).

(c) For the first time, from the asst. yr. 2007-08, the procedure of filing return of income was changed by the respondent from the manual to E-filing. Consequently, on 30th Oct., 2007, the petitioner''s chartered accountant filed its return of income by E-filing the same on the internet. However, by mistake the taxable income was declared in the return at Rs. 13.27 lacs instead of Rs. 7.44 lacs i.e. difference on account of remuneration paid to working partners, which is allowed as deduction not being reflected in the taxable income.

(d) On 5th March, 2009, the Asstt. CIT issued an intimation under s. 143(1) of the Act, accepting the return income at Rs. 13.27 lacs and raising a demand of Rs. 1. 58 lacs. On receipt of the above intimation, the petitioner filed an application for rectification under s. 154 of the Act on 30th March, 2009. However, the Asstt. CIT by order dt. 15th Dec., 2011 rejected the rectification application on the ground that the claim cannot be entertained in the absence of revised return of income, as held by the Supreme Court in the matter of Goetze (India) Ltd. Vs. Commissioner of Income Tax, .

(e) Therefore, on 23rd Jan., 2012, the petitioner filed a revision application under s. 264 of the Act, with the CIT, in respect of order dt. 15th Dec, 2011.

(f) On 26th March, 2012, the CIT rejected the petitioner''s revision application by stating as under:

I have considered the petition of the assessee under s. 264. The AO has rejected the assessee''s application for rectification under s. 154 vide his order dt. 15th Dec, 2011. As such, the assessee has the option for filing the appeal before the CIT(A). Further, I also do not find any good reason to revise the order under s. 154 passed by the AO.

In view of the above, the assessee''s petition under s. 264 is rejected.

Mr. Jitendra Jain, counsel for the petitioners submits that the order dt. 26th March, 2012 passed by the CIT is an order in breach of principle of natural justice inasmuch as it does not consider the petitioner''s revision application and merely rejects the same on the ground that the petitioner has an option of filing an appeal before the CIT(A). It is his submission that when the petitioner has exercised his right to invoke the jurisdiction of the CIT In revision under s. 264 of the Act, he has necessarily waived his rights to prefer an appeal before the CIT(A).

Mr. Tejveer Singh, counsel for the respondent supports the order dt. 26th March, 2012 of the CIT.

We find the order dt. 26th March, 2012 passed by the CIT is a non-speaking order inasmuch as it does not consider the petitioners'' case on merits and dismissed the same on the ground that the petitioners have an alternative remedy of filing an appeal. It is well-settled position in law that one of the basic principles of natural justice is that the authority concerned must pass a speaking order, so as to enable a party to know the reasons, as to why his application is being either accepted or rejected. This giving of reasons also ensures due application of mind to the facts by the authority concerned. The order dt. 26th March, 2012 is bereft of reasons and therefore, quashed and set aside.

We direct the CIT to dispose of the petitioners'' revision application under s. 264 of the Act, after giving the petitioners a personal hearing and considering all the relevant contentions raised by the petitioners. The petition is disposed of in above terms. No order as to costs.