Uttam Modern Rice and Oil Mill vs Union of India and Others

R.K. Agrawal, J.—The present writ petition under article 226 of the Constitution of India has been filed by the petitioner seeking a writ, order or direction in the nature of mandamus directing the Commissioner of income tax, Faizabad, respondent No. 2 to decide the revision or to stay the demand of recovery till the pendency of the revision application. A further writ, order or direction declaring the revision application of the petitioner dated May 8, 2006, filed on May 9, 2006, before the Commissioner of income tax, Faizabad, respondent No. 2, for the assessment year 2003-04 stands allowed. The petitioner also seeks a writ, order or direction, declaring the time limit of one year prescribed u/s 264(6) of the income tax Act, 1961, as mandatory in nature and directing the income tax Officer, Basti, respondent No. 3, not to take any coercive measure for realising the demand arising out of the assessment order till the pendency of the revision application. Briefly stated, the facts giving rise to the present petition are as follows.

The petitioner is a partnership firm engaged in the business of manufacture and sale of rice and trading of paddy, wheat, rice oil-cake, etc. For the financial year 2003-04, the petitioner had disclosed its income at Rs. 6,890. The return was processed u/s 143(1) of the income tax Act, 1961 (hereinafter referred to as the Act). Notices under sections 143(2) and 142(1) of the Act were issued to the petitioner. The petitioner appeared before the income tax Officer, Basti, respondent No. 3, and filed its return. Respondent No. 3 passed an assessment order on March 20, 2006, u/s 143(3) of the Act determining the total income at Rs. 10,03,280. A notice of demand dated March 20, 2006, u/s 156 of the Act was also issued.

Feeling aggrieved against the assessment order, the petitioner preferred a revision u/s 264 of the Act on May 8, 2006, before the Commissioner of income tax, Faizabad-respondent No. 2. The said revision is pending before respondent No. 2. During the pendency of the revision, recovery proceeding has been initiated by the income tax Officer, Basti-respondent No. 3. Proceedings u/s 221(1) of the Act for non-deposit of tax was also initiated. As a period of one year from the end of the financial year in which the application for revision has been made by the petitioner, i.e., March 31, 2008, had expired, in view of the specific provision u/s 264(6) of the Act which enjoined upon the Commissioner of income tax, Faizabad, to decide the revision within a stipulated period, he had become functus officio and, therefore, no order is being passed on the revision preferred by the petitioner. Left with no other alternative, the petitioner has approached this court for redressal of its grievance.

In the counter-affidavit filed by the respondents, it has been stated that the provisions of sub-section (6) of section 264 of the Act are directory in nature and not mandatory and, if the period of one year has expired, the Commissioner of income tax does not become functus officio to decide a revision.

We have heard Sri Krishna Agrawal, learned counsel for the petitioner and Sri Govind Krishna, learned senior standing counsel appearing for the respondents.

Sri Krishna Agrawal, learned counsel appearing for the petitioner, submitted that as the Commissioner can decide a revision preferred by an assessee within a period of one year from the end of the assessment order in which such revision has been filed, therefore, after the expiry of the aforesaid period, the Commissioner of income tax becomes functus officio to decide the revision and the necessary corollary is that the revision should be treated as having been allowed.

Reliance has been placed upon a Division Bench decision of this court in the case of Commissioner of Income Tax Vs. Rohit Organics (P.) Ltd., .

Sri Govind Krishna, learned counsel submitted that the provisions of section 264(6) of the Act is director)''. Even though a time limit has been specified for deciding the revision preferred by an assessee, yet if the same is not decided within the stipulated time limit which was specified, it does not mean that the provisions of section 264(6) are directory in nature. He further submitted that if the revision preferred by an assessee has not been decided within the time limit specified in section 264(6) of the Act. it would not mean that the revision stands allowed. He has placed reliance upon a decision of the apex court in the case of Shri. Chet Ram Vashist Vs. Municipal Corporation of Delhi and Another, . He has also relied upon a decision of the Calcutta High Court in the case of Benoy Kumar Sahas Roy Vs. Commr. of Income Tax, West Bengal, for the proposition that the validity of a reference is not affected by the expiry of the period prescribed by section 66(1) of the Indian income tax Act, 1922, which commands the Tribunal to make a reference within 90 days.

We have given our thoughtful consideration to the various pleas raised by the learned counsel for the parties. We find that by the Finance (No. 2) Act, 1998, with effect from October 1, 1998, sub-section (6) in section 264 of the Act was inserted in the Act. It reads as follows:

(6) On every application by an assessee for revision under this sub-section, made on or after the 1st day of October, 1988, an order shall be passed within one year from the end of the financial year in which such application is made by the assessee for revision.

The scope and effect of newly inserted sub-section (6) of section 264 has been elaborated by the Central Board of Direct Taxes in its Circular No. 772, dated December 23, 1998, which is as under (see English Electric Co. of India Ltd. and Others Vs. Commissioner of Income Tax and Others, ):

Providing limitation of time for revising orders by the Commissioner of income tax u/s 264 of the income tax Act:

62.1 Under the existing provisions, the Commissioner of income tax is empowered to revise an order passed by the subordinate authority where no appeal has been filed. The order passed by the Commissioner of income tax cannot be prejudicial to the interest of the assessee. There is limitation of one year for filing the application but there is no time limit for the Commissioner of income tax to dispose of the application. The absence of such a provision has contributed to the delay in the disposal of such applications.

62.2 The Finance (No. 2) Act, 1988, has made it obligatory on the Commissioner to pass an order u/s 264 within a period of one year from the end of the financial year in which the application is made for revision. However, in computing the period of limitation, the time taken in giving an opportunity to the assessee to be reheard and any period during which any proceedings under this section are stayed by an order or injunction of any court shall be excluded. Further, the above time shall also not apply in cases of reversionary orders to be passed in consequence of or to give effect to any finding or direction in an order of the Appellate Tribunal the High Court or the Supreme Court.

62.3 Corresponding amendments have also been made in other direct tax enactments, namely, the Wealth-tax Act, the Gift-tax Act, the Interest-tax Act and the Expenditure-tax Act.

62.4 These amendments have taken effect from the 1st day of October 1998 [Sections 60, 71, 76, 80 and 83].

From a reading of the aforesaid provisions, we find that if a revision has not been decided by the Commissioner within the stipulated period, it does not mean that the revision stands allowed. The decision relied upon by the learned counsel for the petitioner in the case of Rohit Organics (supra) would not be applicable as that was a case dealing with an application seeking extension of time for filing the return and if no orders have been passed on the said application, the court took the view that extension of time shall be deemed to have been granted. The principles laid down in the aforesaid case would have no application in the facts of the present case. On the other hand, the law laid down by the apex court in the case of Chet Ram (supra) would specifically be applicable wherein it has been held that the failure of the Standing Committee of the Delhi Municipal Corporation to consider u/s 313(3), an application for sanction to a lay-out plan within the period specified in the sub-section does not result in a "deemed" grant of the sanction.

It is settled law that a party cannot be made to suffer prejudice by any default or negligence on the part of the court. In the case of Raja Benoy Kumar Sahas Roy (supra), the Calcutta High Court has held that where the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of that duty-would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the Legislature, such provisions should be construed as being directory only and not imperative. We further find that the hon''ble Supreme Court in the case of May George v. Special Tehsildar (Civil Appeal No. 2255 of 2006, dated May 25, 2010), has summarised the law on the question as to whether a particular provision is mandatory or directory as follows:

The law on this issue can be summarised to the effect that in order to declare a provision mandatory, the test to be applied is as to whether non-compliance with the provision could render entire proceedings invalid or not. Whether the provision is mandatory or directory, depends upon the intent of the Legislature and not upon the language for which the intent is clothed. The issue is to be examined having regard to the context, subject matter and object of the statutory provisions in question. The court may find out as what would be the consequence which would flow from construing it in one way or the other and as to whether the statute provides for a contingency of the non-compliance of the provisions and as to whether the noncompliance is visited by small penalty or serious consequence would flow therefrom and as to whether a particular interpretation would defeat or frustrate the legislation and if the provision is mandatory, the act done in breach thereof will be invalid.

Applying the principles laid down in the aforesaid case to the facts of the present case, we find that if the provisions of section 264(6) is held to be mandatory then the failure to decide the revision within the stipulated period would cause prejudice not only to the person who has filed the revision but also to the Department. It would also defeat or frustrate the legislative intent. The legislative intent is that the revision should be decided expeditiously, if possible within the time bound period. Failure to do so would not defeat the right of the aggrieved person. Thus, the provisions are directory only. The Central Board of Direct Taxes in its Circular dated December 23, 1998, has also explained the provisions in the same manner as to be directory with which we agree.

In view of the foregoing discussion we are of the considered opinion that the provisions of section 264(6) of the Act are only directory and not mandatory. Therefore, in the interest of justice, we direct the Commissioner of income tax, Faizabad-respondent No. 2 to decide the said revision expeditiously preferably within a period of three months from the date a certified copy of this order is filed before him. The writ petition stands disposed of.