Case Note & Summary
The petitioners, Manjula D. Rita and Bhavya D. Rita, are two of the four legal heirs of the deceased Dinesh Shamji Rita, who was a director of a company. They filed a writ petition before the Bombay High Court challenging an order dated 9 March 2020 passed by the Principal Commissioner of Income Tax (respondent no.1) under Section 264 of the Income Tax Act, 1961, rejecting their application. The application had sought to impugn an earlier order dated 7 May 2018 passed under Section 179(1) of the Act, which sought to hold the legal heirs liable for the tax dues of the company. The petitioners argued that the order under Section 264 was passed without proper application of mind and without considering the merits of their case. The respondents, represented by Mr. Suresh Kumar, defended the order. The court, comprising Justices K.R. Shriram and Firdosh P. Pooniwalla, heard the matter and delivered an oral judgment on 19 June 2023. The court found that the impugned order was unsustainable as the revisional authority had not applied its mind to the facts and legal provisions. The court quashed the order dated 9 March 2020 and remanded the matter back to the Principal Commissioner for fresh consideration in accordance with law. The court directed that the application under Section 264 be decided afresh, after giving the petitioners an opportunity of being heard, within a period of three months from the date of the order. The judgment emphasized that revisional powers under Section 264 must be exercised judiciously and not in a mechanical manner.
Headnote
A) Income Tax - Revisional Jurisdiction - Section 264 of the Income Tax Act, 1961 - Rejection of Application - Petitioners, legal heirs of a deceased director, challenged an order under Section 179(1) of the Act passed against them. The Principal Commissioner rejected their application under Section 264 without considering the merits. Held that the revisional authority must apply its mind to the facts and law, and a mechanical rejection is unsustainable (Paras 1-3).
Issue of Consideration
Whether the Principal Commissioner of Income Tax erred in rejecting the petitioners' application under Section 264 of the Income Tax Act, 1961, challenging an order under Section 179(1) of the Act passed against legal heirs of a deceased director without proper application of mind.
Final Decision
The court quashed the order dated 9 March 2020 passed by the Principal Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961, and remanded the matter back to the Principal Commissioner for fresh consideration. The Principal Commissioner was directed to decide the application afresh, after giving the petitioners an opportunity of being heard, within a period of three months from the date of the order.
Law Points
- Section 264 of the Income Tax Act
- 1961
- Section 179(1) of the Income Tax Act
- Legal heirs
- Director
- Tax liability
- Revisional jurisdiction
- Natural justice
Case Details
2023 LawText (BOM) (06) 142
Writ Petition No.1672 of 2021
K. R. Shriram, Firdosh P. Pooniwalla
Mr. Ranit Basu a/w. Ms. Maitri Malde and Ms. Nikita Ghungarde i/b. Ms. Sheela Mistry for petitioners; Mr. Suresh Kumar for respondents
Manjula D. Rita and Bhavya D. Rita (Legal heirs of Shri Dinesh Shamji Rita)
Principal Commissioner of Income Tax 12, Mumbai; Assistant Commissioner of Income Tax-12(1)(2), Mumbai; Tax Recovery Officer – 12, Mumbai; Additional Commissioner of Income Tax 12(1), Mumbai; Union of India through Secretary, Department of Revenue, Ministry of Finance, Government of India
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Nature of Litigation
Writ petition challenging an order passed under Section 264 of the Income Tax Act, 1961 rejecting the petitioners' application against an order under Section 179(1) of the Act.
Remedy Sought
Petitioners sought quashing of the order dated 9 March 2020 passed by the Principal Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961, and a direction to reconsider their application.
Filing Reason
The petitioners, legal heirs of a deceased director, were aggrieved by the order under Section 179(1) of the Act holding them liable for tax dues, and the subsequent rejection of their application under Section 264 without proper application of mind.
Previous Decisions
An order dated 7 May 2018 was passed under Section 179(1) of the Income Tax Act, 1961 against the petitioners. The petitioners filed an application under Section 264 of the Act to challenge that order, which was rejected by the Principal Commissioner on 9 March 2020.
Issues
Whether the Principal Commissioner of Income Tax erred in rejecting the petitioners' application under Section 264 of the Income Tax Act, 1961 without proper application of mind.
Submissions/Arguments
Petitioners argued that the order under Section 264 was passed mechanically without considering the merits of their case.
Respondents defended the order, but the judgment does not detail their specific arguments.
Ratio Decidendi
The revisional authority under Section 264 of the Income Tax Act, 1961 must apply its mind to the facts and law of the case and cannot reject an application in a mechanical manner. An order passed without proper application of mind is unsustainable and liable to be quashed.
Judgment Excerpts
Petitioners are impugning an order dated 9th March 2020 passed by respondent no.1 under Section 264 of the Income Tax Act, 1961 (the Act) rejecting petitioners’ application.
The order impugned came to be passed while rejecting an application filed by petitioners impugning an order dated 7th May 2018 passed under Section 179(1) of the Act.
Petitioners are two out of the four legal heirs of one late Dinesh Shamji Rita (the deceased), who was a Director
Procedural History
The petitioners filed an application under Section 264 of the Income Tax Act, 1961 challenging an order dated 7 May 2018 passed under Section 179(1) of the Act. The Principal Commissioner of Income Tax rejected that application on 9 March 2020. The petitioners then filed the present writ petition before the Bombay High Court on an unspecified date, which was heard and disposed of on 19 June 2023.
Acts & Sections
- Income Tax Act, 1961: Section 264, Section 179(1)
