Madras HC condones Delay in Income Tax Return filing by co-op credit society

S 878 Kalvadangam Primary Agricultural Co-operative Credit Society Limited Vs Chief Commissioner of Income Tax (Madras High Court)

In a recent ruling, the Madras High Court addressed the delay in income tax return filing by the Kalvadangam Primary Agricultural Co-operative Credit Society Limited. Here’s a detailed analysis of the case and its implications.

An order under Section 119(2)(b) of the Income Tax Act, 1961, was challenged in W.P.No.5145 of 2024. The subsequent W.P.No.5155 of 2024 contested an intimation dated 19.10.2020 for the assessment year 2019-2020, stating that the petitioner wasn’t entitled to deductions due to non-filing of returns.

The petitioner, an agricultural co-operative credit society, faced a due date for filing the return of income for the assessment year 2019-2020 on 30.09.2019. Operating under the Tamil Nadu Co-operative Societies Act, 1983, statutory auditing of accounts was necessary. The audit completed on 30.12.2019, with the report received on 15.02.2020. Due to the delay in filing, deductions under amended 80B of the Income Tax Act were denied, leading to the impugned intimation in W.P.No.5155 of 2024.

The petitioner filed its income tax return belatedly on 26.06.2020, along with an application under Section 119(2)(b) to condone the delay. However, this application was rejected by the order challenged in W.P.No.5145 of 2024.

The Court acknowledged that the delay was due to the statutory audit process beyond the petitioner’s control. Despite lacking evidence of the audit report’s receipt date, it noted the petitioner’s assertion of receiving it on 15.02.2020. Considering the onset of the COVID-19 pandemic in mid-March 2020 and the genuine hardship faced by co-operative credit societies without statutory deductions, the Court deemed it fit to condone the delay.

Consequently,

1. W.P.No.5145 of 2024 was allowed by quashing the impugned order, condoning the delay in filing the return of income.
2. The impugned intimation in W.P.No.5155 of 2024 was quashed, and the matter remanded for assessment based on the filed return of income.
3. No costs were ordered in both petitions, and connected miscellaneous petitions were closed.

This judgment highlights the judiciary’s understanding of genuine hardships faced by entities like co-operative credit societies, offering relief through a pragmatic approach.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

An order under Section 119(2)(b) of the Income Tax Act, 1961 (the Income Tax Act) is the subject of challenge in W.P.No.5145 of 2024. W.P.No.5155 of 2024 is consequential thereto in as much as the challenge therein is to an intimation dated 19.10.2020 for assessment year 2019-2020, and such intimation was issued on the basis that the petitioner is not entitled to deduction on account of non filing of the returns of the relevant years.

2. The petitioner is an agricultural co-operative credit society. The due date for filing the return of income for assessment year 2019-2020 was 30.09.2019. As a co-operative society functioning under the Tamil Nadu Co-operative Societies Act, 1983, the petitioner is required to get its accounts audited by a statutory auditor. Such statutory audit was completed on 30.12.2019. The petitioner asserts that the audit report was received only on 15.02.2020. On account of not filing the return of income, the petitioner was not entitled to deductions as per amended 80B of the Income Tax Act. This resulted in the intimation impugned in W.P.No.5155 of 2024.

3. In these circumstances, the petitioner filed its return of income belatedly on 26.06.2020 and also submitted an application under Section 119(2)(b) requesting the Central Board of Direct Taxes to condone the delay in filing the return of income. Such application was rejected by the order impugned in W.P.No.5145 of 2024.

4. Learned counsel for the petitioner referred to the impugned order and pointed out that the Commissioner of Income Tax recognised that the petitioner could not file its return of income until the statutory audit was completed. By pointing out that the statutory audit was not conducted by an auditor engaged by the petitioner and such report was received only in February 2020, he submits that there is sufficient justification to condone delay. He also highlights that the petitioner would be put to genuine hardship if the delay is not condoned.

5. Mrs. S. Premalatha, learned junior standing counsel, accepts notice on behalf of the respondents. By drawing reference to the impugned order, she points out that the application was rejected because the petitioner did not provide any reasons for the delay of 180 days between 30.12.2019 and 26.06.2020.

6. In the impugned order, at paragraph 4.1, it is recorded as under:

“4.1 Hence, the delay in filing the return of income on or before the due date in this case is attributable to the delay in getting the accounts audited by the statutory auditors appointed under the State Law i.e. the delay is due to the circumstances beyond the control of the assessee.”

Thus, the Commissioner of Income Tax was acutely conscious of the fact that the return of income could not be filed until the accounts were audited by the statutory auditor appointed under the Tamil Nadu State Co-operative Societies Act. Such statutory audit was admittedly completed only on 30.12.2019. Although the petitioner has not placed evidence of the date of receipt of the audit report, it is asserted in the writ petition that such audit report was received on 15.02.2020. The onset of the COVID-19 pandemic was on or about 15.03.2020. The petitioner is a co-operative credit society and undoubtedly if such society is unable to avail of statutory deductions, there would be genuine hardship to its members. By taking all these facts and circumstances into account, I am of the view that it is a fit case to condone delay on the ground of genuine hardship.

7. For reasons set out above,

(i) W.P.No.5145 of 2024 is allowed by quashing the order impugned therein and holding that the delay in filing the return of income is condoned.

(ii) As a consequence, the impugned intimation in W.P.No.5155 of 2024 is quashed and the matter is remanded for assessment based on the return of income filed by the petitioner. W.P.No.5155 of 2024 is disposed of on the above terms.

(iii) There will be no order as to costs in both petitions. Consequently, connected miscellaneous petitions are closed.