S.K. Desai, J.
1. In this petition the petitioners have impugned the orders originally of the Addl. Commissioner passed on 14th May, 1971, under s. 264 of the I. T. Act, 1961, holding that the petitioner's petition was hopelessly time barred and the petitioners had not explained the whole period of delay which was from 9th October, 1968, to 16th November, 1970. The matrix of facts which occasioned the said order will be gone into a little later on; but after the said order, the petitioners moved the CBDT, which by its order dated 28th November, 1972, conveyed to the petitioners its decision that it fell disinclined to interfere in the matter.
2. Mr. Mehta, on behalf of the petitioners, has submitted that the original order of the Addl. Commissioner was technical, harsh and perverse. He has further submitted that the decision of the Board was contrary to the provisions of s. 119(2)(b) and that, at any rate, the Board had clearly acted in a manner contrary to the issuance given by it to the Public Accounts Committee of Parliament, which assurance had been brought to the attention of the Board by the petitioners in para. 3 of their representation to the Board. In order to appreciate, the force of these contentions, the necessary facts may now be set out :
We are concerned in this petition with the assessment year 1967-68, the corresponding previous year being the year ending on 30th June, 1966. The petitioners carry on business as technicians and technical advisers and earn fees for technical services for various projects. The petitioner company had two directors, D. T. Zaveri and M. T. Shah. These two directors were given remuneration of Rs. 36,000 per annum in the aggregate. This was the same remuneration which the directors were being paid for the earlier years, viz., assessment years 1965-66 and 1966-67, and the same remuneration was given to them for the subsequent assessment year also, i.e. for 1968-69.
3. For the assessment years 1965-66 and 1966-67, the ITO, who completed the assessments of the petitioner, disallowed Rs. 24,000 out of the remuneration paid to the directors by exercising his powers under s. 40(c) of the I. T. Act, 1961. He, accordingly, disallowed Rs. 24,000 out of the said aggregate remuneration of Rs. 36,000. Being aggrieved by the said order, the matter was carried in appeal to the AAC, who reduced the disallowance by Rs. 2,000 for each of the two assessment years. The matter was thereafter carried in further appeal to the Income-tax Appellate Tribunal, and the order of the Tribunal allowing the full remuneration for both the years is to be found annexed as Ex. A to the petition. It appears that for the subsequent year (to the year under consideration in this petition), i.e., for 1968-69 also, the ITO had disallowed a part of the remuneration, when ultimately the matter was carried to the Tribunal the appeal was allowed and the full amount of Rs. 36,000 was allowed to the petitioners being the remuneration paid to the two directors.
4. Thus we have the position that the full remuneration of Rs. 36,000 paid by the petitioners to the said two directors had been held not to be excessive and, therefore, allowed as a deduction for the two years preceding the year under consideration as also for the subsequent year just after the year under consideration. The assessment order for the year 1967-68, in which the ITO took a similar view as to this remuneration, was passed on 30th September, 1967, and, according to the petitioners, they received the order on 10th October, 1967. According to the petitioners, they sent their employee with the order to their chartered accountant, one Shri B. B. Mehta, for filing the necessary appeal to the AAC. According to the petitioners, further, the said Shri B. B. Mehta was then not well and in fact was required to undergo a major brain operation subsequently, with the result that he was not attending office and did not attend the office for a long time. Hence no appeal in facts was filed though, according to the petitioners, they remained under a bona fide and honest belief that the said appeal was filed. According to the petitioner, in October, 1970, their tax adviser, one Shrinivasan, inquired from them as to what had happened for the assessment year 1967-68, when the petitioners had told him that the appeal had been filed and was pending before the AAC. After this enquiry, according to the petitioners, they caused inquiries to be made and it was then learnt that through inadvertence the appeal had not been filed. It is in these circumstances that the petitioners filed a revision application before the Commissioner on 14th November, 1970, which was an application under s. 264 of the I. T. Act, 1961, which was disposed of by the commissioner by his order dated 14th May, 1971. A copy of the revision application to the commissioner and the two affidavits filed therein by the director of the petitioners are annexed, as Ex. D (collectively), to the petition.
5. I have gone through the revision petition and the two affidavits and in may view sufficient case had been made out by the petitioners for condonation of delay. However, I am not prepared to say that it was impossible for any judicial or quasi-judicial tribunal to hold to the contrary. Sufficiency of cause, good reasons are not matters easy to categorise classify or adjudicate upon. Much depends upon the approach of the Tribunal. On some occasions, a harsh view is warranted but on others a sympathetic one is required to be followed. However, it cannot be gainsaid the there is more than one permissible approach in the matter and the approach of the Commissioner, although the same can be characterized as harsh and over technical, does not deserve to be classified or categorised as perverse.
6. It is in these circumstances that the petitioners made an application to the CBDT, by which application the Board was requested to issue necessary directions which it could issue under the statutory provisions but which it declined to issue by reason of its decision conveyed to the petitioners by its letter dated 20th November, 1972.
7. Now, what is the position here The ITO had exercised discretion in a particular manner for the four assessment years and for the three of these years, i.e., for the two years prior to the year under consideration, and or the fourth year, i.e., the year subsequent to the year under consideration, the exercise of discretion by the ITO in the manner in which he has done was not upheld by the Tribunal and the Tribunal decided that the entire remuneration paid to the directors must be allowed as a deduction to the company and the same could not be properly held to be excessive. For this year, however, the ITO's order would remain operative by reason of the petitioner's failure to file an appeal in the circumstances which have been explained by them in their revision application (to the commissioner) and in the two affidavits filed by the director. The result of this order of the commissioner refusing to condone delay is that although the Tribunal has held the exercise of discretion by the ITO as improper and has directed the allowance of the full remuneration as a deduction for the years, both preceding and subsequent to the year, under consideration, for this year the company will not be allowed the deduction although it has paid the amount or remuneration to the directors concerned. Thus the company will be taxed on an amount of alleged profit which does not exist in fact by reason of the operation of discretion which has been judicially considered by the Tribunal to be improper.
8. In their letter to the CBDT [part of Ex. E (collectively) to the petition] the statements made on behalf of the Board and the assurances given by the Government to the Public Accounts Committee in 1967-68, have been set out. The Committee had inquired whether by reason of considerations of time bar refunds were denied in cases of over-assessments. The Finance Secretary had then stated : 'Such instructions are already there. Regarding revision petitions, we advised the commissioners of Income-tax to condone the delay even though the petitions are filed beyond the permissible limit of two years. We condone delay in hundreds of cases. We have instructed that it should be condoned freely......' The committee in its report has also referred to a note furnished by the Finance ministry, in which it is stated that 'the Government is anxious to discharge its moral obligation, waiving legal impediments'. In the note, it has been further stated that 'under the administrative instructions the commissioners are required to refer to the Government cases of over-assessments occurring due to mistakes of law or facts relating to the computation of total income or tax thereon which cannot normally be rectified is to the operation of the law of limitation. In all suitable cases the Government does waive the limitation and refunds are invariably allowed'.
9. It is startling that after waxing eloquent on its deep desire to discharge its normal obligation, the Central Board, which is directly under Government control, has acted in the manner in which it has acted in the present case by refusing to give directions sought for by the petitioners. Undoubtedly, there was default on the part of the petitioners which gave rise to the bar of time and by reason of such bar the petitioners became disentitled to challenge the disallowance made by the ITO. Such disallowance had been judicially set aside for the two previous years and for one subsequent year and without a doubt would have been set aside for this year also had the appeal been filed in time. The same would have been the position in the revision before the commissioner as the Commissioner would have been bound to follow the decision of the Income-tax Appellate Tribunal for the three years, two earlier and one subsequent. Thus there was a moral obligation to make the refund which has been denied to the petitioners on the ground of bar of time. It was in these circumstances obligatory on the Central Board, unless these assurances given to the Public Accounts Committee were given with reservation, to have given necessary instructions sought for by the petitioners. An impression had been given to the Public Accounts Committee that the Government was anxious not to perpetrate injustice and swallow money of the taxpayer merely because the taxpayer has been a little lethargic and allowed its claim to be barred by limitation.
10. As far as the Commissioner's refusal to condone the delay is concerned, it is entirely a matter of discretion and, as stated earlier, although I might have been inclined to take a different view of the matter, it is not possible to say that the commissioner acted perversely. Therefore, it would not ordinarily be possible to correct his exercise of discretion in the writ jurisdiction of the High Court under art. 226 of the Constitution of India. It may, however, be pointed out that in an appropriate case even this can be done [See Saurashtra Cement and Chemical Industries Ltd. v. CIT : 115ITR27(Guj) ]. To put it in other words, judicial conscience is not shocked though it may be grieved by such harsh orders. Had there been appellate power in me I would have corrected such order; but not exercising appellate power I cannot normally help the petitioners with regard to such orders whilst exercising the writ jurisdiction of the High Court. The judicial conscience, however, is shocked by the decision of the CBDT which was under a moral obligation in respect of which assurances had been given by the Government to the Public Accounts Committee of Parliament, to intervene and to instruct the Commissioner as sought for by the assessees. The assurances given to the Public Accounts Committee suggest that there were already administrative instructions to the effect as indicated in the statement of the Finance Secretary and the note; and if there were such administrative instructions, it is now well settled that such administrative instructions are required to be followed by the Commissioner. If one proceeds on the footing that there must have been such administrative instructions - and that is the proper footing in view of the solemn assurances given to the Public Accounts Committee of the houses of parliament, which assurances would not have been given without a real factual basis thereto - then the commissioner's order becomes amenable to correction. The problem can be posed in this manner : In the absence of direct instructions from the board, the Commissioner's order will merely appear to be harsh and liable to be corrected in appellate jurisdiction but not in the writ jurisdiction of the high court. Proceeding upon the footing that the Board must have issued the necessary instructions although it erroneously refused to intervene in the instant case, the commissioner's order must be held to be not merely harsh but as being contrary to the instructions which are deemed to have been given and non that footing the Commissioner's order could be corrected even in the writ jurisdiction of the High Court. In view of the statements made to the Public Accounts Committee, the attitude indicate by the board in its letter to the petitioners is certainly perverse and is an attempt to go back upon the assurances given by the Government to the Committee of parliament. It is not to be lightly assumed that such assurances are lightly given by the Government or given without having the intention of carrying them out; and proceeding upon the footing that such assurances have been carried out and implemented by the issue of actual directions, I am of opinion that the decision of the Commissioner will be required to be corrected on the footing that it is contrary to the administrative directions which though not brought on record are assumed to exist by reason of the attitude indicated by the government in its assurances to the Public Accounts Committee.
11. It is on this rather unusual footing that it hold that the order dated 14th May, 1971, passed by the Addl. Commissioner concluding that the assessee was not able to explain the delay and dismissing the revision petition as barred by limitation, is improper. The said order will stand quashed and the Commissioner is directed to condone the delay and proceed there after with the hearing of the revision petitioner under s. 264 on the footing that the delay being condoned, the petition is not barred by limitation.
12. The writ to go down forthwith and it is hoped that the Commissioner will dispose of the revision petition as expeditiously as possible in the circumstances of the case; it is suggested that the same be disposed of not later than 30th April, 1979.
13. In the unusual circumstances of the case, although the rule is made absolute to the extent indicated above, the parties are directed to bear their own costs of the proceedings.