Andhra Pradesh HC: CBDT Circular Cannot Curtail Statutory Power Under Section 119(2)(b); Rejection of Refund Claim Solely on Six-Year Limitation Set Aside

Bhupathi Hotels Limited Vs Centralized Processing Centre (Andhra Pradesh High Court)

Andhra Pradesh HC: CBDT Circular Cannot Curtail Statutory Power Under Section 119(2)(b); Rejection of Refund Claim Solely on Six-Year Limitation Set Aside

The Andhra Pradesh High Court held that the statutory power conferred under section 119(2)(b) to condone delay for admitting claims for refund or other relief cannot be curtailed solely by the six-year time limit prescribed in CBDT Circular No. 9/2015. The Court observed that section 119(2)(b) itself does not prescribe any limitation period, but vests the authority with discretionary power to condone delay where doing so would avoid genuine hardship. Consequently, rejection of an application solely on the basis of the Circular, without considering the assessee’s explanation on merits, is legally unsustainable.

In the present case, the petitioner’s applications under section 119(2)(b) seeking condonation of delay and grant of refund for Assessment Years 2013-14 and 2015-16 were rejected exclusively on the ground that they had been filed beyond six years, as stipulated in CBDT Circular No. 9/2015. The petitioner explained that the delay resulted from severe financial difficulties, closure of business, and the Managing Director’s health issues. However, the authority failed to examine these grounds and mechanically rejected the applications by applying the Circular.

The High Court held that while CBDT circulars are binding on departmental authorities, they cannot override or restrict the scope of the statutory discretion conferred by section 119(2)(b). Accordingly, the Court set aside the impugned orders and directed the authorities to reconsider the petitioner’s refund claims on merits, after taking into account the explanation for the delay, and to pass appropriate orders within six weeks. The writ petitions were allowed.

Cases Discussed

• W. P.No.29398 of 2024 (Andhra Pradesh High Court), dt.29.01.2026
• W. P.No.31360 of 2023 (Telangana High Court), dt.24.11.2023

FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT

1. As the issue involved in these writ petitions is similar, there are being disposed of by this common order. The petitioner aggrieved by separate order dt.29.01.2024 passed by the 3rd respondent, whereby and whereunder rejected the application for condonation of delay in claiming refund under Section 119 (2)(b) of Income Tax Act, 1961 in relation to the assessment years 2013-14 & 2015-16 respectively.

2. It is the case of the petitioner that, it had filed income tax returns for the assessment years 2013-14 on 27.09.2014 and in relation to assessment year 2015-16 on 05.09.2016. It is further case of the petitioner that due to the financial difficulties faced by it, the business of the petitioner got wound up. It is further stated that due to health problems of the Managing Director of the petitioner concern, it could not approach the respondent authorities in time to claim refund.

3. It is further case of the petitioner that, in those circumstances he filed two (02) separate applications dt.08.02.2023 seeking to condone the delay in claiming refund for the assessment years 2013-14 & 2015-16 under Section 199(2)(b) of the Act. The said applications were dismissed by two separate orders dt.29.01.2024 by the 3^rdrespondent on the ground that as per the CBDT Circular No.9/2015, dt.09.06.2015, no condonation application for claim of refund/loss shall be entertained beyond six (06) years from the end of the assessment year for which such application/claim is made. It was further stated in the impugned orders that the limit of six (06) years shall be applicable to all the authorities having powers to condone the delay as per the above prescribed monetary limits, including the board. Aggrieved by the said orders, the above writ petitions are filed.

4. On the other hand, the respondents have filed counter affidavit stating that the due date for filing the return of income for audited cases, for the assessment year 2013-14 was 31.10.2013, however the petitioner did not file its return of income as per Section 139(1) of the Act, but filed on 27.09.2014. It was further stated that as per Section 239 of the Act, the assesse has to file a Form for claim of refund, but however the affidavit filed in support of the writ petition is silent, whether any such Form had been filed. It was further stated that as per Circular No.9/2015, dt.09.06.2015, the application for condone of delay cannot be entertained beyond six (06) years from the end of assessment year for which such application has been filed.

4. Heard counsel for the petitioner and the learned Standing Counsel appeared for Income Tax Department.

5. Perused the record.

6. The learned counsel for the petitioner would submit that the impugned orders passed by the respondent No.3 is liable to be set aside inasmuch as the same were passed without application of mind in a mechanical manner as the authority did not deal with the grounds raised in the application filed under Section 119(2)(b) of the Act. He would further submit that the reasons mentioned in the applications were not considered in its proper prospective inasmuch as the 3^rdrespondent failed to take note of the difficulties faced by the petitioner in the business.

7. On the other hand, the counsel for the department would submit that in view of Circular No.9/2015, dt.09.06.2015, the applications filed by the petitioner cannot be considered as the same were filed beyond the period of six (06) years, while supporting the orders under challenge.

8. For proper appreciation of the case of the petitioner Section 119(2)(b) of the Income Tax Act, 1961 is reproduced hereunder:-

“Section 119(2)(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, authorise any income-tax authority, 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.”

9. A reading of the above provision would clearly indicate that the intention of the legislature was to take a liberal approach, whenever an application is filed under the above provision of law. Further, under Section 119(2)(b) of the Act, the power is conferred on the 3^rdrespondent to condone the delay in furnishing the returns or an appropriate application within a reasonable period of time. A further perusal of the above provision would make it clear that, there is no specific time prescribed for condonation of delay, meaning thereby discretion is given to the 3^rd respondent to exercise the same in proper prospective, especially taking into account the difficulties faced by the assessees.

10. Further, the reasoning given by the 3^rdrespondent, while rejecting the applications of the petitioner do not stand for legal scrutiny inasmuch as the circulars issued by Central Board of Direct Taxes would be binding on the authorities, however the same is not binding on this Court, especially while exercising jurisdiction under Article 226 of the Constitution of India. Apart from the same, fixing the time limit under the circular aforementioned is not tenable, as the same would run contrary to Section 119(2)(b) of the Act.

11. Though, the petitioner has challenged the validity of Circular No.9/2015, dt.09.06.2015, during the course of hearing the counsel for the petitioner had given up the same.

12. In nutshell, the 3^rdrespondent is conferred with the power under Section 119(2)(b) of the Act, to condone the delay on the part of assessees in filing the returns or appropriate applications. In such circumstances, rejecting the applications filed by the petitioner on the ground that the same is beyond a period of six (06) years as per the Circular No.9/2015, dt.09.06.2015 is not sustainable under law. Further, our view is also fortified by the decision rendered by coordinate bench of this Court in W.P.No.29398 of 2024, dt.29.01.2026 and judgment of Hon’ble High Court of Telangana in W.P.No.31360 of 2023, dt.24.11.2023.

13. Accordingly, the impugned orders dt.29.01.2024 are set aside with a direction to the respondents to consider the claim of the petitioner for refund and pass appropriate orders, as expeditiously as possible, within a period of six (06) weeks from the date of receipt of copy of this order.

14. In the result, the Writ Petitions are allowed. There shall be no order as to costs.

As a sequel, pending applications, if any shall stand closed.