Shailesh Vitthalbhai Patel Vs Chief Commissioner of Income Tax 1 (Gujarat High Court)
The Gujarat High Court considered a writ petition challenging an order dated 30.11.2021 passed under Section 119(2)(b) of the Income Tax Act, 1961, whereby the Chief Commissioner of Income Tax rejected the petitioner’s application for condonation of a 23-day delay in filing the return of income for Assessment Year 2020-21. The petitioner, an individual, filed the return on 10.03.2021, declaring a total loss of ₹15 lakh, whereas the extended due date for filing the return was 15.02.2021. Along with the return, the petitioner submitted an application seeking condonation of delay supported by affidavits of the petitioner and his accountant.
The petitioner explained that his accountant, who handled the tax compliance work, suffered from COVID-19 during October-November 2020. The petitioner’s business also operated under lockdown restrictions up to August 2020, limiting office attendance. The accountant had to complete accounts of three group concerns, resulting in a backlog that delayed completion of the petitioner’s return. It was further stated that after the returns of the partnership firms were filed, the petitioner realised he had incurred losses from derivative transactions, whereupon the return was finalised on 08.03.2021, uploaded on 10.03.2021, and the audit report was uploaded on 20.03.2021.
The Revenue opposed the petition, contending that the petitioner had adopted a lethargic approach and failed to exercise due diligence despite the due date having already been extended. It relied upon CBDT Circular No. 9/2015, submitting that condonation under Section 119(2)(b) could be granted only where genuine hardship and the correctness of the claim were established.
The High Court examined Section 119(2)(b) and the CBDT Circular, observing that the provision empowers the Board to authorise acceptance of delayed claims for exemption, deduction, refund, or other relief where condonation is desirable to avoid genuine hardship. The Court noted that the Circular requires consideration of both the genuineness of the claim and whether genuine hardship exists, while permitting verification of the claim by the Assessing Officer.
Referring to judicial precedents interpreting the expression “genuine hardship”, the Court observed that the provision is intended to enable authorities to adopt a liberal and justice-oriented approach. It held that the wide discretionary powers under Section 119(2)(b) obligate the authority to consider the reasons explaining the delay rather than adopt a purely technical approach.
Applying these principles, the Court found that the petitioner had furnished cogent reasons for the delay. It held that the illness of the accountant due to COVID-19, coupled with the disruption caused by the pandemic and lockdown restrictions, constituted genuine hardship. The Court observed that the Chief Commissioner erred in concluding that no convincing evidence of hardship had been produced and misdirected himself while appreciating the facts. It further held that, in matters involving condonation of delay, substantive justice should prevail over a pedantic approach.
Accordingly, the Gujarat High Court set aside the order dated 30.11.2021, directed that the petitioner’s return of income for Assessment Year 2020-21 be accepted, and ordered that it be dealt with by the Assessing Officer in accordance with law. The writ petition was allowed and the Rule was made absolute.
Cases Discussed
- Pala Marketing Co-Operative Society Limited vs. Union of India (Kerala High Court), (2009) 311 ITR (Ker)
- Sitaldas K. Motwani vs. Director General of Income Tax and others (Bombay High Court), (2009) SCC Online 2195
Five Alternative SEO Titles
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FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
Having regard to the nature and compass of the dispute and with the consent and request of learned advocates appearing for the parties, this Special Civil Application was taken up for final consideration.
1.1 Rule returnable forthwith. Learned advocate for the respondent waives service of Rule.
1.2 Heard learned advocate Mr. Dhinal Shah for the petitioner and learned senior advocate Mr. M. R. Bhatt for M. R. Bhatt & Co. for the respondent.
2. The petitioner by filling the present petition under Article 226 of the Constitution has prayed to set aside order dated 30.11.2021. By the said order passed under section 119(2) (b) of the Income Tax Act, 1961, the Chief Commissioner of the Income Tax-1, Ahmadabad-respondent herein, rejected the application of the petitioner and refused to condone the delay occurred in filling the Return of Income Tax for the Assessment Year 2020-2021. The petitioner has also prayed to condone the delay in filling the Return.
3. Noticing the basic facts, the petitioner who is an individual, filed his Return of Income under the provisions of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year 2020-2021 declaring total loss of Rs. 15 lakhs. The Return was filed on 10.3.2021. The date of filling of the Return, as extended by the Income Tax authorities, was 15.2.2021. In that view, there was delay of 23 days in filling the Return of Income. Alongwith filing of the Return, the petitioner-assessee submitted an application dated 30.3.2021 for condonation of delay. He also filed his own affidavit as well as affidavit of his accountant to accompany the delay condonation application.
3.1 The assessee inter auia stated explaining the delay that his all accounts were handled by his accountant named Mr. Bharat Khuman, who had been suffering from Corona virus during the October-November, 2020. The place of business of the petitioner was under lockdown upto August, 2020 and there was restriction on the number of persons to work in the office, it was stated. It was further stated that the said accountant had to finalise the accounts of group of three companies and that backlog had piled up, due to which he was unable to complete the work upto 10.3.2021.
3.2 It was stated by the petitioner in the petition that the petitioner was partner in other firms also and Return of those firms were filed on 15.2.2021 only. It was after details of such Returns became available from the derivative transactions undertakern in the individual capacity, it was found that the petitioner had suffered loss. This aspect was brought to the notice of the accountant. The chartered accountant was consulted and the Return was finalised on 8.3.2021, which was ultimately uploaded on 10.3.2021 and audit report was uploaded on 20.3.2021.
4. Learned advocate for the petitioner submitted that the respondent overlooked the reasons which were genuine for belated filling of Return of Income. It was submitted that the delay was for 23 days and the petitioner had no intention not to file the return but on account of the aforementioned circumstances, filling of Return got delayed. It was further submitted that the petitioner paid tax to the tune of about more than two lakhs in the preceding years and has been filling return timely in all previous years. It was submitted that when the accountant was down with the Covid 19 and could not cope up with the work due to his illness, it was a valid cause for condoning the delay. It was submitted that even the Apex Court took suo motu cognisance of the pandemic and extended the period of limitation excluding the period of pandemic in computing of limitation.
4.1 The affidavit-in-reply and thereafter the affidavit-in-rejoinder have been filed. In the reply affidavit, it was inter alia contended by the respondent that the petitioner assessee was lethargic in his approach and that when there was lack of due diligence on part of the assessee, the competent authority is justified in exercise of powers under section 119(2)(b) of the Act not to accept the Return of Income for which the date even extended to 15.2.2021. The petitioner, it was submitted, filed his Return of Income only on 10.3.2021. The application for condonation of delay was filed subsequently, it was contended.
4.2 Circular No. 9/2015 dated 9.6.2015 issued by the the Central Board of Direct Taxes was referred to and on that basis, it was submitted that the condonation could be considered only by exercising of powers under section 119(2)(b) of the Act in genuine cases. It was stated that decision of the respondent was based on two aspects namely merits of the genuine hardship and correctness of the claim.
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 auia contemplates that no condonation application for claim of refund or loss shall be entertained beyond six years. It inter auia 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 non-consideration 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.
7. For the aforesaid reasons, the impugned order dated 30.11.2021 of the respondent refusing to condone the delay of 23 days in filing the return of the income of the petitioner assessee deserves to be set aside. Accordingly, it is set aside. The Return of Income of the petitioner assessee for the Assessment Year 2020-2021 shall be accepted and shall be dealt with in accordance with law by the Assessing Officer. This petition is allowed accordingly. Rule is made absolute.
