Nileshkumar Uttamchand Rathod Vs PCIT (Gujarat High Court)
The petitioner, a legal heir of late Shri Uttamchand Manlal Rathod, filed the writ petition under Article 226 of the Constitution challenging the order dated 16.10.2023 passed by the Principal Commissioner of Income Tax under Section 119(2)(b) of the Income-tax Act, 1961 for Assessment Year 2017-18. The petitioner sought quashing of the order rejecting the application for condonation of delay in filing the return of income and a direction permitting the delayed filing of the return.
According to the petitioner, his father died on 09.03.2016, after which the petitioner’s mother and sisters executed an affidavit enabling him to obtain a legal heir certificate issued on 12.04.2016. The deceased had been carrying on business as a commission agent under the trade name M/s. Shree Rushabh Agencies and had regularly filed income-tax returns. After his father’s death, the petitioner took over the business. He stated that he could not file the return for Assessment Year 2017-18 despite a TDS refund claim of ₹6,93,310. Accordingly, he filed an application under Section 119(2)(b) on 11.04.2018. The Assessing Officer sought details, which were furnished by the petitioner. However, by order dated 16.10.2023, the Principal Commissioner rejected the application seeking condonation of delay, and an intimation dated 19.10.2023 followed.
The petitioner submitted that the refund arising from tax deducted at source was undisputed and that the Principal Commissioner had failed to exercise the discretion available under Section 119(2)(b), which confers wide powers to condone delay in cases of genuine hardship. It was argued that the reasons furnished for the delay demonstrated genuine hardship. The petitioner relied upon judicial decisions dealing with liberal interpretation of Section 119(2)(b) and condonation of delay.
The Revenue submitted that the Assessing Officer had opined against condonation of delay and that the petitioner had failed to establish genuine hardship. It was also contended that the petitioner had not enclosed the death certificate with the application and had approached for delay condonation after a considerable lapse of time. The Revenue further argued that the petitioner could not file the return in the name of his deceased father for Assessment Year 2017-18 and ought to have filed it in his individual capacity as legal heir to claim the refund. On these grounds, it defended the rejection of the application under Section 119(2)(b).
The High Court considered the provisions of Section 119(2)(b) and observed that the Principal Commissioner rejected the application on the premise that, since the petitioner had filed the return for Assessment Year 2016-17, he ought to have filed the return for Assessment Year 2017-18 and had not established circumstances beyond his control. The Court held that this approach was contrary to the settled legal position laid down by the Court and the Supreme Court.
The Court referred to Chintan Navnitlal Parikh (HUF) Versus Deputy Secretary (OT and WT) Central Board of Direct Taxes, wherein the expression “genuine hardship” was considered with reference to the Supreme Court decision in B.M. Malani Versus CIT, which interpreted the expression through the principle of purposive construction. The Court also referred to Sitaldas K. Motwani Versus Director General of Income-Tax (International Taxation), New Delhi, where the Bombay High Court held that authorities should adopt a justice-oriented approach while considering applications for condonation of delay and that delay should not defeat a genuine refund claim. It further noted its earlier decisions in Gujarat Electricity Company Limited Versus CIT, Shailesh Vitthalbhai Patel Versus Chief Commissioner of Income-Tax, and Sarvodaya Charitable Trust Versus Income Tax Officer (Exemption) dealing with condonation of delay and genuine hardship.
Applying these principles to the facts, the High Court observed that it was undisputed that the petitioner was entitled to a refund of ₹6,93,310 representing tax deducted at source from the income of his late father. It further observed that, in the absence of any outstanding dues of the deceased, the amount was liable to be refunded under the provisions of the Income-tax Act. The Court held that the respondent ought to have condoned the delay in filing the return, whether in the name of the deceased or in the petitioner’s individual capacity, and should have examined the refund claim on its merits. If found genuine, the petitioner would be entitled to the refund together with statutory interest, if any.
Accordingly, the High Court allowed the petition, quashed and set aside the order dated 16.10.2023 passed under Section 119(2)(b), permitted the petitioner to file the return of income claiming the refund of ₹6,93,310, and directed that the claim be considered by the proper Assessing Officer in accordance with law. Rule was made absolute to that extent.
Cases Discussed
- Chintan Navnitlal Parikh (HUF) Versus Deputy Secretary (OT and WT) Central Board of Direct Taxes, [2023] 154 com 544 (Gujarat)
- Shailesh Vitthalbhai Patel Versus Cheif Commissioner of Income-Tax, [2022] 145 com 10 (Gujarat)
- Sarvodaya Charitable Trust Versus Income Tax Officer. (Exemption), [2021] 125 com 75 (Gujarat)
- Sitaldas K. Motwani Versus Director General of Income-Tax (International Taxation), New Delhi (Bombay High Court), [2010] 187 Taxmann 44 (Bombay)
- B.M.Malani Versus CIT, [2008] 174 Taxman 363/306 ITR 196
- Gujarat Electricity Company Limited Versus CIT, [2002] 255 ITR 396
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
Heard learned advocate Mr.Sudhir M. Mehta for the petitioner and learned Senior Standing Counsel Mr.Varun K. Patel with learned advocate Mr.Dev D. Patel for the respondents.
1. Rule, returnable forthwith. Learned Senior Standing Counsel Mr.Varun Patel waives service of notice of rule for and on behalf of the respondents.
2. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs :
“A. to quash and set aside the impugned order dated 16.10.2023 passed by the Principal Commissioner of Income Tax under section 119(2)(b) of the act for A.Y. 2017-18 at Annexure-‘F’,
B. to direct the Respondents to allow the application of the petitioner requesting to condone delay in filing return of income for the Assessment Year 2017-18.”
3.1. The brief facts of the case are that the petitioner is a legal heir of late Shri Uttamchand Manlal Rathod who expired on 9th March, 2016.
3.2. It is the case of the petitioner that the mother and the sisters of the petitioner executed an affidavit in his favour in order to acquire the legal heir certificate from the Executive Magistrate and accordingly, a legal heir certificate is issued on 12.04.2016.
3.3. Late Shri Uttamchand Rathod was in a textile industry as a commission agent under the trade name M/s. Shree Rushabh Agencies and had filed income tax returns for several years. The assessment order of Assessment Year 2014-15 was passed on 05.12.2016 under Section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’). The petitioner filed return of income for Assessment Year 2016-17 which was accepted by the Income Tax Department.
3.4. After the death of late Shri Uttamchand Rathod, the petitioner took over the business of commission agent of his father and it was not possible for him to file income tax return for Assessment Year 2017-18 as there was claim in the refund for the said period on account of the tax deducted at source amounting to Rs.6,93,310/-. The petitioner therefore preferred an application under Section 119(2)(b) of the Act on 11.04.2018. The respondent No.2-Assessing Officer issued a notice to the petitioner on 03.05.2018 requesting various details which were submitted by the petitioner on 10.05.2018 and 18.07.2018. Thereafter, further details were called for by the respondent No.2 which were also submitted by the petitioner.
3.5. The respondent No.1-Principal Commissioner of Income Tax (for short ‘PCIT’) passed an impugned order on 16.10.2023 under Section 119(2)(b) of the Act rejecting the application for waiver of time limit for filing of the return for Assessment Year 201718 and intimation letter dated 19.10.2023 was issued.
4.1. Learned advocate Mr.Sudhir Mehta for the petitioner submitted that the respondent No.1-PCIT ought to have condoned the delay in filing the return for Assessment Year 2017-18 as the amount of refund on account of the TDS is not in dispute. It was submitted that the reason given by the respondent No.1 rejecting the application that only because the petitioner filed the return for Assessment Year 2016-17, the reasons cited by the petitioner for not filing the return for Assessment Year 2017-18 in time is not convincing and such reason given by the respondent No.1 is contrary to the basic scheme of the Income Tax Act, whereby, under Section 119(2)(b) of the Act, wide discretionary powers are given for genuine hardships to the assessee and petitioner has demonstrated in his application for not filing the return for Assessment Year 2017-18 in time. In support of his submissions, reliance was placed on the following decisions :
(i) Chintan Navnitlal Parikh (HUF) Versus Deputy Secretary (OT and WT) Central Board of Direct Taxes reported in [2023] 154 com 544 (Gujarat);
(ii) Shailesh Vitthalbhai Patel Versus Cheif Commissioner of Income-Tax reported in [2022] 145 com 10 (Gujarat);
(iii) Sarvodaya Charitable Trust Versus Income Tax Officer. (Exemption) reported in [2021] 125 com 75 (Gujarat);
(iv) Sitaldas K. Motwani Versus Director General of Income-Tax (International Taxation), New Delhi reported in [2010] 187 Taxmann 44 (Bombay).
5.1. On the other hand, learned Senior Standing Counsel Mr.Varun Patel for the respondents referred to and relied upon the affidavit-in-reply filed on behalf of the respondent No.1 as well as the report submitted by the Assessing Officer to the PCIT. It was pointed out that in the impugned order passed by the PCIT, inadvertently it was stated that the Assessing Officer has opined to condone the delay in filing the return of income for Assessment Year 2017-18, however, in the report submitted by the Assessing Officer, it was opined that the delay should not be condoned.
5.2. It was further submitted that it was also pointed out by the Assessing Officer that the case of the assessee does not pertain under any genuine hardship as no death certificate of the father of the petitioner was also attached by the assessee and assessee approached for filing of return with a delay condonation application after four years of his first application.
5.3. It was further submitted by learned Senior Standing Counsel Mr.Varun Patel that the petitioner is also not entitled to file the return in name of his late father as, as per the provisions of the Act, the legal heir is permitted to file return of income only for Assessment Year of the previous year in which the assessee has expired and therefore the return of income filed by the petitioner for Assessment Year 2016-17 was accepted by the Department, however, the petitioner could not have filed the return of income for Assessment Year 2017-18 as a legal heir of his late father but he ought to have filed the return of income as a legal heir in his individual capacity to claim the refund. It was therefore submitted that on both counts, the respondent No.1 has rightly not condoned the delay for filing the return for Assessment Year 2017-18 by the petitioner.
6. Having considered the submissions made by both the sides and in view of the provisions of Section 119(2)(b) of the Act, which indicates that once the petitioner has filed the return for Assessment Year 2016-17, then he ought to have filed return for Assessment Year 2017-18 and without any genuine hardship or showing any reason for not filing the return for Assessment Year 2017-18 that the circumstances were beyond the control of the assessee, the respondent No.1 has accordingly rejected the application. However, the approach of the respondent No.1 is contrary to the settled legal position as held by this Court from time to time as well as by the Apex Court.
7. In case of Chintan Navnitlal Parikh (HUF) (Supra) this Court considered the decision in case of B.M.Malani Versus CIT reported in [2008] 174 Taxman 363/306 ITR 196 wherein the word and phrase “genuine hardship” was interpreted by the Apex Court referring to the term “genuine” as per New Collins English Dictionary, where the word genuine was defined as “Genuine: not a fake or counterfeit, real, not pretending (not bogus or merely a ruse).” The Apex Court in the said case, on applying the principle of purposive construction held that the ingredients of genuine hardships must be determined keeping in view the dictionary meaning thereof and legal conspectus attending thereto. It was further held by the Apex Court that the person cannot take advantage of his own wrong.
8. In case of Sitaldas K. Motwani (Supra), the Bombay High Court has considered the issue of condonation of delay in filing a claim wherein it is held that the approach of the authorities should be justice oriented so as to advance the cause of justice while considering the application for condonation of delay in filing the claim. The Bombay High Court in the said judgment has held as under :
“15. The phrase “genuine hardship” used in Section 119(2)(b) should have been construed liberally even when the petitioner has complied with all the conditions mentioned in Circular dated 12th October, 1993. The Legislature has conferred the power to condone delay to enable the authorities to do substantive justice to the parties by disposing of the matters on merit. The expression “genuine” has received a liberal meaning in view of the law laid down by the Apex Court referred to hereinabove and while considering this aspect, the authorities are expected to bare in mind that ordinarily the applicant, applying for condonation of delay does not stand to benefit by lodging its claim late. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. The approach of the authorities should be justice oriented so as to advance cause of justice. If refund is legitimately due to the applicant, mere delay should not defeat the claim for refund.
16. Whether the refund claim is correct and genuine, the authority must satisfy itself that the applicant has a prima facie correct and genuine claim, does not mean that the authority should examine the merits of the refund claim closely and come to a conclusion that the applicant’s claim is bound to succeed. This would amount to prejudging the case on merits. All that the authority has to see is that on the face of it the person applying for refund after condonation of delay has a case which needs consideration and which is not bound to fail by virtue of some apparent defect. At this stage, the authority is not expected to go deep into the niceties of law. While determining whether refund claim is correct and genuine, the relevant consideration is whether on the evidence led, it was possible to arrive at the conclusion in question and not whether that was the only conclusion which could be arrived at on that evidence.”
9. This Court in case of Gujarat Electricity Company Limited Versus CIT reported in [2002] 255 ITR 396 has held that the Board was not justified in rejecting the claim for refund on the ground that a case of genuine hardship was not made out by the petitioner and delay in claiming the refund was not satisfactorily explained, more particularly when the returns could not be filed in time due to the ill health of the Officer who was looking after the taxation matters of the petitioner.
10. Similarly, in case of Shailesh Vitthalbhai Patel (Supra) and Sarvodaya Charitable Trust (Supra) this Court has considered in detail the aspect of condoning the delay in making an application for filing the return of income by the assessee to get the genuine claim.
11. Adverting to the facts of the case, it is not in dispute that the petitioner is entitled to the refund of the amount of Rs.6,93,310/-which represents the tax deducted at source from the income of his late father and in absence of any outstanding dues of the late father of the petitioner, the said amount is liable to be refunded by the respondent-Authority as per the provisions of the Income Tax Act. In such circumstances, the denial on the part of the respondent No.1 to condone the delay in filing the return of income by the petitioner either in name of his father or in his individual name ought to have been permitted and the respondent-Authority ought to have examined such claim on merits and if it is found to be genuine, the petitioner is entitled to the refund of Rs.6,93,310/- with statutory interest, if any, to be paid on such amount.
12. In view of the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned order dated 16.10.2023 passed by the respondent No.1 under Section 119(2)(b) of the Act is hereby quashed and set aside and the petitioner is permitted to file the return of income claiming the refund of Rs.6,93,310/-which shall be considered by the proper Assessing Officer in accordance with law. Rule is made absolute to the aforesaid extent.
