Facts of the Case

The Petitioner filed a rectification application dated 14 May 2020 for Assessment Year 2018–19 seeking:

  • Grant of TDS credit amounting to Rs. 5,51,15,908, and
  • Deletion of incorrect demand of Rs. 6,97,16,942, which arose due to non-grant of such TDS credit.

However, the Respondent failed to dispose of the application within the statutory time limit prescribed under Section 154(8), which expired on 31 March 2021. As a result, the petitioner continued to suffer due to disallowance of legitimate TDS credit and consequential demand.

Issues Involved

  1. Whether the failure of the Income Tax Department to dispose of a rectification application within the statutory period violates Section 154(8) of the Income Tax Act, 1961.
  2. Whether the petitioner is entitled to relief for delay in granting TDS credit leading to an incorrect tax demand.
  3. Whether the Court should issue directions for time-bound disposal of rectification applications.

Petitioner’s Arguments

  • The Respondent failed to act within the limitation period prescribed under Section 154(8).
  • Due to such inaction:
    • Legitimate TDS credit remained ungranted, and
    • An incorrect demand including interest was raised.
  • Reliance was placed on:
    • LS Cable and System Ltd. vs Union of India (W.P.(C) 5154/2020), where similar directions were issued.
  • CBDT Circular and Instructions mandate strict adherence to statutory timelines for rectification.

Respondent’s Arguments

  • The Revenue, through its counsel, accepted notice and submitted before the Court that:
    • The rectification application dated 14 May 2020 would be disposed of within six weeks.


Court’s Findings

  • The Court took note of:
    • The statutory obligation under Section 154(8), and
    • The undertaking given by the Revenue.
  • The Court emphasized that the Respondents are bound by their undertaking.
  • The writ petition was disposed of based on the assurance of timely action by the department.

Court Order

  • The Respondent was directed (based on undertaking) to:
    • Dispose of the rectification application within six weeks.
  • The Court:
    • Accepted the undertaking,
    • Disposed of the writ petition, and
    • Listed the matter for compliance on 12 January 2022.

Important Clarification

  • The judgment reinforces that:
    • Rectification applications must be disposed of within the statutory timeline under Section 154(8).
    • Administrative delay cannot justify denial of legitimate tax credits.
    • Courts may intervene where inaction leads to unjust tax demands.

Sections Involved

  • Section 154 of the Income Tax Act, 1961 – Rectification of mistakes
  • Section 154(8) – Time limit for disposal of rectification application
  • CBDT Circular No. 14/2001
  • CBDT Instruction No. 1/2016

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:3441-DB/MMH28102021CW122362021_225337.pdf

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