Condonation of Delay for Non-Filing of Return of Income due to Genuine Hardship

Discover the process of condonation of delay for non-filing of income tax returns due to genuine hardship under Section 139(1) or (4) of the Income Tax Act. Learn about the mandatory filing deadlines, consequences of delayed filing, and the relief provided by Section 139(8A) of the Finance Act, 2022. Explore the conditions and procedures for condonation, including the application process and authorities involved. Understand the significance of genuine hardship and how authorities exercise discretion in accepting or rejecting applications. Stay informed about recent updates and case laws related to the condonation of delay in filing income tax returns.

Condonation of Delay for Non-Filing of Return of Income within the time limit prescribed under section 139(1) or (4) of the Income Tax Act, if the delay caused due to “Genuine Hardship”

We all know that if the Taxable Income exceeds basic exemption limit then, it is mandatory to file the income tax return on its due date specified u/s 139(1). However, if it has not been filed on its due date then another option has been given u/s 139(4) to file the return of Income within the prescribed time limit which will be earlier of the following:

a. Three months prior to the end of the relevant assessment year.

b. Before the completion of the assessment.

Let us discuss in detail the above provisions and the remedy available even if the return has not been filed within the time limit prescribed u/s 139(4).

As per Section 139(1) of the Income Tax Act,

 Every person,—

 (a) being a company or a firm; or

 (b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax,

shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed 

Date Prescribed for filing of the Return of Income are as under:

What happens if we do not file our Income Tax Returns on its due date prescribed under section 139(1)?

Even though the income tax department will allow to file return after the due date prescribed u/s 139(1) considering the provisions of section 139(4) but the consequences will be that the department will impose penalty u/s 234F for delay in filing the return and will also not allow to carry forward capital loss as well as Losses on Business and Profession.

What if the assessee has not filed its return of Income within the time limit prescribed under sub section (1) or (4) of section 139?

It is very much clear from the above explanations of section 139(1) & (4) that the Income Tax Department will not allow to file the return after expiry of the time limit prescribed under the said sub-section.

A relief has been provided through the Finance Act, 2022 by insertion of section 139(8A) where it has been said that assessee can file its return even after the expiry of time limit prescribed under sub-section (1) or (4), at any time within twenty-four months from the end of the relevant assessment year.

Now the question arises that what if the Tax has been deducted on the Income reflecting in 26AS but the return has not been filed within the time limit prescribed under section 139(1) or 139(4)? Whether the department will allow to file the return in case of refund after expiry of the time limit prescribed and will refund the TDS amount?

Even though assessee can file its return of income u/s 139(8A) after expiry of the time limit prescribed under sub section (1) or (4) but first proviso to sec 139(8A) provides that an updated return cannot be filed, where such return result into refund or increases the refund due on the basis of return furnished under sub section (1) or (4).

A relief has been provided by the CBDT via Circular No. 9/2015 dated 09.06.2015 where it had provided the guidelines on the conditions for condonation of delay in filing the return claiming refund or returns claiming carry forward of loss and set-off and the procedure to be followed on such matters using its power referred under section 119(2)(b) of the Act.

a. Where the refund or claims amount is up to Rs. 10 Lakhs for each assessment year, then the application shall be made to the Ld. CIT/PCIT for acceptance or rejection of such application.

b. Where the refund or claims amount exceeds Rs. 10 Lakhs upto Rs. 50 Lakhs for any one assessment year then the application shall be made to the Ld. CCIT/PCCIT for acceptance or rejection of such application.

Example 1: Assessee wants to file the return for the AY 2020-21 and AY 2021-22 and the amount of refund in AY 2020-21 is 9 Lakhs and in AY 2021-22 is 9.50 Lakhs, then in this case the point no. (a) will be applicable and application is required to be made to CIT/PCIT as the claim has not been exceeded Rs 10 Lakhs in any one assessment year.

Example 2: Assessee wants to file the return for the two assessment years i.e. AY 2020-21 and AY 2021-22 and the amount of refund in AY 2020-21 is Rs. 9.50 Lakhs and in AY 2021-22 is 15 Lakhs, then in this case the point no. (b) will be applicable and application is required to be made to CCIT/ PCCIT as claim in any assessment year exceeds Rs. 10 Lakhs.

c. Where the refund or claims amount exceeds Rs. 50 Lakhs, then the application shall be considered by the Board.

Application for the condonation of delay can made within a period of six years from the end of assessment year for which the application has been made. Where the refund has been arisen consequent to a court order then the period for which the proceeding was pending before the court of law shall be ignored while calculating the period of six years provided that the application has been made within a period of six months form the end of month in which the order has been passed or the end of Financial Year, whichever is later.

If the application has not been filed within the above prescribed time limit, then no further time will be provided to make an application to the delegated authorities for condonation of delay.

While considering the application by the delegated CIT/PCIT/CCIT/PCCIT, it shall be ensured by them that the case is of Genuine hardship and on merits. Further they have to ensure that the income/ Loss declared is genuine and correct and for this they can give direction to the jurisdictional assessing officer to make the necessary enquiries. So, after submission of the application there is a possibility that further notices may be received from the assessing officers regarding submission of the books, documents and supportings so as to satisfy themselves about the claim. Application for condonation shall be disposed off by the delegated authorities within a period of six months from the end of the month in which the application has been received.

Before accepting the application for refund/ supplementary claim of refund, the following conditions must be checked by the delegated authorities.

a. Income declared is not assessible in the hands of any other person.

b. No interest will be provided on such belated claim of refund u/s 234E.

c. Refund has been arisen as a result of excess TDS/TCS or excess payment of advance tax/ self-assessment tax.

There are certain case laws regarding the matter related to 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 for not filing the return exists.

a. The Hon’ble Supreme Court in the case of B.M. Malani Vs. Commissioner of Income Tax, 174 Taxman 363 (SC) (2008) defined the term ‘Genuine Hardship’ which means “not fake or counterfeit, real, not pretending (not bogus or merely a ruse)” or ‘genuine difficulty’ and held that the ingredients of genuine hardship must be determined keeping in view of the dictionary meaning thereof and the legal conspectus attending thereto. 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 per se would cause hardship.

b. In the case of CBDT  Vs M/s Vasudev Adigas Fast Food Pvt Ltd dated 02nd July, 2021 having Writ Appeal No. 272/2020 (T-IT), the Hon’ble High court of Karnataka, Bangalore   held that since the promoters of the assessee company was in the dispute due to which a petition has been filed before the Company Law Board (CLB) alleging the oppression and mismanagement by the Investors and because of the pendency of the proceeding the statutory audit for the FY 2012-13 & 2013-14 has not been completed with the prescribed time limit. Further where assessee faces any hardship, CBDT by using it power prescribed u/s 119(2)(b) of the Act can authorize any income tax authority t admit application or claim for exemption, deduction or refund or any other relief and the said authority has to examine the return so filed on merits in accordance with law. The reason given by the assessee was beyond the control and the genuine hardship exists, the delay should be condoned upholding the order passed by the learned Single Judge.

c. The Hon’ble Bombay High Court in the 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 of the 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.

Hence, it is clear from the above case judgements and Circular No. 9/2015 dated 09.06.2015 that the authorities can condone the delay and will allow to file the return to claim refund/ carried forward of lossess provided the non-filing of return was due to some genuine reason and based on facts.