Facts of the Case

The Petitioner, KLJ Plasticizers Limited, filed a writ petition challenging the order dated 27 March 2021 passed by the Commissioner of Income Tax (International Taxation)-2, New Delhi for Assessment Year 2018–19.

The grievance arose from dismissal of a revision petition filed under Section 264 of the Income Tax Act, 1961 on the ground of limitation.

Initially, the Petitioner had filed an appeal under Section 248 of the Act under a bona fide belief that the order was appealable. The said appeal was pursued diligently until June 2019. However, it was later discovered that the appeal was not maintainable due to non-payment of tax as required under Section 195(2).

Subsequently, the Petitioner withdrew the appeal on 7 June 2019 and filed a revision petition under Section 264 on 11 June 2019. Despite this, the revision petition was rejected as time-barred.

Issues Involved

  1. Whether the delay in filing the revision petition under Section 264 of the Income Tax Act, 1961 could be condoned.
  2. Whether Section 14 of the Limitation Act, 1963 applies to proceedings under the Income Tax Act.
  3. Whether time spent in pursuing a remedy before an incorrect forum under a bona fide mistake can be excluded.

Petitioner’s Arguments

  • The Petitioner contended that the delay occurred due to a bona fide mistake of law.
  • It relied on earlier favorable orders in similar matters involving associated entities.
  • The Petitioner had pursued the appeal under Section 248 diligently and without negligence.
  • Upon realizing the non-maintainability, immediate steps were taken to withdraw the appeal and file a revision petition.
  • The rejection of the revision petition as time-barred was contrary to proviso (3) of Section 264, which permits condonation upon sufficient cause.

Respondent’s Arguments

  • The Respondent argued that the reasons provided for condonation of delay were not tenable in law.
  • It supported the impugned order and maintained that the revision petition was rightly dismissed as barred by limitation.

Court’s Findings / Order

  • The Delhi High Court held that Section 14 of the Limitation Act, 1963 is applicable to the facts of the present case.
  • It observed that the Petitioner had prosecuted the earlier proceedings bona fide and with due diligence before a forum lacking jurisdiction.
  • The Court ruled that the time spent in pursuing the appeal under Section 248 must be excluded.
  • Upon such exclusion, the revision petition under Section 264 would fall within limitation.
  • Accordingly, the writ petition was allowed and the matter was remanded to the Commissioner of Income Tax (International Taxation) to decide the revision petition on merits.
  • The Court clarified that it had not expressed any opinion on the merits of the case.

Important Clarification

  • Bona fide prosecution of a remedy before an incorrect forum entitles the taxpayer to exclusion of time under Section 14 of the Limitation Act.
  • Technical dismissal on limitation grounds is not sustainable where sufficient cause and due diligence are established.
  • Section 264 revision proceedings must be interpreted liberally in cases involving genuine hardship.

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:694-DB/MMH21022022CW31372022_223359.pdf

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