Vrushti Aulkumar Shah Vs Principal Chief Commissioner of Income Tax (Gujarat High Court)
Summary: The Gujarat High Court allowed Vrushti Aulkumar Shah’s petition challenging the rejection dated 12 October 2021 of her application for condonation of delay in correcting a defective return for AY 2019-20. The petitioner, engaged in professional services and share trading, had filed under Section 44ADA reporting income of Rs.12,61,150 and loss of Rs.39,55,031. CPC issued a defective-return notice under Section 139(9) on 18 February 2020 and treated the return as invalid on 7 July 2020 when the defect was not removed in time.
The petitioner sought relief through the E-Nivaran portal and was advised to submit a revised return under Section 139(5), but the portal rejected the acknowledgment number of the invalidated original return. She sought condonation from the tax authorities. PCIT-1 initially condoned the delay on 7 September 2021, recognising COVID-lockdown hardship, but withdrew that order on 27 September 2021 for lack of jurisdiction. The competent authority rejected her application on 12 October 2021, holding that genuine hardship was not established.
The petitioner relied on ADCC Infocom (P.) Ltd. and an earlier Gujarat High Court decision in Special Civil Application No. 281 of 2022. The Revenue maintained that adequate time had been allowed for correction. The High Court considered the lockdown circumstances, the application materials and an affidavit from an employee of the petitioner’s chartered accountant. Relying on principles in Sitaldas K. Motwani and B.M. Malani, it held that genuine hardship under Section 119(2)(b) should be construed liberally, with substantive justice preferred over a technical approach.
The Court found the earlier order accepting the lockdown-related explanation relevant notwithstanding its withdrawal for want of jurisdiction. It quashed the rejection dated 12 October 2021, condoned the delay in applying to rectify the return and permitted the petitioner to file a revised return for AY 2019-20 after correcting the CPC-identified defects.
Cases Discussed
- ADCC Infocom (P.) Ltd. v. Principal Chief Commissioner of Income-tax — (2023) 150 taxmann.com 529 (Bombay High Court).
- Gujarat High Court, Special Civil Application No. 281 of 2022 — Order dated 26 July 2022; party names not stated in the supplied source.
- Sitaldas K. Motwani v. Director General of Income Tax and Others — (2009) SCC OnLine Bom 2195 (Bombay High Court).
- B.M. Malani v. Commissioner of Income Tax and Another — (2008) 306 ITR 196 (Supreme Court).
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
1.This petition is filed under Article 226 of the Constitution of India, in which, the petitioner has prayed for the following relief/s:
“a. To quash and set aside the impugned order dated 12.10.2021 at Annexure-L to this Petition and direct the respondent or the CPC, to condone the delay and accept the original return of income, or allow the petitioner to file a fresh return or revised return of income for A.Y. 2019-20;
b. Provide for cost of this petition;
c. Pass any other order(s) as this Hon’ble Court may deem to be fit and more appropriate in order to grant interim relief to the Petitioner.”
2. Looking to the issue involved in the present petition, learned counsel appearing for the parties jointly requested that this petition be disposed of finally at admission stage. Hence, Rule. Learned Standing Counsel Mr. Dev D. Patel waives service of notice of Rule for the respondent.
3. The brief facts leading to filing of the present petition are as under:
3.1. It is the case of the petitioner that petitioner is an individual engaged in providing professional services and also trading in shares. She filed her return under Section 44ADA of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’ for short) declaring total income of Rs.12,61,150/- and total loss of Rs.39,55,031/-. It is further stated that the Central Processing Centre (CPC) found the return defective and issued a notice under Section 139(9) of the Act. The petitioner was asked to remove the defect in her return of income within 15 days from the receipt of the notice. The said notice was issued on 18.02.2020. 3.
3.2. It is stated that the petitioner was unable to remove the defect within stipulated period given by the CPC and therefore an order dated 07.07.2020 came to be passed under Section 139(9) of the Act by treating the return filed by the petitioner as ‘invalid’. 3.
3.3. It is further stated that the petitioner submitted an application on E-Nivaran Portal of CPC to remove the tag of invalid return from her original return and give a chance to file revised return of income. It is also stated in the said application that as per Section 44ADA of the Act, she is not required to maintain Books of Accounts including Balance Sheet and Profit & Loss Account but she is only required to file the cash balance. 3.
3.4. It is further stated that the CPC replied to the application submitted by the petitioner by mentioning that since the defect was not removed, the return has been treated invalid and therefore petitioner was required to file revised return under Section 139(5) of the Act with correct details. 3.
3.5. It is also stated that the petitioner filed another application to CPC in pursuant to the reply, wherein, she mentioned that while filing the revised return, there was an error shown on the portal that the acknowledgment number of the original return, which the petitioner has to mention in the revised return, is invalid. The petitioner has also requested to remove the tag of invalid return from the original return filed by the petitioner so that the revised return can be uploaded. Similar type of application was once again submitted. However, no response was received by the petitioner from the CPC. 3.
3.6. The petitioner has further averred that petitioner thereafter filed an application before the PCIT-5, Ahmedabad and prayed that the delay in filing the return of income be condoned. The said application was submitted on 06.08.2020. Thereafter, in February, 2021, petitioner received a reply from the office of PCIT-5 that the jurisdiction to decide the said application was not with the said authority but the same is with CCIT-1, Ahmedabad i.e. the present respondent.
3.7. The petitioner, therefore, filed an application before the respondent and prayed that the delay in filing the return be condoned. Thereafter, PCIT-1, passed an order condoning the delay in filing the return of the petitioner treating the same as valid. However, PCIT-1 withdrew the said order by treating it as non est for want of jurisdiction as the jurisdiction was with the present respondent. The said order was withdrawn on 27.09.2021. Thereafter, now the respondent herein passed the impugned order on 12.10.2021, whereby, the application submitted by the petitioner for condonation of delay came to be dismissed. The petitioner has, therefore, preferred the present petition challenging the said order.
4. Learned advocate Mr. Tej Shah appearing for the petitioner would mainly contend that petitioner has shown genuine hardship caused to the petitioner and pointed out that the petitioner could not rectify the mistake of the return as suggested by the CPC within stipulated period, in spite of that, the respondent authority has rejected the application for condonation of delay submitted by the petitioner. It is submitted that the respondent authority is empowered to condone the delay in view of the provisions contained in Section 119(2)(b) of the Act. It is also contended that PCIT-1 in fact had condoned the delay after considering the same grounds mentioned by the petitioner in the application for condonation of delay submitted before the said authority. However, the said order was withdrawn on the ground that the said authority did not have jurisdiction to entertain the application. The fact remains that the same grounds were considered by another authority, in spite of that, the respondent authority has rejected the application submitted by the petitioner on the ground that the petitioner has failed to show genuine hardship. Learned advocate, therefore, urged that the impugned order passed by the respondent authority be quashed and set aside and thereby delay be condoned.
5. Learned advocate for the petitioner has placed reliance upon the decision rendered by the High Court of Bombay in the case of ADCC Infocom (P.) Ltd. v. Principal Chief Commissioner of Income-tax, reported in (2023) 150 taxmann.com 529 (Bombay). Learned advocate has also placed reliance upon the order dated 26.07.2022 passed by this Court in Special Civil Application No.281 of 2022. Learned advocate, therefore, urged that the impugned order be quashed and set aside and thereby the respondent authority be directed to accept the original return of income or allow the petitioner to file fresh return or revised return of income for the Assessment Year 2019-2020.
6. On the other hand, learned advocate for the respondent has opposed this petition and referred the averments made in the affidavit-in-reply filed by the respondent, copy of which is placed on record at page 94 of the compilation. It is submitted that the CPC granted reasonable time to the petitioner to rectify the defects pointed out by the said authority. However, the petitioner has not made any effort to rectify such defects and thereafter application has been filed for condonation of delay before the respondent authority. It is submitted that when the petitioner has failed to point out genuine hardship, the respondent authority has rightly rejected the request made by the petitioner. Learned advocate, therefore, urged that present petition may not be entertained.
7. We have considered the submissions canvassed by learned advocates appearing for the parties. We have also perused the material placed on record. It would emerge from the record that the petitioner submitted return of income for the Assessment Year 2019-2020. However, CPC issued notice to the petitioner under Section 139(9) of the Act and asked the petitioner to remove the defects in return of income submitted by the petitioner within 15 days. The petitioner could not remove the said defects within stipulated time and therefore an application was submitted by the petitioner on E Nivaran Portal of CPC. The CPC asked the petitioner to file revised return. However, the petitioner once again pointed out to the CPC that because of certain technical aspect, revised return could not be uploaded on the Portal. The petitioner, thereafter, made an application before the concerned authority i.e. PCIT-5, Ahmedabad and requested to condone the delay in filing the return of income. The said application was forwarded to PCIT-1 and thereafter PCIT-1 passed an order in favour of the petitioner by condoning the delay in filing the return and the same was treated as valid. The said order was passed on 07.09.2021. However, when the said authority i.e. PCIT-1 realized that the said authority is not having jurisdiction to pass the order, the same was withdrawn on 27.09.2021. Thereafter, the respondent passed the impugned order on 12.10.2021, by which, the application of petitioner for condonation of delay came to be dismissed on the ground that petitioner has failed to show genuine hardship.
8. We have perused the application submitted by the petitioner before the respondent authority. Copy of the said application is placed on record at page 79 of the compilation. Similar application is placed on record at page 81 of the compilation. The petitioner has specifically pointed out in the said application that because of the lock down during the period between March, 2020 to April, 2020, it was difficult for the petitioner to rectify the mistake committed in filing of the return, as suggested by the CPC. We have also perused the averments made in the memo of the application as well as the affidavit filed by the employee of the CA. Copy of the said affidavit is placed on record at page 74.
9. At this stage, we would like to refer the decision upon which reliance is placed by learned advocate for the petitioner. In the decision dated 26.07.2022 rendered in Special Civil Application No.281 of 2022, this Court has observed in para 4.2, 5, 5.4, 5.5, 5.6 and 6 as under:
“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.”
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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.”
10.In the case of ADCC Infocom (P.) Ltd (supra), the Bombay High Court has also considered similar type of issue and observed in para 8, 9, 10 and 11 as under:
“8. The expression ‘genuine hardship’ came up for consideration of the Supreme Court in case of B.M. Malani vs. Commissioner of Income Tax and another – (2008) 306 ITR 196 (SC), wherein 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.
9. In case of Sitaldas K Motwani vs. Director General of Income Tax and others – (2009) SCC OnLine Bom 2195, this Court has held that the expression “genuine hardship” used in Section 119(2)(b) of the Act should be construed liberally, particularly, in matters of entertaining of applications seeking condonation of delay and this Court was pleased to observe as under:
“15. 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 12th October, 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 here in above 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 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 hearing 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.”
10. In the aforesaid decision, it clearly indicates that the power under Section 119(2) (b) of the Act while ascertaining the ‘genuine hardship’ is to be construed liberally for the reason that the authorities can do substantive justice of disposing the matters on merits. The authorities, as observed by the Supreme Court are expected to bear in mind that ordinarily an applicant applying for condonation of delay does not benefit by lodging its claim late and refusing to condone a delay can result in a meritorious matter being thrown out at the very threshold defeating the cause of justice. Substantial justice cannot be defeated by technical considerations of delay, where there is no deliberate delay or delay on account of negligence or on account of mala fide, the authorities should have taken a justice oriented approach and if a claim is legitimately due to an applicant even if a delay has occasional due to genuine hardship that should not be denied on technicalities.
11. This takes us to the order dated 24/03/2022 passed by respondent No.1. Perusal of the order reveals that respondent No.1 has not dealt with the reasons contained in the application for condonation of delay and the application was rejected without considering the affidavit of the Charted Accountant on the premise that since the account has been audited on 25/06/2020, there is no reason for delay in filing the return. Another reason, which has given that though the petitioner had incurred losses, it had distributed dividend of Rs.302.93 lakhs. Holding that there is no financial hardship, respondent No.1 rejected the application for condonation of delay. It appears that respondent No.1 has lost sight of the provisions of Section 119(2)(b) of the Act, which speaks about genuine hardship and not the financial hardship. More so, the petitioner has filed affidavit of the Chartered Accountant describing difficulty during the relevant period and engagement, but that has not been considered at all.
11.Keeping in view the aforesaid decisions rendered by this Court as well as Bombay High Court wherein the expression ‘genuine hardship’ has been discussed, if the facts of the present case are examined, we are of the view that the petitioner has pointed out genuine hardship caused to the petitioner as a result of which the mistake committed in the return could not be rectified, as suggested by the CPC within the stipulated period. At this stage, it is also pertinent to note that in the present case one of the authorities of Revenue i.e. PCIT-1 passed an order on 07.09.2021 in favour of the petitioner, copy of which is placed on record at page 87 of the compilation. In the said order, it is specifically observed by the said authority that, ‘in view of the genuine hardship faced due to lockdown in Ahmedabad city due to the corona pandemic, the assessee could not comply with the notice issued by the CPC, Bangalore within the stipulated period’ and by giving the said finding, the order was passed by the said authority in favour of the petitioner. However, as observed hereinabove, the said authority was not having jurisdiction to pass said order and therefore the same was withdrawn. Be that as it may, the fact remains the one of the authorities of the Revenue considered the case of the petitioner and thereby granted relief in favour of the petitioner.
12.Thus, in view of the aforesaid facts and circumstances of the present case, the case of the petitioner deserves consideration. Hence, petition is allowed. The impugned order dated 12.10.2021 passed by the respondent is hereby quashed and set aside. The delay in filing the application for rectification of error committed in the return of income is condoned. The petitioner is permitted to file revised return of income for the assessment year 2019-2020 by rectifying the errors, as suggested by the CPC. Rule is made absolute accordingly.
