Tender condition to submit income tax return of the “previous financial year” would not mean Financial Year for which time for filing ITR has not expired – SC
In a recent judgment, Hon’ble Supreme Court has held that auction notice requiring bidders to submit income tax return of the “previous financial year” would not mean the Financial Year for which time for filing ITR has not expired u/s 139(1) of the Income Tax Act, 1961
ABCAUS Case Law Citation:
4838 (2025) (11) abcaus.in SC
In the instant case, the issue involved was interpretation of the term ‘previous Financial Year’ as used in tender document.
A bid was invited for extraction of sand on lease for a period of five years. The bidders were inter alia required to submit copy of Income Tax Return of previous financial year showing annual income for an amount not less than the amount of additional charge offered and the royalty payable for the minimum guaranteed quantity for one whole year.
The bid of the unsuccessful bidder who had quoted the highest rate was declared non-responsive on the ground that it failed to comply with conditions, as it did not submit the Income Tax Return for the previous financial year. The bid of the successful bidder was found to be technically responsive and he was declared to be the highest bidder.
The unsuccessful bidder filed a writ petition, before the High Court, in which challenge was made to award of tender in favour of successful bidder.
The High Court by order inter alia held that bid of the unsuccessful bidder was rightly rejected on account of non-compliance with the condition of submitting ITR for the previous financial year and upheld the grant of tender in favour of successful bidder. However, the High Court held that there is a huge difference between the rates quoted by unsuccessful and successful bidder and the grant of tender to successful bidder shall result in huge loss to public exchequer. The Tendering Authority was, therefore, directed to call upon the successful bidder to match the highest price offered by the unsuccessful bidder, in the interest of the State exchequer and public at large.
Both, the successful and unsuccessful bidder aggrieved by the direction and order of the Hon’ble High Court approached the Hon’ble Supreme Court.
Before the Hon’ble Supreme Court, the unsuccessful bidder submitted that the tender was invited in July 2022 and he had submitted the Income Tax Return for the financial year 2020-2021 along with its bid. It was further submitted that Tender Committee ought to have appreciated that the tender was floated in the midst of the year and the he had filed the provisional balance sheet for the financial year 2021-2022, as, the last date for filing the Income Tax Return for unsuccessful bidder company, was 31.10.2022.
It was, therefore, urged that Tender Committee misinterpreted tender condition and he had duly complied with the condition of submitting ITR for the previous financial year by submitting income tax return for the FY 2020-2021 along with its bid.
The Hon’ble Supreme Court observed that the court’s interference is limited to cases where the decision making process is shown to be arbitrary, irrational, mala fide or contrary to public interest.
The Hon’ble Supreme Court observed that a public tender is not a private bargain. It is instrument of governance, a mechanism through which the State discharges its solemn duty as trustee of public wealth. The obligation of the Tendering Authority is therefore twofold, namely, to interpret its own terms with consistency and to ensure that such interpretation advances, not defeats, the object of tender.
The Hon’ble Supreme Court further observed that the court must intervene in a case of demonstrable misconstruction of a tender condition or irrationality which affects the public interest. When an interpretation of a tender condition narrows competition and excludes the highest bidder on a ground unsupported by law, the decision making process is vitiated.
The Hon’ble Supreme Court noted that the auction notice was issued in the midst of the year i.e. on 11.07.2022, therefore, proper construction of the phrase ‘previous Financial Year’ assumed critical importance. Rule requiring the bidder to produce an Income Tax Return of the “previous Financial Year” has to be read in harmony with the provisions of the Income Tax Act, 1961 (the Act).
The Hon’ble Supreme Court observed that the unsuccessful bidder was a company and under Section 139(1) of the Act, a company may file the Income Tax Return for the Financial Year 2021-2022 up to 31st of October, 2022. As per auction notice, the bids were required to be submitted on 18.07.2022. The period for filing the Income Tax Return for Financial Year 2021-2022 (relevant to Assessment Year 2022-2023) was yet to expire. Therefore, on the said date the bidder could not have been expected to file an Income Tax Return for Financial Year 2021-2022 along with its bid documents, as the statutory period for filing the same had not expired.
The Hon’ble Supreme Court opined that the reasonable understanding of the term ‘previous Financial Year’ must therefore, be treated to mean the year immediately preceding Financial Year i.e. 2020-2021, for which the unsuccessful bidder had filed the Income Tax Return. The aforesaid interpretation is in consonance with the provisions of the Income Tax Act, 1961
The Hon’ble Supreme Court held that the Tender Committee, proceeded on a narrow and erroneous understanding of the expression of the term ‘previous Financial Year’ and erroneously concluded that since the unsuccessful bidder had not filed the Income Tax Return for Financial Year 2021-2022, therefore it had not complied with the mandate contained in Rule.
The Hon’ble Supreme Court held that the High Court while deciding the writ petition had failed to advert itself to the correct application of the Rule. The impugned judgment passed by the High Court, therefore, cannot be sustained.
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