HC Condones Delay Under Section 119(2)(b), Allows Carry Forward of Capital Loss

Chintan Navnitlal Parikh (HUF) Throu Karta Chintan Vs Deputy Secretary (OT And WT) (Gujarat High Court)

The Gujarat High Court considered a writ petition challenging an order dated 16.05.2018 rejecting the petitioner’s application under Section 119(2)(b) of the Income-tax Act, 1961 for condonation of delay in filing the return of income for Assessment Year 2014-15. The petitioner, a Hindu Undivided Family, had filed its return on 31.12.2014, declaring nil income and claiming carry forward of long-term capital loss of ₹1,39,41,842/-. The statutory due date for filing the return was 30.07.2014. Because of the delayed filing, the loss was not permitted to be carried forward under Section 139(3). The petitioner thereafter filed an application under Section 119(2)(b) on 14.11.2016, seeking condonation of the delay.

The petitioner submitted that the delay of 152 days resulted from genuine hardship, including the serious illness and prolonged absence of the senior accountant, corruption of computer data requiring reconstruction, heavy rainfall disrupting work on 29 and 30 July 2014, and the engagement of employees in completing statutory accounts of a group company. It was also contended that the authority wrongly treated the petitioner as a habitual defaulter, despite due dates having been extended by the tax authorities in several earlier years. The petitioner relied upon CBDT Circular No. 9/2015, Circular No. 8/2001, and several judicial precedents to contend that delay in claiming carry forward of losses could be condoned to avoid genuine hardship.

The Revenue argued that the reasons cited were attributable to the petitioner’s own business decisions and were not circumstances beyond its control. It further submitted that the petitioner was a habitual defaulter and that the delay could not be regarded as arising from genuine hardship.

The High Court examined Section 119(2)(b) and the judicial interpretation of the expression “genuine hardship”. It referred to various decisions explaining that the provision confers wide powers on the Board to condone delay where substantial justice so requires and that the expression should receive a liberal construction. The Court also referred to CBDT Circular No. 8/2001, which clarified that delay in filing returns claiming carry forward of losses could be condoned, subject to fulfilment of other conditions.

The Court found that the observation treating the petitioner as a habitual defaulter was misconceived because, in three out of five years, the due dates had been extended by the tax authorities. It held that the petitioner’s explanation regarding the illness of the senior accountant, corruption of computer data, impending retirement and ill health of the head of accounts, and heavy rainfall disrupting office work constituted genuine reasons for the delay. The Court noted that the delay was only 152 days and that refusal to condone the delay would prevent the petitioner from carrying forward a genuine capital loss, thereby defeating substantial justice.

Holding that the Board possessed wide discretionary powers under Section 119(2)(b), the High Court observed that such powers ought to have been exercised judiciously in the facts of the case. It concluded that the impugned order ignored both the factual circumstances and the settled legal position governing condonation of delay.

Accordingly, the Gujarat High Court quashed and set aside the order dated 16.05.2018, allowed the petitioner’s application under Section 119(2)(b), condoned the delay in filing the return for Assessment Year 2014-15, and permitted the petitioner to carry forward the long-term capital loss of ₹1,39,41,842/-. The petition was allowed and the Rule was made absolute.

Cases Discussed

• ADCC Infocom (P) Ltd vs. Principal Chief Commissioner of Income-tax, [2023] 150 taxmann.com 529 (Bombay)
• Bhatewara Associates Manik vs. Union of India, [2023] 147 taxmann.com 297 (Bombay)
• Shailesh Vitthalbhai Patel vs. Chief Commissioner of Income-tax (Gujarat High Court), [2022] 145 taxmann.com 10 (Gujarat)
• G.V. Infosutions Pvt. Ltd. vs. Deputy Commissioner of Income Tax, Circle 10(2) and others (Delhi High Court), (2019) 261 taxmann.com 482 (Delhi)
• Deputy Commissioner of Income-tax Vs. Surendranagar District Co-operative Bank Ltd. (Supreme Court), [2019] 108 taxmann.com 609 (SC)
• PDS Logistics International (P) Ltd vs. Chief Commissioner of Income-tax, Beng. (Karnataka High Court), [2018] 93 taxmann.com 194 (Karnataka)
• Dr.(Smt) Sujatha Ramesh vs. Central Board of Direct Taxes, New Delhi (Karnataka High Court), [2017] 87 taxmann.com 228 (Karnataka)
• Shyam Sunder Nirankari vs. Commissioner of Income-tax, Karnal (Punjab & Haryana High Court), [2016] 65 taxmann.com 104 (Punjab & Haryana)
• M. Rajan Vs. Principal Commissioner of Income-tax, Calicut (Kerala High Court), [2016] 76 taxmann.com 164 (Kerala)
• Travancore Cements Employees Co-operative Bank Ltd vs. Commissioner of Income-tax, Kottayam (Kerala High Court), [2014] 50 taxmann.com 141 (Kerala)
• Lodhi Property Co. Ltd vs. Under Secretary (ITA-II), Department of Revenue (Delhi High Court), [2010] 191 Taxman 74 (Delhi)
• Bombay Mercantile Co-op Bank Ltd vs. Central Board of Direct Taxes (Bombay High Court), [2010] 195 Taxman 106 (Bombay)
• B.M. Malani vs. Commissioner of Income-tax & Anr. (Supreme Court), [2008] 306 ITR 196
• Pala Marketing Co-operative Society Ltd vs. Union of India (Kerala High Court), [2008] 167 Taxman 238 (Kerala)
• Madhya Pradesh State Electricity Board vs. Union of India (Madhya Pradesh High Court), [2011] 197 Taxman 238 (Madhya Pradesh)
• Jay Vijay Express Carriers vs. Commissioner of Income-tax-III (Gujarat High Court), [2013] 34 taxmann.com 61 (Gujarat)
• Associated Electro Ceramics vs. Chairman, Central Board of Direct Taxes (Karnataka High Court), [1993] 201 ITR 501 (Karnataka)
• Mahalakshmi Co-operative Bank Ltd vs. Central Board of Direct Taxes (Karnataka High Court), [2013] 33 taxmann.com 615 (Karnataka)
• Artist Tree Pvt. Ltd. vs. Central Board of Direct Taxes and others, (2014) 369 ITR 691 (Bombay)
• CIT v. Gujarat Oil and Allied Industries Limited (Gujarat High Court), (1993) 201 ITR 325 (Gujarat)

Five Alternative SEO Titles

• HC Allows Section 119(2)(b) Delay Condonation for Carry Forward of Capital Loss
• HC Sets Aside Rejection of Delay Condonation Under Section 119(2)(b)
• HC Permits Carry Forward of Capital Loss After Condoning Delay in Return Filing
• HC Holds Genuine Hardship Justified Delay Condonation Under Section 119(2)(b)
• HC Grants Delay Condonation for Belated Return Claiming Capital Loss Carry Forward

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. Rule returnable forthwith. Mr.Dev Patel, learned advocate, waives service of notice of rule on behalf of the respondent. With consent of the learned advocates appearing for the respective parties, the matter is taken up for final hearing today.

2. This petiton, under Article 226 of the Constitution of India, is filed with the following prayers:

“(a) quash and set aside the impugned order at Annexure-’A’ to this petition;

(b) direct the respondent to allow the application of the petitioner requesting to condone delay in filing return of income for AY 2014-15;

(c) any other and further reilef deemed just and proper be granted in the interest of justice;

(d) to provide for the cost of this petition.”

3. Facts in brief are as under:-

3.1 The petitioner is a Hindu Undivided Family individual. The petitioner filed return of income for the Assessment Year 2014-15 on 31.12.2014 declaring total income ‘NIL’ and claim of loss to be carried forward of Long Term Capital Loss of Rs.1,39,41,852/-.

3.2 The due date of filing the return was 30.07.2014. However, it is the petitioner’s case that due to genuine hardship, the petitioner could not file the return within stipulated time. Due to delay in filing such return, loss was not allowed to be carried forward under Section 139(3) of the Income Tax Act, 1961.

3.3 On 14.11.2016, the petitioner filed an application under section 119(2) of the Act to condone the delay in filing the return and allow carry forward of the loss. By the order impugned dated 16.05.2018, the application was rejected.

4. Mr.B.S.Soparkar, learned advocate appearing for the petitioner, would make the following submissions:

4.1 That the due date for filing the return was 30.07.2014. The return was filed on 31.12.2014, and therefore, the delay was merely of five months. Genuine hardship was pointed out in the application seeking condonation of delay and grounds are stated therein. All the factors narrated in the case was one of bringing in circumstances beyond the control of the assessee and reflected a case of genuine hardship. The delay ought to have been condoned.

4.2 The observation in the impugned order that the petitioner was a habitual defaulter was misconceived and unwarranted. The finding was largely incorrect as in three out of five years, there is no delay since the due dates were extended by the tax authorities themselves. The case, therefore, had to be considered only on the basis of the year under consideration.

4.3 The order is bad as the authority ought to appreciate that the period of limitation would not come as a hindrance to do substantial justice. The loss suffered by the petitioner was genuine and not allowing to set-off the same would result in hindrance to do substantial justice.

4.4 The three reasons for delay, namely, health problems of Senior Accountant Pragna Patel, computer data system having got corrupted, Heads of Accounts being on the verge of retirement and heavy rainfall on 29^th and 30^th July 2014 disrupting routine were genuine and could have been the proper perspective and delay should have been condoned.

4.5 Mr.Soparkar, learned counsel, would also rely on Circular No. 9/2015, where it was observed that in matters of refund claims, the authorities shall have power to condone the delay.

4.6 Mr.Soparkar, learned counsel, would rely on the following decisions:

(1) Lodhi Property Co. Ltd vs. Under Secretary (ITA-II),Department of Revenue, reported in [2010] 191 Taxman 74 (Delhi).

(2) Associated Electro Ceramics vs. Chairman, Central Board of Direct Taxes, reported in [1993] 201 ITR 501(KAR.).

(3) Deputy Commissioner of Income-tax Vs. Surendranagar District Co-operative bank Ltd., reported in [20191 108 taxmann.com 609(SC).

(4) ADCC Infocom (P) Ltd vs. Principal Chief Commissioner of Income-tax, reported in [20231 150 com 529 (Bombay).

(5) Shailesh Vitthalbhai Patel vs. Chief Commissioner of Income-tax, reported in [20221 145 com 10 (Gujarat).

(6) Mahalakshmi Co-operative Bank Ltd vs. Central Board of direct Taxes, reported in [20131 33 com 615 (Karnataka).

(7) Dr.(Smt) Sujatha Ramesh vs. Central Board of Direct Taxes, New Delhi, reported in [20171 87 taxmann.com 228 (Karnataka)

(8) Bombay Mercantile Co-op Bank Ltd vs. Central Board of Direct Taxes., reported in [20101 195 Taxman 106 (Bombay)

(9) Bhatewara Associates Manik vs. Union of India, reported in [20231 147 com 297 (Bombay)

10. PDS Logistics International (P) Ltd vs. Chief Commissioner of Income-tax, Beng, reported in [20181 93 taxmann.com 194 (Karnataka)

11. M.Rajan Vs. Principal Commissioner of Income-tax, Calicut, reported in [20161 76 taxmann.com 164 (Kerala)

12 Madhya Pradesh State Electricity Board vs. Union of India, reported in [20111 197 Taxman 238 (Madhya Pradesh)

13 Pala Marketing Co-operative Society Ltd vs. Union of India, reported in [20081 167 Taxman 238 (Kerala)

14 Jay Vijay Express Carriers vs. Commissioner of Income-tax-III, reported in [20131 34 taxmann.com 61 (Gujarat).

5. Mr.Dev D. Patel, learned advocate appearing for the revenue would submit that the order passed under Sec.119(2)(b) of the Income-tax Act, 1961, is a reasoned order. He would submit that it is evident on reading the order that the circumstances listed out by the petitioner that one of the employee was unwell, that data in computers had got corrupted and that the employees were busy with the work of statutory accounts of the company etc., were circumstances related to his business and as held by the authorities, these were completely attributable to his decision and account. From the table in the order, it was indicative of the fact that the petitioner-assessee was a habitual offender and that the delay was a reslut of a conscious decision made by him in diverting the resoruces for the purpose of meeting the statutory liability of the company. He would further submit that it cannot be said that the delay in filing the return of income was beyond the control of the assessee and that there was a genuine hardship.

5.1 Mr.Dev Patel, learned advocate, relied on the following decisions:

(I) Shyam Sunder Nirankari vs. Commissioner of Income-tax, Karnal., reported in [2016] 65 taxmann.com 104 (Punjab & Haryana). He would submit that the application for condonation of delay in the case was not considered thought the assessee therein had advanced reason that his family life had remained disturbed.

(ii) Mr.Patel, learned advocate, also relied on a decision in the case of Travancore Cements Employees Co­operative Bank Ltd vs. Commissioner of Income-tax, Kottayam, reported in [2014] 50 taxmann.com 141 (Kerala). He would submit that the High Court of Kerala had held that when the delay was attributable to the assessee, the authorities were justified in rejecting the application for condonation of delay.

6. Having considered the submissions made by the learned counsels for the respective parties, the relevant provision which deals with the power of the Board to permit the authority to admit the application or a claim for any exemption, deduction, revision, or any relief under the Income-tax Act is section 119 of the Act. Sec.119(1) & (2) of the Act, read as under:

“119 (1) the Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and fellow such orders, instructions and directions of the Board:

XXX                    XXX                     XXX

(2) Without prejudice to the generality of the foregoing power:-

(a)**

(b) the Board may, if it considers is desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize any income-tax authority, not being a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law.”

6.1 Let us examine this provision in context of the facts set out by the petitioner. The petitioner had filed the application under Sec.119(2)(b) of the Act requesting the Board to condone the delay of 152 days in filing the return of income. The due date of filing the return of income was 30.07.2014. The return of income was filed on 31.12.2014. The reasons listed for the petitioner’s failure to file the return within the stipulated time under Sec.139(1) of the Income-tax Act were as under

“(i) One of its employees viz. Mrs Pragna Yogesh Patel who handled the work of maintenance of record and filing of its return, suffered with severe medical problems as well as an incidence of death of her family member resulting in prolonged absence and irregularity at work.

(ii) The Data of petitioner’s business maintained in its computers got corrupted in mid July 2014 and it took three weeks to reconstruct data from back up.

(iii) There was heavy rainfall on 29th and 30th July 2014 in the city of Ahmedabad disrupting the routine work.

(iv) All the employees of petitioner firm were engaged in and occupied with work of statutory accounts of Ashima Ltd., a group company of Sri Chintan N Parikh, Karta of assessee HUF, so that the deadline of the said company may be met.

(v) The due date for filing the ROI of petitioner was extended to 30.11.2014 by Circular No. 30.11.2014.

(vi) Sri Jayesh B Thakkar, baing on verge of retirement and due to ill health was very irregular in attending office.”

6.2 The case of the petitioner is that the circumstances narrated hereinabove were such cases which indicated that the petitioner had claimed the benefit of carryforward of a Long Term capital Loss amounting to Rs.1,39,41,842/- for setting off the same against the capital gain arising in the future years. It was his case that for the reasons assigned hereinabove, the delay was for reasons beyond the control of the petitioner.

6.3 Perusal of the order under Sec.119(2)(b) of the Act indicates that the authorities have found that it was the action of the assessee itself and there was no circumstance stated beyond the control of the assessee.

7. Mr.Soparkar, learned counsel for the petitioner has relied on the decisions, which have been set out hereinabove.s

8. In the case of B.M.Malani vs. Commissioner of Income-tax & Anr., reported in [2008] 306 ITR 196, the Hon’ble Supreme Court had an occasion of interpreting the word and phrase “genuine hardship”. 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)”. On the principle of purposive construction, the Hon’ble Supreme Court held that the ingredients of genuine hardships must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, another well-known principle, namely, “a person cannot take advantage of his own wrong”, may also have to be borne in mind.

8.1 In the case of Sitaldas K. Motwani vs. Director General of Income-tax (International Taxation), New Delhi., the Division Bench of the High Court was considering the issue of condonation of delay in filing a claim. The Court 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 authority is to satisfy itself that the claim is a genuine one. The Bombay High Court has held as under:

“14. The Apex Court, in the case of BM Malani v CFT [2008] 10 SCC 617 has explained the term “genuine” in following words :

16. The term ‘genuine’ as per the New Collins Concise English Dictionary is defined as under: ‘Genuine means not fake or counterfeit, real, not pretending (not bogus or merely a ruse)’.

17. ****

18. The ingredients of genuine hardship must be determined keeping in view the dictionary meaning th the legal conspectus attending thereto. For the said purpose another well-known principle, namely, a person cannot take advantage of his own wrong, may also have to be borne in mind. The Gujarat High Court in the case of Gujarat Electric C. Lid (supra) was pleased to hold as under:

“…The Board was not justified in rejecting the clairn for refund on the ground that a case of genuine hardship was not made out by the petitioner and delay in claiming the relief 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 laxation matters of the petitioner….”

The Madras High Court in the case of R Seshammal (P) Ltd (supra), was pleased to observe as under

“This is hardly the manner in which the State is expected to deal with the citizens, whe in their antiety to comply with all the requirements of the Act pay monies as advance tax to the State, even though the monies were not actually required to be paid by them and thereafter, seck refund of the monies so paid by mistake after the proceedings under the Act are dropped by the authorities concemed. The State is not entitled to plead the hypertechnical plea of limitation in such a situation to avoid return of the amounts. Section 119 of the Act vests ample power in the Board to render justice in such a situation. The Board has acted arbitrarily in rejecting the petitioner’s request for refund.”

15. The phrase “genuine hardship” used in section 119(2)(b) should have been construed liberally even when the petitioner has comphed with all the conditions mentioned in Circular dated 12-10-1993 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 Refining 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 bearing 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 mala fides. 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 nuine, the relevam 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.”

8.2 So also in the case of PDS Logistics (supra), the Karnataka High Court considered the cases where the company could not file its returns as, there was a sudden crash of computer system, and therefore, the substantial data had to be updated. In such circumstances, the Karnataka High Court held as under:

“5. The factual matrix of the case as narrated above is not in dispute. The petitioner filed petition for condonation of delay under Section 119(2)(b) of the Act before erstwhile Income Tax III. Bengaluru on 24-02-2009 and further a letter was addressed to Chairman, CHDT New Delhi secking permission to file the said return of income and requesting to allow the refund claim of Rs 30,83,829 The same was forwarded to the Chief Commissioner of Income Tax, Bengaluru for necessary action. In temos of the advise made by the Authorities, the petitioner filed the return of income on 09-09-2009 declaring the total income of Rs 2.39,46,244 and claimed refund of Rs.30,83,819- The application seeking condonation of delay before the Chief Commissioner of Income Tax was filed on 11-06-2010. The same came to be disposed of on 11-03-2016. In the context, it is worth referring to Section 1192)(b) of the Act which reads as under

“Section 119(2)(b) -The Board may, if it considers it desirable or expedient so to do for avoiding gemine hardship in any case or class of cases, by general or special order authorize (any income-tax authority, not being Commissioner (Appeals)) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;”

6. In terms of Section 119(2)(b) of the Act CBDT is vested with the powers to admit an application or claim for way exemption, deduction, refund or any other relief under the Act after the expiry of period prescribed under the Act for making such application or claim and appeal and to deal with the same on merits in accordance with law Instruction No. 12/2003 contemplates that the cases where delayed claims of refunds are being considered would be taken up for scrutiny Similar instruction No.13/2006, interalia provides that no interest would be admissible on the belated refund claims Phrase “genuine hardship” was interpreted by the Hon’ble Apex Court in R.M Malani CIT 120081124 Tasman 363/106 ITR 126. It was held that the genuine hardship means a gemine difficulty. The Bombay High Court in the case of Sitaldas K. Motwani v. DGIT (International Taxation (2010) 187 Tasman 44/323 ITR 223 held that the expression genuine hardship used in Section 119(2)(b) of the Act should be construed liberal, particularly in manters of entertaining of applications seeking condonation of delay The same view was taken in another judgment of the Bombay High Court in the case of Bombay Mercantile Co-operative Bank Lady Central Board of Direct Taxes [2010] 195 Taxman 106/120111 332 ITR 82 It is also the case of the petitioner that it is not avoiding any scrutiny the Authorities can verify the genuineness of the petitioner by taking up the matter for scrutiny. It is also not in dispute that the petitioner was regularly filing the return of income and a genuine tax payee It is prima facie apparent that only for the assessment year 2006-07 owing to the alleged crashing of the system, no income of retum was filed within the prescribed time, the petitioner is not avoiding any scrutiny. The circumstance that financial report and audit reports were signed by the Managing Director on 04-09-2006 would not be a ground to reject the condonation of delay in filing the report. It cannot be said that the petitioner has obtained any undue advantage of the delay in filing the income tax returns

7. It is trite law that rendering substantial justice shall be paramount consideration of the Courts as well as the Authorities rather than deciding on hyper-technicalities. It is obvious that there is some lapse on the part of the petitioner that itself would not be a factor to turn out the ples for filing of the return, when the explanation offered was acceptable and genuine hardship is established. It was with a fond hope of getting justice at the hands of the Chief Commissioner of Income Tax. petition was filed on 11-06-2010. However, no decision was taken for nearly 6 years Finally on 11-03-2016, the said petition has been dismissed which has to be viewed seriously while rendering substantial justice to the parties.”

9. From the various decisions cited by the learned counsel for the petitioner, the Courts’ on various factual circumstances placed before it, had condoned the delay. The circumstances of the petitioner before the Court in the aforesaid decisions were as under:-

(I) Inability to file a return in time due to the work load of the Chartered Accountant. The assessee therein could not file the return of loss.

(ii) The place of business of the concerned assessee was under lockdown up to August 2020. The accountant could not finalize the accounts of the group of the three companies.

(iii) The assessee had gone to the USA for some personal work, and therefore, could not file his return within time.

9.1 Facts of the present case would indicate that the assertion of the revenue is that the insistence of the petitioner for condoning the delay in filing the return was because he wanted to claim carry forward of losses. During the course of arguments, Mr.Soparkar, learned counsel for the petitioner, has placed before us a copy of Circular No.8/2001 dated 16.05.2001. Reading of the Circular would indicate that the Board prescribed additional conditions which were required to be fulfilled before condonation of delay in filing belated revision claims could be considered. Paragraphs 3,4 & 5 of the Circular, read as under:

“3. Subsequently the Karnataka High Court in the case of Associated Electro Ceramics Chairman, CBDT [1993] 201 ITR 501 held that the Board have power to condone the delay in cases having claim of carry forward of losses. The department did not file special leave petition against this order Subsequently the matter was taken up with the Ministry of Law who also agreed with the view that the Board have power to condone the delay in filing the return under section 119(2)(b) of the Income-tax Act 1961 in a case having claim of carry forward of losses.

4. Hence, conditions at Serial No. (i) of order under section 119(2)(6), dated 12th October 1993 stipulating that the delay cannot be condoned in cases where returned income is a loss and assessee claims benefit of carry forward of the loss, is not legally tenable.

5. In view of above, the board, hereby clarify that delay in making refund claim as well as claim of carry forward of losses, both, can be condoned in cases where returned income is a loss, provided other conditions are satisfied. The monetary limits prescribed for condonation of delay in making refund claims, by different IT authorities will apply to condonation of delay in cases of claim of carry forward of losses as well.”

9.2 Reading of the aforesaid circular would indicate that the Board has powers to condone the delay in cases where the return of income is a loss. Considering this Circular, the Delhi High Court in the case of Lodhi Property Co. Ltd (supra), held as under:

“5. We find that the very same contention was raised before the Karnataka High Court in the case of Associated Electro Ceramic Vs. Chairman CBDT [1993] 201 ITR 501. In that case, the board had disposed of the application under section 119(2) of the said Act taking the view that section 119(2)(b) did not cover the case of a belated return on the basis of which loss, for the purposes of carrying forward the loss, had to be determined and that the matter was regulated by sections 139, 72, 74 and 157. The view taken by the board was that section 119(2)(b) speaks of an application or claim and not a return to be filed beyond time Consequently, the board did not accede to the request of the petitioner for condoning the delay. The Karnataka High Court in the case of Associated Electro Ceramics (pro) examined the matter in detail and came to the conclusion that though the claim of cay forward of loss in the case of a loss retum was not a claim regarding exemption, determination or refied refered to in section 119), it was definitely datable as a claim arising under the category of any other relief available under the Act, as indicated in the said provision itself. The court also held that the contention of the department that if power had been grad to an Income-tax Officer or any other officer to condone the delay in making such a claim, the Board could sise was not correct. It also held that the provision expressly provided that where aty me-limit had been found, ch be extended and the delay could be condoned by the Board. It rejected the finding of the Board that the of dain referred to in section 119(2X) did not cover a loss claim made in a return.

6. The learned counsel for the petitioner has also drawn our attention to Circular No. 8/2001, dated 16-5-2001 which was with reference to the Board’s order under section 119(2)(3), dated 13-10-1993 and Circular No. 670, dated 36-10-199) which laid down the procedure for condonation of delay in the case of belated claims of refund. In paragraph 3 of the said Clear dated 16-5-2001, the decision of the Karnataka High Court in the case of Associated Electro Ceramics (supra) has been specifically noted. The said circular also notes the fact that as per the said decision, the Board had the post to code the delay in ca claims of carry forward of losses. It also notes that the department did not lea pecial Lease Petition against the said order af the Karmans High Court and subsequently the matter was taken up with the Ministry of Law ich also agreed with the view that the Board had the power to condone the delay in filing the return under section 119CEN the Act in a case having claim of carry forward of losses. The said cireuter at 1552001 Bather clarified that well is a claim of carry forwant of tosser, both could be condoned in cases where the returned conditions are satisfied prided the

7. In view of the foregoing, it is absolutely clear that the submissions sought to be raised before by the learned counsel for the respondent have specifically and categorically been rejected by the Karnataka High Court and the same have been accepted not only by the Board, but also by the Ministry of Law, We notice that a similar sien has also been taken by the Bombay High Court In the case of Sitaldas K. Motwani v. DGIT (International Taxation 2010I IX Taxman 44 Coment Karnataka High Court, we are of the view that the Board has the power under section 1190 to condone the dele return which is filed late and where, a claim for carry forward of losses is made

8. Coming back to the facts of the present case, we find that the impugned ander under section 119 passed by the Board a non- speaking one. Normally, we would have remanded the matter to the Board to consider the application of the However, we find that in the present case, the delay is only of one day and the circumstances have been explained and have not been controverted by the respondents. The fact of the matter is that the petitioner did reach the Central Revenue Building before the closure of the counter on 1-11-2004. It is only because he was sent from one room to the other and had to wait in long queues that he could not present the return at the counter which was receiving the returns prior to 8.00 pm on that date. We feel that sufficient cause has been shown by the petitioner for the delay of one day in filing the return. If the delay is not condoned, it would cause genuine hardship to the petitioner. Thus, in the circumstances of this case instead of remanding the matter back to the CBDT we direct that the delay of one day in filing of the return be condoned

The writ petition is allowed. There shall be no order as to costs.”

9.3 The Division Bench of this Court in the case of Sarvoday Charitable Trust vs. Income Tax Officer (Exemption), extensively considering the powers of the Board for condoning delay, held that the powers of condoning delay must be used to cure genuine hardship. Moreover, when it is found that the delay was neither deliberate nor on account of culpable negligence or any mala fides, such a delay could be condoned.

9.4 On the perception of the revenue that the reasons assigned in the impugned order are not arbitrary or whimsical, the reasons indicated therein when read shows that the approach of the authority was in taking the view that was not judicious and holistic. After referring to the several judgements in the case on hand, what was observed was that the approach of the authorities in dealing with an application for condonation of delay, the approach should be equitious, balancing and judicious. It should reflect application of mind and genuine claim of the assessee merely on the ground that the claim is delayed should not be rejected. Paragraphs 24 to 32 of the decision read as under:

“24. The respondent no. 2. however, declined to condone the delay and rejected the said application by the impugned order dated 19th August 2019 (Annexure-A) assigning the following reasons in the impugned order:-

“ORDER U/S. 119(2)(b) OF THE INCOME TAX ACT 1961 The applicant. Sarvodaya Chantable Trust has filed an application dated 5-9-2018 in the office on 19-9-2018, for condonation of delay in filing Form No. 10B of the IT Act 1961 for the A.Y 2016-17. The application stated that the assessee received notice of demand of Rs 1,67,41,980/-from CPC, Bangalore under reference no CPC/ 1617/C94/1803900360 dated 28-8-2018. The reason provided therein by CPC for raising of demand was non filing of Audit report in Form 108. The assessee thereafter filed Form 10B on 2-9-2018 and submined application for Condonation of delay.

2. As no specific reason was given in the application for the delay in fling Audit Report in Form No. 10B, show cause notice was issued to the assessee vide letter dated 23-10-2018. In response to the show cause notice the assessee submitted a detailed reply vide letter dated 12­11-2018 filed in this office on 13-11-2018. The assessee, in its reply, further submitted that the assesse trust is primarily running a school named lshvarlal Gulabbhai Desai Vidya Sankal providing education to the children from slum and low income group and it has been regularly filing its return of income and Form 10B on time. It was under the impression that the statutory auditors of the Trust would have filed Form 10B for AY 2016-17 on time. However, it was only receipt of notice of demand from CRC, Bangalore that it realized that Form 10B has not been filed by its auditor. Applicant Trust has also filed an affidavit duly signed by one of its trustees namely Shri Parimal Gunvantlal Desai affirming on solemn above facts of the case. It has also relied upon the Judgement of ITAT Mumbai Bench ‘E’ rendered in the case of ITO, Mumbai v. Shri Kikabhai Premchand Trust. [2010] 42 SOT 403 (Mum) submitting that the facts are squarely applicable to the facts of its case. The assesse was granted one more opportunity of being heard, vide this office letter dated 26-12-2018 to produce documentary evidence to substantiate its claim. However, in response thereto, the assessee, vide letter dated 9-1-2019 sought adjournment of the hearing. Acceding to the request of the applicant, another letter was issued on 5-4-2019 to submit documentary evidence to present its case. The Trustee and Secretary namely Shri Parimal Desai attended on 18-4-2019 and mated that it relied on its earlier submission filed on 13-11-2018.

3. The reply of the assessee is carefully examined in light of CBDT’s circular no. 10/2019 dated 22-5-2019. In para 4(ii) of the said circular, it has been emphasized that the Commissioner shall satisfy himself that the assessee was prevented by reasonable cause from such belated application in filing Form no. 10B within the stipulated time. After going through the submission of the applicant, it is found that it does not meet the criteria of Para 4(ii) of reasonable cause which prevented it from timely compliance. In the present case, Form no. 10B was to be e-filed on or before 17-10-2016 but it was e-filed on 2-9- 2018, after a gap of 23 months, more so when filing of return of income for Assessment years i.e. 2017-18 was over. Simply saying that the trustees of the trust remained under the impression that the auditor of the trust would have filed Form no. 10B audit report in Form no. 10B could not be filed is not acceptable.

4. It should be noted the Legislature has provided time limits for certain obligations under the Act and these time limits have to be observed to be able to claim certain deductions, allowances and avoid interest and penalty. If these time limits were to be relaxed in a particular case, mere fact that a default occurred due to some reason is not enough to establish the claim of genuine hardship. Discipline on time limits regarding uploading Audit report in Form no. 10B online have to be complied and respected, unless compelling and good reasons are shown and established for grant of extensin of time. Extension of time cannot be claimed as a vested right on mere asking and on the basis of vague assertions without proof.

5. In determinining whether genuine hardship is caused to the assessee, one has to see whether the delay in filing audit report in Form no. 10B electronically was due to a reasonable cause or not. In this case, delay is stated to be attributed to the Auditor. However in such a case on ehas to see whether the assessee pursued the matter due to diligence to get his audit report in Form no. 10B uploaded in time.

6. There is no details and evidences on record filed by the assessee in support of such contention. When the other functions of filing of return of income and other formalities were being taken care of by the said auditor then why such failure can be attributed on the accountant? The said plea taken by the applicant is therefore, unaccepted. Moreover, the assessee’s activities are of high volume as is evident from the facts that in the year under consideration, the assessee has shown gross income of Rs.3,85,99,831/- and amount applied towards charitable purposes in India was Rs.3,82,80,458/-. This magniture itself speaks that the trustees of the trust could have paid attention for making the legal compliances. Thus, the sole condition applicable to the facts of the case mentioned in circular no. 10/2019 does not get fulfilled. Thus the reason cannot be taken as ‘Genuine Hardship’ which prevented it from timely compliance. Further, the case law relied upon by the applicant i.e. ITO(E)(11)(1), Mumbai v. Sir Kikabhai Premchand Trust rendered by ITAT, Mumbai Bench ‘E’ is not applicable to the facts of the case as in the above case.

7. Having gone through the above facts, I am of the opinion that the assessee has not shown any genuine hardship on account of which the lapse occurred. It has merely passed on the blame on the auditors that too without any supporting evidences. By assigning any work to any external agencythe onus of statutory duty does not get shifted. As per provisions of section 12A(1)(b) of I.T.Act, the assessee should have ensured that the audit report duly signed by the accountant, as defined in Explanation below sub-section (2) of section 288 of the Act, is submitted alongwith the return of income on time. As the lapse is on the part of the assessee without any genuine cause, there is no reason for which condonation can be granted. Therefore, in exercise of the powers conferred on me u/s 119(2)(b) of the Act, I hereby reject the Condonation application for delay in filing the Form No. 10B for the A.Y 2016-17.”

25. The rectification application also came to be rejected vide order dated 12^th February 2020. The order reads thus:

“The application trust vide letter filed in this office on 19-9-2018 has requested to condone the delay in filing of Form 10B for A.Y. 2016-17 on account of the reasons mentioned in the application. The assessee has attached copy of documents to substantiate its claim. The said application of the assessee was disposed off by an order dated 19.08.2019, by the then Commissioner of Income-tax (Exemptions), Ahmedabad, wherein the application of the assessee was rejected.

2. The assessee vide application dated 9-9­2019 requested for rectification of the order dated 19-8-2019. Accordingly, the assessee was given an opportunity of being heard on 27-11­2019. The assessee requested for adjournment. Accordingly, an another opportunity of being heard was given on 10-12-2019. The assessee again requested for adjournment vide letter dated 10-12-2019. Therefore, a final opportunity was given to the assessee on 9-1­2020. In response the representative of the assessee attended and case discussed. Further, the assessee furnished a letter dated 13-1­2020, wherein it was submitted that Form No. 10B was uploaded by the auditor of the assessee in the e-filing portal on 17.10.2016, however, as the trustees were unaware of the procedure they did not approve the Form No.10B by the due date. The Form No.10B was uploaded on 1.9.2018. The assessee has accordingly requested that the delay has occurred due to a bonafide reason and therefore, requested for rectification of the order dated 19.8.2019.

3. I have examined the submissions made by the assessee and also perused order dated 19.8.2019 passed u/s.119(2)(b) of the I.T. Act (which is sought to be rectified by the assessee). In para nos.5 & 6 of order dated 19.8.2019, detailed reasons have been given as to why the case of assessee is not covered under ‘reasonable cause’ as per the requirements of para no.4(ii) of CBDT Circular No.10/2019 dated 22.5.2019. The submissions made by the assessee were duly considered in this order before rejecting assessee’s contention (as is summarised in para no.7 of said order). The assessee has failed to point out as to how there is mistake apparent from records which may be rectified under Section 154 of the I.T. Act

4. It is relevant to note that the Hon’ble Supreme Court in the case of T.S.Balaram, ITO vs. Volkart Bros (1971) 82 ITR 40 (SC) held that “a mistake apparent on the record” must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Further, ‘mistake’ means commission that is not designed and which is obvious and something which has two opinions or which is debatable as has been held in the case of CIT vs. Lakshmi Prasad Lahkar (1996) 220 ITR 100 (GAU).

5. After considering the submissions of the assessee and on perusal of documents on file it is seen there is no apparent mistake in the records, with regard to the order dated 19.8.2019, passed under section 119(2)(b) of the Income Tax Act, 1961, which requires rectification. Therefore, the application for rectification is rejected.”

26. Soparkar, the learned counsel is right in his submission that a fair and dispassionate view of the facts ought to have persuaded the respondent no.2, who possesses wide discretion in the matter under Section 119 of the Act, to condone the delay and allow the assessee to avail the said exemption under Section 12 of the Act being a public charitable trust.

27. We should look into the position of law as regards the subject matter of this writ-application : (i) In Artist Tree Pvt. Ltd. vs. Central Board of Direct Taxes and others, (2014) 369 ITR 691 (Bombay). The relevant paragraphs 11 to 14 and 23 of the said judgment are quoted below for ready reference :

“11. The expression ‘genuine hardship’ came up for consideration of the Supreme Court in the case of B.M.Malani (supra), wherein, by reference to New Collins Concise English Dictionary, the Supreme Court accepted the position that “genuine” means not fake or counterfeit, real, not pretending (not bogus or merely a ruse). Further, a genuine hardship would, inter alia, mean a genuine difficulty. The ingredients of genuine hardship, must be determined keeping in view the dictionary meaning thereof and legal conspectus attending thereto. For the said purpose, another well known principle, namely, that a person cannot take advantage of his own wrong, may also have to be borne in mind. Compulsion to pay any unjust dues per se would cause hardship. But a question as to whether the default in payment of the amount was due to circumstances beyond the control of the assessee, also bears consideration.

12. In the case of R. Seshammal (supra), the Madras High Court was pleased to observe as under (page 187 of 237 ITR):

“This is hardly the manner in which the State is expected to deal with the citizens, who in their anxiety to comply with all the requirements of the Act pay monies as advance tax to the State, even though the monies were not actually required to be paid by them and there after seek refund of the monies so paid by mistake after the proceedings under the Act are dropped by the authorities concerned. The State is not entitled to plead the hyper technical plea of limitation in such a situation to avoid return of the amounts. Section 119 of the Act vests ample power in the Board to render justice in such a situation. The Board has acted arbitrarily in rejecting the petitioner’s request for refund.”

13. In the case of Sitaldas Motwani (supra), this court has held that the expression “genuine hardship” used in section 119(2)(b) of the said Act should be construed liberally, particularly in matters of entertaining of applications seeking condonation of delay. This court was pleased to observe as under (page 228 of 323 ITR):

“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 October 12, 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 the merits. 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 bear 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 an 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 the merits after hearing the parties. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a vested right in injustice being done because of a nondeliberate delay. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. 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 the cause of justice. If refund is legitimately due to the applicant, mere delay should not defeat the claim for refund.”

14. In the case of Bombay Mercantile Co­operative Bank Ltd. (supra), this court again observed that it is well settled that in matters of condonation of delay highly pedantic approach should be eschewed and a justice-oriented should be adopted. It also observed that a party should not be made to suffer on account of technicalities. 23. In the light of the aforesaid discussion, we are of the opinion that an acceptable explanation was offered by the petitioner and a case of genuine hardship was made out. The refusal by the Central Board of Direct Taxes to condone the delay was a result of adoption of an unduly restrictive approach. The Central Board of Direct Taxes appears to have proceeded on the basis that the delay was deliberate, when from the explanation offered by the petitioner, it is clear that the delay was neither deliberate nor on account of culpable negligence or any mala fides. Therefore, the impugned order dated May 16, 2006, made by the Central Board of Direct Taxes refusing to condone the delay in filing the return of income for the assessment year 1997-98 is liable to be set aside.”

(ii) In Jay Vijay Express Carriers vs. Commissioner of Income Tax-III, (2013) 34 taxmann.com.61 (Gujarat), in relevant paragraph 16 of the said judgment, this Court held as under :

“16. In our opinion, in the present case, there would be genuine hardship, if the time limit is not extended as otherwise, the entire claim of Rs.17,84,323/- would be destroyed. The petitioner would neither get deduction in the assessment year 2005-06 nor in the year 2008- 09 as per then prevailing Section 40(a)(ia) of the Act. In our opinion, the petitioner was neither lethargic nor lacking in bona fides in making the claim beyond the period of limitation, which should have a relevance to the desirability and expedience for exercising such power. Before proceeding further we may caution that undoubtedly such powers are not to be exercised in routine manner to extend limitation provided by the Act for various stages. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so for avoiding genuine hardship. In the present case, however, considering special facts, we are of the opinion that the Commissioner ought to have exercised such powers. It is true that the Appellate Commissioner recorded that the petitioner did not remain present in the appellate proceedings. However that by itself would not take away the petitioner’s case for genuine hardship nor contrary to what is vehemently contended before us by the counsel for the Revenue, convince us to hold that filing of revised return beyond limitation lacked bona fides.”

(iii) In the case of State of Jharkhand and others vs. Ambay Cements and another, (2005 Sales Tax Cases Vol.129). The relevant extract of the said judgment is quoted from the Head Note below for ready reference :

“An exception or an exempting provision in a taxing statute should be construed strictly. If the condition under which an exemption is granted stands changed on account of any subsequent event the exemption would not operate. (see paras 23 and 24).

Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. If the statute provide that a particular thing should be done, it should be done in the manner prescribed and not in any other way (see para 26).”

(iv) In the case of B.M.Malani vs. Commissioner of Income Tax and another, (2008) 219 CTR 313), the Court observed :

“8. The term ‘genuine’ as per the New Collins Concise English Dictionary is defined as under:

“’Genuine’ means not fake or counterfeit, real, not pretending (not bogus or merely a ruse).”

For interpretation of the aforementioned provision, the principle of purposive construction should be resorted to. Levy of interest although is statutory in nature, inter alia for recompensating the Revenue from loss suffered by non-deposit of tax by the assessee within the time specified therefor. The said principle should also be applied for the purpose of determining as to whether any hardship had been caused or not. A genuine hardship would, inter alia, mean a genuine difficulty. That per se would not lead to a conclusion that a person having large assets would never be in difficulty as he can sell those assets and pay the amount of interest levied.

The ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, another well-known principle, namely, a person cannot take advantage of his own wrong, may also have to be borne in mind. The said principle, it is conceded, has not been applied by the Courts below in this case, but we may take note of a few precedents operating in the field to highlight the aforementioned proposition of law. (See Priyanka Overseas (P) Ltd. & Anr. Vs. Union of India & Ors.1991 Suppl. (1)SCC 102, para 39, Union of India & Ors. Vs. Maj.Gen.(Retd.) Madan Lal Yadav (1996)4 SCC 127 at 142, paras 28 and 29, Ashok Kapil Vs. Sana Ullah (dead) & Ors. (1996) 6 SCC 342 at 345, para 7, Sushil Kumar vs. Rakesh Kumar (2003) 8 SCC 673 at 692, para 65, first sentence, Kusheshwar Prasad Singh vs. State of Bihar & Ors. (2007) 11 SCC 447, paras 13, 14 and 16).”

(iv) Section 119 of the Act is couched in very wide terms. The same is quoted below for ready reference : Instructions to subordinate authorities:

“119. (1) the Board may, from time to time, issue suchorders, instructions and directions to other income- tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:

xxx xxx xxx

(2) Without prejudice to the generality of the foregoing power:-

(a) xxx xxx xxx

(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize any income-tax authority, not being a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law:”

29. We may also refer to a decision of the Karnataka High Court in the case of Dr. (Smt.) Sujatha Ramesh vs. Central Board of Direct Taxes, New Delhi, (2017)87 taxmann.com 228 (Karnataka), wherein the Court has observed as under :

“12. It is true that the so called reasons assigned by the respondent Central Board of Direct Taxes (CBDT) in the impugned order, on the face of it, do not appear to be whimsical or arbitrary reasons and it is equally true that such investment could be made by assessee very well before the cut off date also when she was physically present in India or even when she had gone back to USA on 20th February 2013. Nonetheless, the delay of six months in the circumstances in which it occurred, especially, in view of the fact that the investment condition was undisputably met by the assessee could have been condoned taking a judicious and holistic view of the facts. The wide powers of the Central Board of Direct Taxes or other higher authorities of the Department to whom such powers can be delegated under Section 119 of the Act, need not always take only a pro revenue approach in such matters. Their approach in such cases should be equitious, balancing and judicious which should reflect the application of mind to the facts of the case and before denying the genuine claim of the assessee on the grounds of mere delay in making such claim, something more than the user of innocuous terms as employed in the present case, should be forthcoming. Technically, strictly and literally speaking, the Board might be justified in denying the exemption from capital gains tax by rejecting such condonation application, but an assessee, who substantially satisfies the condition for availing such exemption should not be denied the same, merely on the bar of limitation, especially, when the legislature has conferred wide discretionary powers to condone such delay on the highest executive authority of the Central Board of Direct Taxes under the Act.

13. The general and wide powers given to the Board in this regard, “if it considers it desirable or expedient so to do for avoiding genuine hardship in any case….. ”, not only gives wide powers to the Board, but confers upon it a obligation to consider facts relevant for condonation of delay as well as the merit of the claim simultaneously. If the claim of exemption or other claim on merits is eminently a fit case for making such claim, it should not normally be defeated on the bar of limitation, particularly, when the delay or the time period for which condonation is sought is not abnormally large. It will of course depend upon the facts of the each case, where such a time period or the merit of the claim deserves such exercise of discretion in favour of the assessee under Section 119(2)(b) of the Act or not and therefore, no straight jacket formula or guidelines can be laid down in this regard. However, such orders passed by the Central Board of Direct Taxes being a quasi-judicial order is always open to judicial review by the higher constitutional courts. If the good conscience of the Courts is pricked, even though such orders rejecting the claims on the bar of limitation may appear to be prima facie tenable, the Courts may exercise their jurisdiction to set aside such orders and allow the claims on merits, setting aside the bar of limitation.

14. The present case is one of such nature, where the Court finds that the substantial conditions for claiming the exemption from capital gain tax stood satisfied and the prescribed investment was made by the assessee in the Bonds of the National Highways Authority, for the minimum lock-in period of three years also is an undisputed fact, and therefore, the delay in making such investment of six months deserved to be condoned, in view of the fact that, the assessee-petitioner, a Doctor by profession was traveling from India to USA a long distance country where she normally resided and came to India not only to meet her family members, but to sell the immoveable property belonging to her and sought to avail the genuine exemption from such tax liability upon making the investment in the prescribed investment in the form of Bonds of Infrastructure which she did make in the National Highways Authority.”

30. We may also refer to and rely upon a decision of the Delhi High Court in the case of G.V.Infosutions Pvt. Ltd. vs. Deputy Commissioner of Income Tax, Circle 10(2) and others, reported in (2019) 261 taxmann.com 482 (Delhi). We may quote the relevant observations thus :

“8. The rejection of the petitioner’s application under Section 119(2)(b) is only on the ground that according to the Chief Commissioner’s opinion the plea of omission by the auditor was not substantiated. This court has difficulty to understand what more plea or proof any assessee could have brought on record, to substantiate the inadvertence of its advisor. The net result of the impugned order is in effect that the petitioner’s claim of inadvertent mistake is sought to be characterised as not bonafide. The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. “Bonafide” is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the petitioner raises (concededly belatedly), there can not necessarily be independent proof or material to establish that the auditor in fact acted without diligence. The petitioner did not urge any other grounds such as illness of someone etc., which could reasonably have been substantiated by independent material. In the circumstances of the case, the petitioner, in our opinion, was able to show bonafide reasons why the refund claim could not be made in time.

9. The statute or period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities – including Revenue Authorities have to construe them in a reasonable manner. That was the effect and purport of this court’s decision in Indglonal Investment & Finance Ltd. (supra). This court is of the opinion that a similar approach is to be adopted in the circumstances of the case.”

31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no.2 might be justified in denying the exemption under Section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.

32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Limited, (1993) 201 ITR 325 (Gujarat), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either beore the Income Tax Officer or before the appellate authority by assigning sufficient cause.”

9.5 As recently as on 26.07.2022, in the case of Shailesh Vitthalbhai Patel (supra), the Division Bench of this Court, while considering the application for condonation of delay in the circumstances that the assessee had explained the delay by stating that the accountant who was handling the accounts was suffering from corona virus and therefore finalizing of accounts was not possible, referring to the Circular of the Board dated 09.06.2015, held as under:

“5. Section 119(2)(b) of the Act reads as under,

“The Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income-tax authority, not being a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law.”

5.1 The Central Board of Direct Taxes has issued circular No. 9/2015 dated 9.6.2015 which contained the instructions to the sub-ordinate authorities in respect of condonation of delay for the purse of exercise of powers under section 119 of the Act. It deals with the aspect of avoiding genuine hardshps to the assessee in respect of certain applications which made by him to the authority. It includes aspect of condonation of delay in filling of Return claiming refund and Return claiming carry forward of loss and set-off thereof under section 119(2)(b) of the Act which applies in the case of the petitioner assessee who filed belated Return of income showing loss.

5.2 The above circular inter alia contemplates that no condonation application for claim of refund or loss shall be entertained beyond six years. It inter alia contemplates that the powers of acceptance or rejection of the application would be subject to two conditions. Firstly is that at the time of considering the case under section 119(2)(b) of the Act, it shall be ensured that the income/loss declared and/or refund claim is correct and genuine and also that it is a case of genuine hardship on merits. The second consideration to be applied states the circular is that in dealing with the case, the competent authority is empowered to direct the jurisdictional Assessing Officer to make necessary inquiries or scruitinise the case in accordance with the provisions of the Act to ascertain the correctness of the claim.

5.3 The Kerala High Court in Pala Marketing Co-Opereative Society Limited vs. Union of India [(2009) 311 ITR (Ker)] stated,

“Even though courts while considering application for condonation of delay under section 5 of the Limitation Act may be justified in considering the merits of the case and consequences to the party for nonconsideration of the case on merits, I do not think section 119(2)(b) is just an incorporation of Section 5 of the Limitation Act. What is stated in section 119(2)(b) is that if the Board considers it desirable or expedient for avoiding genuine hardship to the assessee, it should condone the delay. In other words, what the Board should consider is hardship to the party if delay is not condoned. The Board should condone the delay if failure to condone the delay cause genuine hardship to the assessee, no matter whether the delay in filling return is meticulously explained or no….”

5.4 In Sitaldas K. Motwani vs. Director General of Income Tax and others [(2009) SCC online 2195], the Bombay High Court observed that words ‘genuine hardship’ used in section 119(2)(b) should have been construed liberally. It was observed that refusing to condone the delay could result into a meritorious matter being thrown out the very threshold defeating the cause of justice.

5.5 Section 119(2)(b) of the Act is a statutory authorisation whereby the Board may authorise an income tax authority to hear an application or claim for any exemption, deduction, refund or for any other relief under the Act after expiry of period specified for the purpose in the relevant provisions of the Act for making such application. After hearing any such application post the expiry of period specified, the authority may deal with the same on merits in accordance with the law. It is avowed purpose of the provision in section 119(2)(b) to avoid genuine hardship in the classes of cases as is expressly mentioned.

5.6 The words in the section, “if it considers it desirable or expedient to do so for avoiding genuine hardship” give wide power on the Board and obligates the authority concerned dealing with the request for acceptance of the applicant etc.. to consider the relevant facts and reasons which may have been advanced for condoning the delay. The object is to help the assessee who for good and valid reasons are prevented from moving an application for any purpose within the time stipulated under the Act. In other words, their applications may have witnessed delay for several meritorious reasons. It is true that merit of the case of the assessee could be simultaneously considered by the authority exercising powers under section 119(2)(b) of the Act, however, the dominant purpose to be achieved is to condone the delay and therefore, it is the grounds offered explaining the delay which should overweigh with the authorities.

6. Adverting to the facts of the present case, the assessee explained by cogent reasons that the accountant who was handling the work to file Return etc. suffered Covid 19 vires and due to his indisposed health the completion of work was delayed resulting into delayed filling of return. The Chief Commissioner of Income Tax could not have been insensitive to the cause which was genuine. In the matters of condonation of delay, where the condonation is to be permitted to avoid the genuine hardship, liberal rather than technical approach is expected from the authorities. It is the substantive consideration and not the pedantic approach which should govern the decision under section 119(2)(b) of the Act.

6.1 The respondent Commissioner has come to a conclusion that there was nothing on record to suggest that it was a case of genuine hardship. There is no basis for arriving at such conclusion by the respondent. Not only that, the respondent Commissioner proceeded to observe that the application of the assessee did not contain any convincing evidence to prove that the return could not be filed within extended date of 15.2.2011 and that despite the ground of sufferance of assessee’s accountant from Covid there was sufficient time. The respondent Chief Commissioner of Income Tax misdirected himself in appreciating the facts of the case of the assessee and reached to the erroneous conclusion that it was not a good case of genuine hardship.”

9.6 The Court held that the words in the section “if it considers it desirable or expedient to do so for avoiding genuine hardship” given wide powers on the Board and obligates the authority concerned dealing with the request for acceptance of the application, to consider the relevant facts and reasons which may have been advanced for condoning the delay. The object is to help the assessee, who for good and valid reasons is prevented from making an application.

10. Considering the conspectus of law amd the facts of the case emerging from the record, it is not in dispute that the observations made in the impugned order regarding that the petitioner was a habitual defaulter is misconceived, as in three out of five years, there was no delay since the due dates were extended by the authorities. Moreover, in order to do substantial justice, the period of limitation would not come as hindrance as the loss suffered by the petitioner is genuine and not set off the same would result into denial of substantial justice. The three reasons given by the assessee for delay, namely, health problems of Senior Accountant Pragna Patel, computer system having got corrupted and heads of accounts being on the verge of retirement and heavy rainfall in the month of July disrupting routine were genuine and cannot be termed as an excuse for filing delayed returns. The petitioner has explained in detail all the above reasons for delay in filing the return. The delay is also of not more than 152 days.

11. It is a settled position of law that the respondent-Board has wide powers to condone the delay and in the facts of the case, such powers ought to have been exercised judiciously so as to render substantial justice. We, therefore, find that the rejecting the application of the petitioner by the impugned order dated 16.05.2008, the respondent-Board ignored the facts and the settled legal position of law while considering the genuine claim of the petitioner to condone the delay in filing the return of the income.

12. In view of foregoing reasons, we find that in rejecting the application of the petitioner vide impugned order dated 16.05.2018, the Board, the respondent, ignored the above position of law and failed to consider the petitioner’s genuine claim for condoning the delay. Therefore, the order of the respondent dated 16.05.2018 is quashed and set aside. The application filed by the petitioner under Sec.119(2)(b) of the Income-tax Act for condonation of delay in filing the return of income for the Assessment Year 2014-15 seeking to carry forward the capital loss of Rs.1,39,41,842/- is allowed. The petition is allowed, accordingly. Rule is made absolute to the aforesaid extent.