Facts of the Case

The Petitioner filed a writ petition seeking directions to the Respondents to dispose of its rectification application pertaining to Assessment Year 2017–18 dated 12 April 2019 within a stipulated time. The Petitioner further prayed that no coercive recovery be initiated for the allegedly wrongful tax demand until 30 days after disposal of the rectification application.

The tax demand of ₹6,40,47,590/- arose due to alleged errors in processing under Section 143(1), including disallowance under Section 43B, short grant of TDS credit, and levy of consequential interest.

Despite repeated follow-ups, the rectification application remained pending for over two and a half years.

Issues Involved

  • Whether the Income Tax Department failed to discharge its statutory duty by not deciding the rectification application within a reasonable time.
  • Whether coercive recovery can be initiated when a rectification application pointing out apparent errors is pending.
  • Scope of judicial intervention in administrative inaction under Article 226 of the Constitution.

Petitioner’s Arguments

  • The demand was erroneously raised due to mistakes in the intimation under Section 143(1), including wrongful disallowance under Section 43B and incorrect TDS credit.
  • The Respondents failed to act upon the rectification application despite repeated reminders for more than two and a half years.
  • The inaction of the department violated statutory duties and caused undue hardship.
  • The Petitioner sought protection from coercive recovery until disposal of the rectification application.

Respondent’s Arguments

  • The Respondents contended that the Petitioner had been advised to approach the Directorate of Income Tax (Systems) for necessary relief.
  • It was argued that appropriate procedural steps had been indicated to the Petitioner.

Court’s Findings / Order

  • The Delhi High Court observed that considering the limited relief sought, the matter could be disposed of with appropriate directions.
  • The Court directed the Respondents to decide the rectification application dated 09 October 2019 within six weeks by passing a reasoned order.
  • The Court further directed that any refund, if found due, shall be paid in accordance with law.
  • All rights and contentions of both parties were kept open.

Important Clarification

  • The Court did not adjudicate on the merits of the tax demand.
  • The order is limited to ensuring timely disposal of rectification applications.
  • Administrative delay in deciding rectification applications can be subject to judicial scrutiny.

Sections Involved

  • Section 143(1), Income Tax Act, 1961
  • Section 43B, Income Tax Act, 1961
  • Article 226, Constitution of India

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2899-DB/MMH16092021CW102042021_203359.pdf

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