Kerala HC Upholds Rejection of Delayed Income Tax Refund Claim Due to Five-Year CBDT Limit

Suresh Velu Ellathukalathil Vs PCIT (Kerala High Court)

In , the Kerala High Court dismissed a writ petition challenging an order rejecting an application filed under Section 119(2)(b) of the Income Tax Act for condonation of delay in filing income tax returns for AY 2018-19 to claim a refund.

The petitioner contended that the earlier CBDT Circular No. 9/2015 permitted condonation of delay up to six years and that the application was filed within that period. The petitioner argued that the subsequent circular reducing the limitation period from six years to five years could not take away the benefit allegedly available under the earlier circular. Reliance was also placed on a Madras High Court decision observing that failure of the Income Tax Department to issue notice under Section 148 warranted interference.

The Revenue opposed the plea by pointing out that the earlier circular had been superseded by a later circular issued on 01.10.2024, which reduced the limitation period to five years. Since the petitioner filed the condonation application on 15.03.2025, when the revised circular was already in force, the authority lacked competence to entertain the application.

The High Court accepted the Revenue’s contention. It held that the later circular superseded the earlier one and validly reduced the condonation period from six years to five years. The Court observed that powers under Section 119(2)(b) are confined strictly to the CBDT circulars issued from time to time, and the authority cannot travel beyond those limits.

The Court further held that failure to issue notice under Section 148 has no relevance while considering condonation under Section 119(2)(b). According to the Court, Section 148 and Section 119(2)(b) operate in separate fields. Section 148 deals with reassessment proceedings where returns are not filed, whereas Section 119(2)(b) concerns enlargement of time for filing returns in specified circumstances. The Court stated that non-issuance of notice under Section 148 does not create any right in favour of an assessee to seek condonation beyond the time prescribed by CBDT circulars.

The Court also held that an assessee has no vested right to seek enlargement of time beyond the manner permitted under the statutory framework and applicable circulars. It disagreed with the observations made by the Madras High Court to the extent they suggested otherwise.

Accordingly, the writ petition was dismissed, without prejudice to any other remedies available to the petitioner.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The petitioner is an individual assessee under the Income Tax Act, 1961. The challenge raised in this writ petition is against Ext.P6 order passed by the 1^st respondent rejecting the application submitted by the petitioner under Section 119(2)(b) of the Income Tax Act, for condoning the delay in submitting the returns. Earlier, the petitioner had submitted Ext.P2 application under Section 119(2)(b) before the 1st respondent for condoning the delay in filing the income tax returns for the year 2018-19 for claiming refund. The said application was considered by the 1^st respondent in the light of Ext.P5 Circular and rejected the same on the reason that, the application was submitted beyond the period of five years from the end of the relevant assessment year and hence the 1^st respondent was not competent to entertain the said application. The said order is under challenge in this writ petition.

I have heard Smt. Preetha S. Nair, learned Counsel for the petitioner and Sri. Cyriac Tom, learned Standing Counsel for the respondents.

3.The challenge is raised by the learned Counsel for the petitioner mainly on the ground that, the time limit contemplated for considering the said application as per Ext.P4 Circular No.9/2015 was six years, and if the period specified in Ext.P4 is reckoned as the relevant criteria, the application submitted by the petitioner was submitted in time. It is also contended that, the petitioner is having a vested right to get the delay in submitting the returns condoned, in view of Ext.P4 circular and the fact that, subsequently, period of six years was reduced to five years based on Ext.P5, cannot be a ground to deny the benefit of the petitioner. The learned Counsel for the petitioner also placed reliance upon the decision rendered by the High Court of Madras in W.P. No.7433 of 2019 and W.M.P. No.8101 of 2019, where certain observations were made by the learned Single Judge of Madras High Court to the effect that, since the Income Tax Authorities failed to issue a notice under Section 148 of the Income Tax Act to determine the tax liability of the petitioner, an interference is required.

4. On the other hand, the learned Standing Counsel for the respondents would oppose the aforesaid contention by pointing out that, as far as Ext.P4 Circular is concerned, the same was superseded as per Ext.P5, by which the period of limitation was reduced to five years. It was also pointed out that, Ext.P5 Circular was issued on 01.10.2024 whereas, the application submitted by the petitioner was on 15.03.2025, which is during the period when Ext.P5 was in force. Therefore, under no circumstances, the 1^st respondent could have considered the application submitted by the petitioner for condoning the delay in submitting the returns.

5. After carefully going through the statutory provisions contained and the contents of Exts.P4 and P5 Circulars, I find merit in the submission made by the learned Standing Counsel for the respondents. This is particularly because, Ext.P5 was issued in supersession of Ext.P4 Circular and thus, modifying the period of limitation from six years to five years. With regard to the contentions raised by the petitioner for the failure on the part of the respondents in issuing notice under Section 148 of the Income Tax Act, I am of the view that, the said provision has nothing to do with the submission of the returns and the enlargement of time for filing the return under Section 119(2)(b) of the Act. Section 119(2)(b) only empowers the Central Board of Direct Taxes to allow the submission of the return in certain circumstances beyond the normal period and in exercise of the said powers, Exts.P4 and P5 Circulars were issued, conferring specific power upon the Principal Commissioner of Income Tax. The said power is supposed to be used strictly in the manner as specified in the relevant Circulars and the said authority cannot go beyond the same. In Ext.P4 Circular, even though initially the period up to which the delay could be condoned was fixed as six years, later it was revised as five years. In fact, these are relaxation granted to the assessee, for the purpose of submitting the return beyond the original period of limitation contemplated under Section 139 of the Act. Therefore, a statutory duty is imposed upon the assessee to submit the returns within the period specified.

6. The fact that, no notice under Section 148 was issued by the statutory authorities, will not lessen the burden of obligation of the assessee to submit the return, within the statutory period, and nor such assessee can get rid of the rigour of the consequence that arising from non-submission of the returns within the specified time. Moreover, as far as the powers of the 1^st respondent while considering an application under Section 119(2)(b) are concerned, the same are strictly confined to the notifications issued by the Central Board of Direct Taxes from time to time, and the question regarding the failure on the part of the statutory authorities to issue notices under Section 148 of the Act, cannot be a subject matter, that comes within the scope of the power of the Commissioner. Therefore, on that reason also, no interference could be made in the order passed. It is also to be noted in this regard that, the petitioner does not have any vested right to get the time enlarged for submitting the return, if a time limit is contemplated, otherwise than the manner contemplated for the same. As far as the observations made in the decision of the Madras High Court, which is relied on by the petitioner, I respectfully disagree with the observation, as I entered into a specific finding that, the fact that, there is failure on the part of the statutory authorities in issuing notice under Section 148 of the Income Tax Act, by itself would not create any right for the assessee to get the delay condoned, beyond the time limit fixed by the Central Board of Direct Taxes. Both the said provisions, i.e section 148 and section 119(2)(b) and are separate and distinct provisions, and the consequences of the compliance/non compliance of section 148 cannot be relevant, when it comes to the question of sustainability of the proceedings under section 119(2)(b). Section 148 deals with the procedure when the assessee fails to submit the return, whereas, the section 119(2)(b), deals with the enlarging of time for filing the return. While considering an application under section 119(2)(b), the authority concerned, is not bound to consider the question whether, a notice is issued under section 148 to the assessee, as the matters which come within the zone of consideration of such authority are those strictly within the confines of the Circulars issued and also under section 119(2)(b). In any of the Circulars or in the said statutory provision, there is no reference of section 148. Therefore, I am not prepared accept the contention of the petitioner in this regard.

In such circumstances, I do not find any scope for entertaining this writ petition and accordingly, this writ petition is dismissed without prejudice to the other rights of the petitioner, if any available.