CWP No.3815 of 2013 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.3815 of 2013 Date of Decision:
13. 5.2014 Om Parkash ....Petitioner. Versus Union of India and another ...Respondents. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE JASPAL SINGH. PRESENT: Mr. Sandeep Goyal, Advocate for the petitioner. Mr. Tajender K. Joshi, Advocate for the respondent-revenue. AJAY KUMAR MITTAL, J.
1. In this petition filed under Articles 226/227 of the Constitution of India, the petitioner has prayed for issuance of a writ in the nature of certiorari for setting aside the order dated 21.11.2012 (Annexure P-8) passed by the Central Board of Director Taxes (in short “the Board”.) under Section 119(2)(c) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”.) refusing to condone the delay of 21 days in making the investment in Rural Electrification Corporation Limited Capital Tax Exemption Bonds (for brevity, “REC Bonds”.) under Section 54EC of the Act. Further, a writ of Mandamus has been sought directing the respondent-Department to allow the benefit of Section 54EC of the Act to the petitioner.
2. The facts, in brief, necessary for adjudication of the present Singh Gurbachan 2014.06.10 11:04 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.3815 of 2013 -2- petition as narrated therein may be noticed. The petitioner who is a doctor by profession and is running a Nursing Home in Hansi had sold two properties during the assessment year 2009-10 for ` 36,41,500/- on 20.5.2008 and ` 25 lacs on 17.4.2008, respectively. Out of the said amount, the petitioner purchased a residential property worth ` 24.39 lacs at Delhi and the amount of ` 36 lacs was kept in a bank account for making necessary investment in the REC Bonds on which the capital gain leviable was exempted under Section 54EC of the Act. On 10.11.2008, the petitioner contacted one Shri Atul Jain, for making investment who told that he was only a sub broker but can arrange for REC Bonds from the main broker M/s Bajaj Capital Ltd., New Delhi. According to the petitioner, he was exclusively dependent on Shri Atul Jain who made all efforts for procuring the application form for the purposes of making investment in REC Bonds. On 10.12.2008, Shri Atul Jain procured the application form from his broker M/s Bajaj Capital Ltd., New Delhi and informed the petitioner about the procedure for investment. Immediately thereafter the petitioner got prepared a demand draft bearing No.714398 for ` 36.50 lacs in favour of Rural Electrification Corporation Ltd. and handed over the same to Shri Atul Jain. The petitioner filed his return for the assessment year 2009-10 on 30.9.2009 (Annexure P-1) claiming deduction of ` 26.93 lacs under Section 54EC of the Act. The case was taken up for scrutiny and notice dated 8.9.2010 under Section 143(2) of the Act was issued to the petitioner. Thereafter, another notice dated 24.10.2011 (Annexure P-2) was issued to the petitioner for explaining as to why deduction claimed under Section 54EC of the Act be not disallowed as the investment had not been made within the prescribed time limit. The petitioner filed a Singh Gurbachan 2014.06.10 11:04 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.3815 of 2013 -3- detailed reply dated 14.11.2011 (Annexure P-3) explaining the circumstances in which the delay had occurred. The Assessing Officer vide order dated 9.12.2011 (Annexure P-4) assessed the income of the petitioner at ` 31,55,090/- after disallowing the exemption of ` 27,04,510/- claimed under Section 54EC of the Act. The petitioner was directed to deposit tax of ` 8,18,720/- which was deposited on 17.2.2012. Against the assessment order dated 9.12.2011 (Annexure P- 4), the petitioner filed an appeal on 19.1.2012 (Annexure P-5) before the Commissioner of Income Tax (Appeals). The petitioner also moved a petition dated 5.11.2011 (Annexure P-6) under Section 119(2)(c) of the Act before the Board for condonation of 21 days' delay in making the investment in REC Bonds. The petitioner made written submissions (Annexure P-7) before the Board. The Board vide order dated 21.11.2012 (Annexure P-8) rejected the petition. Hence, the present writ petition.
3. Learned counsel for the petitioner submitted that there was a delay of 21 days in making the investment in REC Bonds under Section 54EC of the Act. It was further submitted that the delay was due to the reasons beyond the control of the assessee. It was urged that six months' period as referred to in Section 54EC of the Act was directory and not mandatory. It was argued that the amount was not utilized and was retained which was invested in REC Bonds. In such circumstances, the Board had erred in not condoning the delay of 21 days under Section 119(2)(c) of the Act.
4. On the other hand, learned counsel for the revenue supported the order passed by respondent No.2.
5. After hearing learned counsel for the parties, we do not find Singh Gurbachan 2014.06.10 11:04 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.3815 of 2013 -4- any merit in the writ petition.
6. It would be apposite to reproduce Section 119(2)(c) of the Act which reads thus:- “Section 119- (1) XX XX XX (2) Without prejudice to the generality of the foregoing power,— (a) & (b) XX XX XX (c) the Board, may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely :— (i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and (ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed : Provided that the Central Government shall cause every order issued under this clause to be laid Singh Gurbachan 2014.06.10 11:04 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.3815 of 2013 -5- before each House of Parliament.”. 7. Clause (c) of Section 119(2) of the Act was inserted by Finance (No.2) Act, 1991 with effect from 1st October, 1991. Under the aforesaid provision, the Board is empowered to issue general or special order to relax any requirement in respect of any of the provisions of Chapter IV or Chapter VI-A of the Act, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder. However, the said power is exercisable where the default in complying with the requirement is due to the circumstances beyond the control of the assessee and the assessee has complied with such requirement before the completion of the assessment in relation to the previous year in which such a deduction is claimed. The scope and purpose of insertion of this provision in the Act has been explained by the Board in Circular No.621 dated 19.12.1991 reported in (1992) 195 ITR (St.) 154 which is to the following effect:- “45.3 The existing provisions of sub-section (2) of section 119 of the Income-tax Act do not empower the Board to relax the requirements contained in any of the provisions of Chapter IV (computation of income) and Chapter VIA in cases of genuine hardship. 45.4 Therefore, a new clause (c) has been inserted in sub-section (2) to empower the Board to relax any of the provisions of Chapter IV or Chapter VIA of the Act, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of Singh Gurbachan 2014.06.10 11:04 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.3815 of 2013 -6- cases. However, this can be done only by a general or special order for reasons to be specified therein. The said order can be made by the Board subject to the conditions that the default has been due to circumstances beyond the control of the assessee and the assessee has complied with the requirement before the completion of assessment for the assessment year in which such deduction is claimed. A copy of the order issued is also required to be laid before each House of Parliament. 45.5 This amendment takes effect from 1st October, 1991.”. 8. The submission of the learned counsel for the petitioner that the provisions of Section 54EC of the Act are directory in nature and the period specified therein is not mandatory, is bereft of any force. If the argument of the learned counsel for the petitioner is accepted then the very purpose of specifying the period for making investment under Section 54EC of the Act would be rendered ostioso. Wherever the legislature intends the period specified in the provision to be directory, then the language used is worded in such a manner.
9. Adverting to the factual matrix herein, it may be noticed that respondent No.2-Board while declining the application for condonation of delay of the assessee had observed as under:- “A detailed analysis of the events as given in para 7 above proves that the delay caused cannot be considered as delay due to the circumstances beyond the control of the assessee. Further, the point to be Singh Gurbachan 2014.06.10 11:04 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.3815 of 2013 -7- emphasized is that the petitioner has come up with this petition only after the wrong claim of deduction was noticed by the Income Tax Department. In the assessment order it has been held by the assessing officer that petitioner has concealed the particulars of its income and has furnished inaccurate particulars of its income. Had the scrutiny of the case not taken place the fate of such illegal deduction claimed by the petitioner would not have been surfaced and seen to light. In fact, this is a case of intentional concealment of correct facts and the petition filed before CBDT is nothing but a means to circumvent the disallowance made in the assessment and consequent penal action.”. 10. It was also recorded by the Board that the petitioner while filing the return for the assessment year 2009-10 had claimed deduction under Section 54EC of the Act but it was only when the case was selected for scrutiny and notice was issued to the assessee that application under Section 119(2)(c) of the Act was filed. The bonafides of the petitioner were, thus, not established.
11. In view of the above, finding no merit in the writ petition, the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE May 13, 2014 (JASPAL SINGH) gbs JUDGE Singh Gurbachan 2014.06.10 11:04 I attest to the accuracy and integrity of this document High Court Chandigarh