Tulsi Mall (Association of Person) Vs. Commissioner of Income-tax,Valsad - Court Judgment

SooperKanoon Citationsooperkanoon.com/1179972
CourtGujarat High Court
Decided OnDec-04-2015
Case NumberSpecial Civil Application No. 8193 of 2015
JudgeAkil Kureshi &Amp; Mohinder Pal
AppellantTulsi Mall (Association of Person)
RespondentCommissioner of Income-tax,Valsad
Excerpt:
akil kureshi, j. 1. petitioners have challenged an order dated 16.10.2014 as at annexure-a to the petition passed by the commissioner of income tax on application dated 19.02.2014 filed by the petitioners. 2. brief facts are as under: petitioner no.1 is an association of persons ("aop" for short). petitioners no.2 to 9 are members of such association. the association owns a mall and is engaged in managing the mall. being an association of persons, according to the petitioners, the income generated from such activity would be proportionately divided among its members in their individual capacity. petitioner no.1 applied for grant of pan card on 19.01.2015. unfortunately, though on the request for issuance of pan in the name of aop the department erroneously issued pan in favour of partnership firm, the petitioner did not take any steps to get the pan corrected for a long time. under a belief that aop is not required to file returns, for several years the petitioner did not file income-tax returns. the petitioner, however, received notice on 13.10.2011 from the department insisting that the partnership firm should file returns. after some correspondence, the petitioners applied to the commissioner of income tax on 19.02.2014 pointing out that the pan was applied by the aop with supporting documents, but was issued in the name of the firm erroneously by the department and submitted as under: "sir, in view of the aforesaid background of facts, we request your honour to kindly consider the factual aspect of return of income of co-paceners of the aop vis-a-vis the firm and the aop itself. sir, as stated earlier, the assessee surrendered his pan which was allotted in the status of firm vide his letter dtd 24.05.2012. however, to respond to the letter of the concerned assessing officer i.e. assessing officer, ward-4, he had to file his return of income in the status of firm which may please be appreciated. sir, the assessee filed his return of income as a firm as the co-parceners of the aop were not given the due credit of t.d.s. deducted against their proportionate income of aop offered for taxation in their returns of individuals and to respond the letters of assessing officer, ward-4 which were issued to the assessee being a 'non-filer' of the same. sir, the status of return of income filed by the respective co-parceners of the aop along with the return of income of firm and the return of income of aop is enclosed herewith for your kind reference and record - exhibit-i. sir, you may appreciate that in any case the same income may not be taxed twice i.e. firm, aop or the respective co-parceners. sir, in view of the foregoing submission, we would earnestly request you to direct your assessing officer to kindly process the return of income appropriately and oblige." 3. it was this application which the commissioner rejected by the impugned order on 16.10.2014. after quoting sub-section (1) of section 119 of the income tax act, observed as under: "therefore, no action can be taken by the cit, valsad under the provision of this section. 3. it is observed that the pan for the aop has been obtained in the year 2011 pertaining to a.y.2012-13 and therefore, the aop was not in existence prior to this assessment year. similarly, the returns filed by the firm cannot be acted upon since in the absence of any partnership deed, no such firm existed during the relevant period. further, it is also observed that the returns filed in the capacity of aop as well as the firm for the a.yrs.2009-10 to 2011-12 have been filed belatedly and therefore it is not possible to process the returns of the aop and the firm as the same are already time barred. therefore, no action can be taken with regard to the income tax return filed in the hands of aop and firm for the a.yrs 2009-10 to 2011-12. 4. however, the itr filed by the aop for the a.y.2012-13 may be processed by the assessing officer. necessary instructions are being issued to the assessing officer in this regard." 4. learned counsel mr. gandhi for the petitioners vehemently contended that the authorities committed serious error in not recognizing the error committed by the department while issuing pan in favour of the firm when no such application was ever made. he submitted that this is a clear case of genuine hardship and to remove such hardship, delay should have been condoned by exercising powers under sub-section (2) of section 119 of the act. in support of such contention, counsel relied on the following decisions: (i) in case of jay vijay express carriers v. cit [2013] 34 taxmann.com 61/215 taxman 562 (guj.) (ii) in case of sitaldas k. motwani v. dgit (international taxation) [2010] 323 itr 223/187 taxman 44 (bom.) (iii) in case of north eastern electric power corpn. employees provident fund trust v. union of india [2012] 348 itr 584/[2013] 213 taxman 191 (mag.)/31 taxmann.com 62 (gau.) (iv) in case of vasco sales and marketing corpn. v. dy. cit [2014] 360 itr 578/[2013] 216 taxman 250/34 taxmann.com 229 (ker.). 5. counsel submitted that in absence of necessary correction in pan, the department is insisting that the firm should file returns when no firm ever existed and the members of aop are denied the benefit of tds by the income tax authorities. 6. on the other hand, counsel mr. sudhir mehta for the department opposed the petition contending that for years together the petitioners did not take any steps for getting the pan corrected. valsad commissioner had no authority to grant relief under section 119 of the act. in any case, present case cannot be categorized as one of undue hardship which can be removed in exercise of powers under section 119 of the act. 7. the facts are not seriously disputed. the petitioners applied for pan in the name of aop. the department, however, while granting pan registered it as a partnership firm. this happened way back in the year 2005. right till the department put the petitioners to notice under communication dated 13.10.2011, petitioner no.1- aop did not file any returns. we are informed that the other petitioners, i.e. the members of the aop, had shown proportionate income in their income tax returns. the petitioners thereafter also did not apply for nearly two and a half years. it was only on 19.02.2014 that the petitioners made a request for giving suitable directions. 8. for severals reasons, the prayers made in the petition cannot be granted. first and foremost, the pan was issued way back in the year 2005 on an application made by the petitioners. if there was any inaccuracy, the petitioners ought to have got it corrected within a reasonable time. for the first time in the year 2014, the petitioners applied to the commissioner for giving suitable directions. this is not a case where the hardship can be removed under section 119 of the act. in the division bench judgment of this court in the case of jay vijay express carriers (supra), while giving suitable directions for entertaining an application belatedly filed, following observations were made to safeguard against undue relaxation of such powers in routine manner: "16. . . . . . . . .before proceeding further we may caution that undoubtedly such powers are not to be exercised in a routine manner to extend limitation provided by the act for various stages. we are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so for avoiding genuine hardship. in the present case, however, considering special facts, we are of the opinion that the commissioner ought to have exercised such powers. it is true that the appellate commissioner recorded that the petitioner did not remain present in the appellate proceedings. however that by itself would not take away the petitioner s case for genuine hardship nor contrary to what is vehemently contended before us by the counsel for the revenue, convince us to hold that filing of revised return beyond limitation lacked bona fides." 9. the insistence of the department, however, on the firm filing return since the pan was issued on the name of the firm does not appear to be valid. even according to the department, no such partnership firm existed. merely because pan was issued by the department erroneously, there cannot be any insistence that return should be filed in the same capacity. erroneous description in the pan would not change the reality that no such partnership firm ever existed. however, with respect to the members of the aop and the grievance of not being able to get credit of the tax deducted at source, we are afraid, the same cannot be resolved at this distant point of time. we are referring to the years 2005 and onwards till the fresh pan was issued in favour of the aop in the year 2011. assessments would have been over or time-barred. 10. subject to the above observations, the petition is disposed of.
Judgment:

Akil Kureshi, J.

1. Petitioners have challenged an order dated 16.10.2014 as at Annexure-A to the petition passed by the Commissioner of Income Tax on application dated 19.02.2014 filed by the petitioners.

2. Brief facts are as under:

Petitioner No.1 is an association of persons ("AOP" for short). Petitioners No.2 to 9 are members of such association. The association owns a Mall and is engaged in managing the Mall. Being an association of persons, according to the petitioners, the income generated from such activity would be proportionately divided among its members in their individual capacity. Petitioner No.1 applied for grant of PAN Card on 19.01.2015. Unfortunately, though on the request for issuance of PAN in the name of AOP the Department erroneously issued PAN in favour of partnership firm, the petitioner did not take any steps to get the PAN corrected for a long time. Under a belief that AOP is not required to file returns, for several years the petitioner did not file income-tax returns. The petitioner, however, received notice on 13.10.2011 from the Department insisting that the partnership firm should file returns. After some correspondence, the petitioners applied to the Commissioner of Income Tax on 19.02.2014 pointing out that the PAN was applied by the AOP with supporting documents, but was issued in the name of the firm erroneously by the Department and submitted as under:

"Sir, in view of the aforesaid background of facts, we request your honour to kindly consider the factual aspect of Return of Income of co-paceners of the AOP vis-a-vis the firm and the AOP itself.

Sir, as stated earlier, the assessee surrendered his PAN which was allotted in the status of FIRM vide his letter dtd 24.05.2012. However, to respond to the letter of the concerned assessing officer i.e. assessing officer, ward-4, he had to file his Return Of Income in the status of firm which may please be appreciated.

Sir, the assessee filed his Return of Income as a firm as the co-parceners of the AOP were not given the due credit of T.D.S. deducted against their proportionate income of AOP offered for taxation in their returns of individuals and to respond the letters of assessing officer, ward-4 which were issued to the assessee being a 'NON-FILER' of the same.

Sir, the status of Return of Income filed by the respective co-parceners of the AOP along with the Return of Income of firm and the Return of Income of AOP is enclosed herewith for your kind reference and record - EXHIBIT-I.

Sir, you may appreciate that in any case the same income may not be taxed twice i.e. firm, AOP or the respective co-parceners.

Sir, in view of the foregoing submission, we would earnestly request you to direct your assessing officer to kindly process the Return of Income appropriately and oblige."

3. It was this application which the Commissioner rejected by the impugned order on 16.10.2014. After quoting sub-section (1) of section 119 of the Income Tax Act, observed as under:

"Therefore, no action can be taken by the CIT, Valsad under the provision of this section.

3. It is observed that the PAN for the AOP has been obtained in the year 2011 pertaining to A.Y.2012-13 and therefore, the AOP was not in existence prior to this assessment year. Similarly, the returns filed by the firm cannot be acted upon since in the absence of any partnership deed, no such firm existed during the relevant period. Further, it is also observed that the returns filed in the capacity of AOP as well as the firm for the A.Yrs.2009-10 to 2011-12 have been filed belatedly and therefore it is not possible to process the returns of the AOP and the firm as the same are already time barred. Therefore, no action can be taken with regard to the income tax return filed in the hands of AOP and firm for the A.Yrs 2009-10 to 2011-12.

4. However, the ITR filed by the AOP for the A.Y.2012-13 may be processed by the Assessing Officer. Necessary instructions are being issued to the Assessing Officer in this regard."

4. Learned counsel Mr. Gandhi for the petitioners vehemently contended that the authorities committed serious error in not recognizing the error committed by the Department while issuing PAN in favour of the firm when no such application was ever made. He submitted that this is a clear case of genuine hardship and to remove such hardship, delay should have been condoned by exercising powers under sub-section (2) of section 119 of the Act. In support of such contention, counsel relied on the following decisions:

(I) In case of Jay Vijay Express Carriers v. CIT [2013] 34 taxmann.com 61/215 Taxman 562 (Guj.)

(II) In case of Sitaldas K. Motwani v. DGIT (International Taxation) [2010] 323 ITR 223/187 Taxman 44 (Bom.)

(III) In case of North Eastern Electric Power Corpn. Employees Provident Fund Trust v. Union of India [2012] 348 ITR 584/[2013] 213 Taxman 191 (Mag.)/31 taxmann.com 62 (Gau.)

(IV) In case of Vasco Sales and Marketing Corpn. v. Dy. CIT [2014] 360 ITR 578/[2013] 216 Taxman 250/34 taxmann.com 229 (Ker.).

5. Counsel submitted that in absence of necessary correction in PAN, the Department is insisting that the firm should file returns when no firm ever existed and the members of AOP are denied the benefit of TDS by the income tax authorities.

6. On the other hand, counsel Mr. Sudhir Mehta for the Department opposed the petition contending that for years together the petitioners did not take any steps for getting the PAN corrected. Valsad Commissioner had no authority to grant relief under section 119 of the Act. In any case, present case cannot be categorized as one of undue hardship which can be removed in exercise of powers under section 119 of the Act.

7. The facts are not seriously disputed. The petitioners applied for PAN in the name of AOP. The Department, however, while granting PAN registered it as a partnership firm. This happened way back in the year 2005. Right till the Department put the petitioners to notice under communication dated 13.10.2011, petitioner No.1- AOP did not file any returns. We are informed that the other petitioners, i.e. the members of the AOP, had shown proportionate income in their income tax returns. The petitioners thereafter also did not apply for nearly two and a half years. It was only on 19.02.2014 that the petitioners made a request for giving suitable directions.

8. For severals reasons, the prayers made in the petition cannot be granted. First and foremost, the PAN was issued way back in the year 2005 on an application made by the petitioners. If there was any inaccuracy, the petitioners ought to have got it corrected within a reasonable time. For the first time in the year 2014, the petitioners applied to the Commissioner for giving suitable directions. This is not a case where the hardship can be removed under section 119 of the Act. In the Division Bench judgment of this Court in the case of Jay Vijay Express Carriers (supra), while giving suitable directions for entertaining an application belatedly filed, following observations were made to safeguard against undue relaxation of such powers in routine manner:

"16. . . . . . . . .Before proceeding further we may caution that undoubtedly such powers are not to be exercised in a routine manner to extend limitation provided by the Act for various stages. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so for avoiding genuine hardship. In the present case, however, considering special facts, we are of the opinion that the Commissioner ought to have exercised such powers. It is true that the Appellate Commissioner recorded that the petitioner did not remain present in the appellate proceedings. However that by itself would not take away the petitioner s case for genuine hardship nor contrary to what is vehemently contended before us by the counsel for the Revenue, convince us to hold that filing of revised return beyond limitation lacked bona fides."

9. The insistence of the Department, however, on the firm filing return since the PAN was issued on the name of the firm does not appear to be valid. Even according to the Department, no such partnership firm existed. Merely because PAN was issued by the Department erroneously, there cannot be any insistence that return should be filed in the same capacity. Erroneous description in the PAN would not change the reality that no such partnership firm ever existed. However, with respect to the members of the AOP and the grievance of not being able to get credit of the tax deducted at source, we are afraid, the same cannot be resolved at this distant point of time. We are referring to the years 2005 and onwards till the fresh PAN was issued in favour of the AOP in the year 2011. Assessments would have been over or time-barred.

10. Subject to the above observations, the petition is disposed of.