1. Petitioner No. 1 is a partnership firm and petitioner No. 2 is one of its partners. The firm is engaged in the business of manufacture of chemicals and at the relevant time had a factory situate at Dadar in Bombay and also another at Ambarnath. The Dadar unit is in existence since 1951, while the new industrial undertaking at Ambarnath was started some time in the year 1969. The accounting year of the petitioners for the purpose of income-tax is the calendar year, i.e., ending on December 31 of each years. Section 80J of the I.T. Act, 1961, provides that where the gross total income of an assessee includes any profits and gains derived from a new industrial undertaking, there shall, in accordance with and subject to the provisions of the said section, be allowed in computing the total income of the assessee a deduction from such profits and gains of an amount calculated at the rate of 6% per annum on the capital employed in the industrial understanding in respect of the industrial undertaking in respect of the previous year relevant to the assessment year.
2. The petitioners claim that the relevant time they were not aware of the provisions of s. 80J of the I.T. Act and, therefore, failed to claim a deduction in their income-tax returns for the assessment years 1970-71 to the 1974-75. The petitioners claim that their income-tax matters are handled not by an income-tax expert and the chartered accountant who was engaged by them advised them only to explain the matters relating to the accounts. The petitioners claim that the assessment orders were passed by the concerned ITO in respect of the relevant years and the petitioners did not secure the advantage of the provisions of s. 80J of the Act. The petitioners further claim that in November, 1978, the petitioners consulted a firm of chartered accountants regarding income-tax matters and for the first time came to know that they were entitled to claim the relief provided under s. 80J of the Act. The petitioners thereupon filed an application before the Central Board of Direct Taxes, New Delhi, requesting to issue directions to the ITO under s. 119(2)(b) of the Act to reopen the assessment and grant the requisite relief under s. 80J of the Act for the assessment year 1970-71. Similar application were made on January 5, 1979, in respect of the subsequent four assessment years. The petitioners were informed by a communication dated November 8, 1979, that their application dated November 3, 1978, stands rejected and that the Board declined to interfere in the matter. The petitioners have thereafter approached this court by filing the present petition under article 226 of the Constitution of India on February 18, 1980.
Sub-s (2)(b) of s. 119 of the Act reads as under :
'The Board may, if it is considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general in special order, authorise the Commissioner or the Income-tax Officer to admit an application for claim for any exemption, deduction, refund any other relief under this Act after the expiry of the period specified or under this Act for making such application or claim and deal with the same or merits in accordance with law.'
3. Shri Dastur, learned counsel appearing on behalf of the petitioners, submitted that the petitioners filed applications requesting the Central Board of Revenue to exercise the powers under sub-s.(2)(b) of s. 119 and issue directions to the ITO to reopen the assessment and grant requisite relief to the petitioners. Shri Dastur urged that the petitioners requested the Central Board of Revenue to give them a hearing before exercising the powers, but the Board without any notice or without any hearing the petitioners passed the impugned order declining to interfere in the matter. The learned counsel urged that the communication sent to the petitioners did not reject that the Board has though that the request made by the petitioners is neither desirable nor expedient or is not for avoiding genuine hardship. Shri Dastur also submitted that the Central Board of Revenue had issued a circular dated April 11, 1955, wherein the officers of the Department were advised not the take advantage of the ignorance of the assessee as to his rights. The learned counsel urged that the circular demands that the officers should take the initiative in guiding taxpayers and should draw their attention to any refund or relief to which they appear to be clearly entitled but which they have omitted to claim for some reason or the other. Shri Dastur submits that the relevant (last) date for claiming exemption was available before the concerned ITO and the ITO ought to have guided the petitioners to make a such claim. Shri Joshi for the Revenue, on the other hand, submits that the case of the petitioners does not a fall within the ambit of the circular and the claim of the petitioners that the officers should have advised the assessee to claim deductions cannot be entertained. Shri Joshi submits that the Board while rejecting the claim must have come to the conclusion that it is not desirable or expedient to reopen the assessment and the claim of the petitioners that this is a case of genuine hardship a should not be accepted. Shri Joshi also urged that it is not possible for the Board to exercise the power under sub-s. (2)(b) of s. 119 and issue direction in every case.
4. In my judgment, the submission of Shri Joshi that it cannot be laid down a rule that the Board must give personal hearing to every assessee which makes as application seeking directions to the ITO or the Board should pass a reasoned order in every case is correct. But, on the facts and circumstances of the present case, the Board was not justified in merely communicating to the petitioners that the Board does not desire to interfere in the matter. From this communication, it is difficult to appreciate what the Board exactly desired to convey. The Board was called upon to exercise statutory powers and it was necessary for the Board, at least to indicate, however briefly, as to why the powers were not exercised. In the case the Board comes to the conclusion that it is not desirable to expedient to exercise the powers, then the application could have been rejected. In my judgment, it would be appropriate if the Central Board is directed to consider the application of the petitioners afresh and then pass an appropriate order. The Board should permit the petitioners to make a detailed representation, if so desired, and it is open to the Board to consider whether any personal hearing should be given to the petitioners before deciding whether to exercise the powers or not.
5. Shri Dastur made an attempt to urge that in view of the contents of the circular referred to hereinabove, the Board should be given a direction to issue the order authorising the ITO to reopen the assessment. It is impossible to accede to this submission. The question whether the circular an application to the facts of the present case or not cannot be determined by this court. It is for the Board to decide whether the contents of the circular apply to the facts of the case or not and I am not prepared to exercise my jurisdiction to limit the powers of the Central Board of Revenue.
6. Accordingly, the petition succeeds and the decision taken by the Central Board of Direct Taxes not to interfere with the matter and communicated to the petitioners by letter dated November 8, 1979, is set aside and the Central Board of Direct Taxes is directed to reconsider the matter a fresh in the light of the observations made in the judgment. There will be no order as to costs.