Introduction
Section 119(2)(b) of the Income Tax Act, 1961(‘the Act’), plays a critical role in India’s tax framework. It provides essential support to taxpayers, who face challenges in meeting crucial tax-related deadlines due to valid reasons. This provision allows for the granting of time extensions, recognizing that unforeseen circumstances and legitimate difficulties can hamper the timely compliance with tax responsibilities. Understanding Section 119(2)(b) is essential for taxpayers navigating the complexities.
Section 119(2)(b) empowers “Central Board of Direct Taxes” (CBDT) to direct Income tax authorities to allow any claim for exemption, deduction, refund and any other relief under the Income Tax Act, 1961 even after the expiry of time limit to make such claim. However, such claims will only be allowed by the income tax authority provided, making such a claim within the prescribed due date was genuinely out of the control of the taxpayer.
For clarification Section 119(2)(b) reproduced here:
“…the Board(CBDT) may, if it considers it desirable or expedient so to do so 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;…”
Understand the significance of Timely filing:
Section 139 of the Income Tax Act necessitates taxpayers to adhere to designated time frames for filing their returns. The significance of these time constraints is manifold, encompassing the timely collection of tax revenues, the precision of tax liability assessments, and the facilitation of refund claims or loss carry forwards.
When taxpayers miss the prescribed deadlines, it can have significant consequences. Filing tax returns after the due date can carry substantial implications, such as the potential forfeiture of refund claims and the inability to carry forward losses from particular year. This shows the importance of adhering to the tax deadlines specified in Section 139 of the Income Tax.
What is condonation of Delay in Filing ITR:
The Fundamental objective of Section 119(2)(b) is to offer assistance for taxpayers facing authentic difficulties or hindrances that causes delays in their application or claim submissions. This provision acknowledges that strict compliance with tax-related deadline may not always be achievable, particularly in situations involving unforeseen challenges.
Condonation of delay in filing ITR is a special relief provided by the Income Tax Department to the taxpayers for late filing or verification of ITR. To avail this benefit, the assessee must file a request for condonation of the delay in filing ITR to Commissioner of Income Tax. If the Commissioner of Income Tax deem fit, they can accept the request and allow the taxpayer to file the ITR.
Some important points related to Condonation:
a) Aims for Fairness and Equity: It seeks to ensure fairness and equity by taking into account genuine explanations for the delay.
b) Preservation of Rights: It helps assessee to preserve their rights when strict adherence to deadlines is crucial, such as in legal cases or financial matters.
c) Case-Specific: Condonation is not guaranteed and is determined on a case-by-case basis. A compelling explanation of the delay is essential when seeking condonation of delay.
d) Discretionary Decision: The decision is to grant condonation of delay is made at the discretion of relevant authorities and courts.
The core principle behind condonation of delay is to strike a balance between enforcing deadlines and recognizing that unavoidable situations can sometimes hinder timely compliance with legal or administrative requirements.
Time limit to the application for Condonation:
CBDT circular no. 09/2015 imposes a limitation on the timeframe for considering condonation applications. Application of condonation u/s 119(2)(b) can be filed within 6 years from the end of the relevant assessment year.
Time limit to process the Application:
The Circular No. 09/2015 emphasizes the importance of timely decision making. The application filed has to be accepted/rejected within 6 months from end of the month in which application was submitted. This provision ensures that taxpayers receive a prompt resolution to their condonation of delay requests.
How to file the application u/s 119(2)(b) ?
Step 1: A detailed note stating as to why the return could not be filed has to be submitted along with the documents supporting the claim. This has to be submitted to the appropriate authority, usually “Principal Commissioner of Income Tax” (PCIT) or the “Commissioner of Income Tax” (CIT).
Step 2: Once the documents are submitted CBDT will direct PCIT to collect the required documents to verify whether there was a genuine hardship to file the return of income within due date.
Step 3: PCIT in turn will direct jurisdictional AO to provide the report based on the documents. AO can also seek for additional documents which he considers necessary to verify the genuineness for the delay.
Step 4: Once AO collects all the necessary documents a report will be prepared and submitted with the PCIT. PCIT will provide all the information to the CBDT.
Step 5: Upon receipt of report from PCIT but before concluding the case the CBDT will issue a “Show Cause notice” (SCN) to the assessee to give a detailed reply as to why the “Return of Income” (ROI) filed should be condoned.
Step 6: Once the Assessee submits the response, the CBDT will either accept and condone the delay in filing or reject the application.
Upon acceptance of Application u/s 119(2)(b):
If the Return of Income is condoned, the CBDT will issue an order u/s 119(2)(b). Upon receipt of the same, the Assessee has to submit a request with jurisdictional AO to provide a letter with DIN.
The AO will go through the documents and issue a letter with DIN and with the same DIN assessee has to file return u/s 119(2)(b).
Case Laws:
There are certain judicial precedents regarding condonation of delay where the Judicial courts has also allowed to file the return after it had become time barred but only in the case where the Genuine Hardship (means “not fake or counterfeit, real”) for not filing the return exists.
1) The Honourable Supreme Court in the case of “B.M. Malani Vs. Commissioner of Income Tax, 174 Taxman 363 (SC) (2008)” held that ingredients of genuine hardships must be determined. The court further held that the Commissioner has the discretion not to accede to the request of the assessee, but that discretion must be judiciously exercised. Any compulsion to pay unjust dues as per se would cause hardship.
2) The Honourable Bombay High Court in case of “Sitaldas K. Motwani Vs. Director General of Income Tax (International Taxation), New Delhi, reported in 187 Taxman 44(Bom) (2010)” held that while considering any application u/s 119(2)(b) the term genuine hardship has to be construed liberally and has held that CBDT cannot examine refund closely to see, if the claim succeeds. The legislature has conferred the power to condone delay to enable the authorities to do substantive justice to the parties by disposing off matters on merit. When the refund claim is correct and genuine the authority must satisfy itself about the correctness and genuineness of the claim but it doesn’t mean that the authority should examine the refund claim closely. All that authority has to see that whether the case needs consideration and not bound to be fail by some apparent defect. The authority is not expected to go deep into the niceties of law.
Conclusion:
In conclusion, Section 119(2)(b) and Circular No. 09/2015 offer a lifeline to taxpayers facing genuine hardships and obstacles in meeting tax deadlines. This provision reflects the flexibility and fairness of the Indian tax system, ensuring that individuals and businesses are not unfairly penalized for circumstances beyond their control. This provision serves as a crucial safety net in India’s taxation framework.
Understanding the process and adhering to the prescribed steps can help taxpayers navigate this aspect of tax compliance effectively.
****
Authors:
Karan Vakharia, Partner
Nitesh Jha, Manager
Palash Jain, Associate Consultant
(Authors can be reached at [email protected] | Contact: +91 98709 25375,)
Author Bio
