Section 11 exemption cannot be denied merely for late filing of Form 10B

Sarvodaya Charitable Trust Vs ITO (Exemption) (Gujarat High Court)

Gujarat High Court reviewed a petition filed by Sarvodaya Charitable Trust, a public charitable trust, challenging the rejection of its application for condonation of delay in filing Form 10B under Section 119(2)(b) of the Income Tax Act, 1961. The trust claimed that the delay was due to an oversight, as the trustees assumed that the auditor had completed the e-filing process. The Income Tax Department disallowed the exemption under Section 11, leading to a demand notice of Rs. 1.67 crore. The trust later filed the audit report and requested condonation of delay, which was denied by the Commissioner of Income Tax (Exemption). The trust then approached the High Court, arguing that the rejection was a rigid interpretation of the law and that the delay was inadvertent.

The IT department, represented by Ms. Mauna Bhatt, defended the rejection, stating that filing the audit report was mandatory and that the trust had not provided a compelling reason for the delay. The department also cited procedural limitations in reopening assessments beyond statutory deadlines. The High Court considered both arguments, focusing on whether the Commissioner exercised discretion judiciously. The trust cited past judicial precedents favoring a lenient approach to condonation in similar cases. However, the IT department maintained that the law required strict adherence to filing deadlines. The court’s final decision emphasized the importance of compliance while also considering genuine hardships faced by taxpayers in procedural lapses.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

By this writ-application under Article 226 of the Constitution of India, the writ-applicant, a public charitable trust, has prayed for the following reliefs :

“(a) quash and set aside the impugned orders at Annexure-A to this petition and direct the respondent no.2 to condone the delay;

(b) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the impugned notice dated 28.8.2018 at Annexure-C to this petition.

(c) any other and further relief deemed just and proper be granted in the interest of justice;”

2. The facts giving rise to this writ-application may be summarised as under :

3. The writ-applicant is a public charitable trust. The writ-applicant seeks to challenge the order passed by the respondent no.2 dated 19^th August 2019 under Section 119(2)(b) of the Income Tax Act, 1961 (for short, ‘the Act 1961’), rejecting the application filed by the writ-applicant for condonation of delay in filing the Form no.10B of the Act 1961 for the Assessment Year 2016-17. The writ-applicant also seeks to challenge the rectification order dated 12^th February 2020, wherein the respondent no.2 rejected the rectification application.

4. It is the case of the writ-applicant that being a public charitable trust, it is registered with the Charity Commissioner as well as with the Income Tax authorities under Section 12A of the Act 1961 past more than 30 years. The books of accounts of the writ-applicant are being audited regularly and the return of income is also filed without any issues. For the Assessment Year 2016-17, the due date for filing the return of income was extended from 30^th September 2016 to 17^th October 2016 vide order under Section 119 of the Act 1961 dated 9^th September 2016. The Auditor of the writ-applicant filed the audit report in the Form no.10B under Section 12A(b) of the Act 1961 on 6th October 2016. The said document was required to be confirmed by the writ-applicant using the online account. Unfortunately, the trustees of the trust failed to confirm the same and, as a result, the audit report did not get e-filed alongwith the return of income.

5. An order under Section 143(1) came to be passed dated 17^th March 2018 rejecting the benefit of exemption to the writ-applicant and a demand notice for Rs.1,67,41,980=00 came to be issued on 28^th August 2018. The notice referred to above stated the reason for demand on account of non e-filing of the audit report in the Form no.10B and suggested that the same may be filed with a request to condone the delay.

6. It is the case of the writ-applicant that the aforesaid notice ultimately brought the fact to their knowledge as regards the non-filing of the audit report.

7. On receipt of the demand notice dated 28^th August 2018 referred to above, the writ-applicant e-filed the audit report in the Form no.10B on 2^nd September 2018 and requested to condone the delay vide letter dated 5^th September 2018 addressed to the respondent no.2. The respondent no.2, vide his reply dated 23^rd October 2018, informed the writ-applicant that no ground for condonation of delay was made out and that it was only after the issuance of the demand notice that the writ-applicant had e-filed the audit report.

8. On 12^th November 2018, the writ-applicant replied to the respondent no.2 explaining the entire chain of events and requested to condone the delay. However, another notice dated 26^th December 2018 came to be issued to the writ-applicant asking the trustees or any legal representative to remain present with the documentary evidence for the purpose of substantiating the claim.

9. The writ-applicant appeared before the respondent no.2 and tried to make good its case for the purpose of condonation of delay. However, the application ultimately came to be rejected vide the order dated 19^th August 2019.

10. It appears from the materials on record that relying on the Circular No.10 of 2019 issued by the Central Board of Direct Taxes, a rectification application came to be filed by the writ-applicant before the respondent no.2. However, vide order dated 12^th February 2020, the rectification application also came to be rejected.

11. Being dissatisfied with the two orders referred to above passed by the respondent no.2, the writ-applicant is here before this Court with the present writ-application.

SUBMISSIONS ON BEHALF OF THE WRIT-APPLICANT :

12. Mr. B. S. Soparkar, the learned counsel appearing for the writ-applicant vehemently submitted that the impugned orders passed by the respondent no.2 are patently errorneous in law. According to Mr. Soparkar, the respondent no.2 ought to have appreciated that it was a bonafide mistake on the part of the trustees who believed that it was the Auditor who was obliged to upload all the required documents without any follow-up action on their part. Mr. Soparkar would submit that it was only after the exemption was disallowed and demand was raised that the issue came to the knowledge of the writ-applicant. It is argued that the delay in electronically filing was caused due to the circumstances beyond the control of the writ-applicant.

13. It is also pointed out that the writ-applicant filed the report immediately upon having come to know that the audit report could not be uploaded in accordance with law.

14. Mr.Soparkar would submit that the respondent no.2 ought to have adopted a liberal approach for the purpose of condoning the delay rather than adopting a highly pedantic approach.

15. Mr.Soparkar, in support of his above noted submissions, has placed reliance on the following two decisions of this High Court :

(1) Jai Vijay Express Carriers vs. Commissioner of Income Tax-III, (2013)34 com 61 (Gujarat);

(2) Commissioner of Income Tax-IV vs. Xavier Kelavani Mandal (P) Ltd., (2014)41 com 184 (Gujarat)

16. In such circumstances referred to above, Mr.Soparkar prays that there being merit in his writ-application, the same may be allowed and the two impugned orders be quashed and set-aside.

SUBMISSIONS ON BEHALF OF THE RESPONDENTS :

17. On the other hand, this writ-application has been vehemently opposed by Ms.Mauna Bhatt, the learned senior standing counsel appearing for the Revenue. Ms.Bhatt would submit that no error, not to speak of any error of law, could be said to have been committed by the respondent no.2 in passing the two impugned orders.

18. Ms. Bhatt would submit that although the audit report in the Form no.10B was to be filed along with the return of income, yet the assessee failed in doing so. It is argued that the respondent no.2 has thought fit, in exercise of his discretion, not to condone the delay and such discretion cannot be said to have been exercised arbitrarily or unjudiciously.

19. Ms. Bhatt would submit that in the case on hand, the Commissioner has recorded cogent reasons while declining to condone the delay. She would submit that the two decisions of this High Court upon which reliance is placed on behalf of the writ-applicant has, on the contrary, sounded a note of caution that the powers should be exercised cautiously with due care and circumspection and not in a routine manner only to extend the limitation provided by the Act. Ms.Bhatt has expressed a strong apprehension about a difficulty that may arise if ultimately the two impugned orders are quashed and the Form no.10B is ordered to be taken on record. According to her, as per the proviso to Section 142(2) of the Act, no notice can be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. She would submit that the said date has elapsed. Similarly, according to Ms.Bhatt, no notice under Section 142(1) of the Act can be issued as the time limit for passing the assessment order under Section 143(3) of the Act has also expired. She would argue that even after the writ-applicant is allowed to upload the Form no.10B along with the audit report, the veracity thereof is required to be ascertained. It will also have to be ascertained, whether the writ-applicant is eligible to the benefits/exemption under Section 11 of the Act. She would submit that the time limit as aforesaid has expired.

20. In the last, Ms.Bhatt submitted that if ultimately this Court is convinced that sufficient cause has been assigned by the writ-applicant for the purpose of condonation of delay, then this Court may clarify that despite the time period having expired, it shall be open for the department to issue notice under Section 143(2) of the Act or Section 142(1) of the Act, as the case may be.

21. In such circumstances referred to above, Ms.Bhatt prays that there being no merit in this writ-application, the same may be rejected.

ANALYSIS :

22. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the respondent no.2 committed any error in passing the impugned orders.

23 .For the purpose of seeking condonation of delay, the writ-applicant moved an application filed under Section 119(2) of the Act addressed to the Principal Commissioner of Income Tax (Exemption), stating as under :

“Re: Condonation of delay in Form No.10B in case of Sarvodaya Charitable Trust for A.Y. 2016-17.

P.A. No.AABTS2931H

Sir,

(1) We are in receipt of your letter dated 23.10.2018 (received on 29.10.2018) seeking the reasons for condonation of delay in filing Form No.10B. In this regard, we submit as under :

(2) The assessee is a charitable Trust primarily running a school named Ishvarlal Gulabbhai Desai Vidya Sankul in the name of freedom fighter Late Shri Ishvarlal Gulabbhai Desai to provide education to the children primarily of the slum and those coming from low-level income. Activities of the Trust are attached (Page No.1).

(3) The Trust is registered with the Charity Commissioner vide Registration No.E-2357-Surat, as per the Bombay Public Trust Act, 1950 (Page No.2).

(4) The Trust is also registered with the Income-tax Act, 1961 u/s.12A (Page No.3) and enjoys recognition u/s.80G(5) of the Act (Page No.4).

(5) The Trust has been scrutinized by the Income-tax Department from time to time. Copy of assessment order for A.Y.2010-11 is attached (Page No.5 to 7).

(6) With the above, it is clear that the Trust is a bonafide Trust rendering charitable activities, accepted by the department time and again.

(7) Form No.10B is required to be filed on on-line as per Rule 17B by the statutory auditors of the Trust in their log-in. The trustees of the Trust remained under the impression that the auditors of the Trust would have filed Form No.10B from his log-in in compliance with the necessary requirements. Only after demand springing from the e-portal that the Trust realized that the auditor had failed to furnish Form No.10B.

(8) The Trust has always been mindful in its compliance. Hence, Form No.10B furnished by the Trust of last 7 years are stated below.

(9) Given the above, the lapse occurred only for one year and that too on account of oversight. Therefore, it is urged that relief u/s.11 may kindly not be denied on account of a hyper-technical lapse.

(10) To support the above, an affidavit is attached (Page No.31 to 32).

(11) In the matter, reliance is placed on the following decisions.

(12) Considering all the above, it is requested to kindly condone the delay and oblige. Please appreciate that substantial relief should not be denied to the Trust solely on the ground that the auditors of the Trust had failed to furnish Form No.10B particularly when the Trust complied with all the other conditions.”

24. The respondent no.2, however, declined to condone the delay and rejected the said application by the impugned order dated 19^th August 2019 (Annexure-A), assigning the following reasons in the impugned order :

“ORDER U/S.119(2)(b) OF THE INCOME-TAX ACT, 1961

The applicant, Sarvodaya Charitable Trust has filed an application dated 05.09.2018 in the office on 19.09.2018, for condonation of delay in filing Form No.10B of the I.T. Act, 1961 for the A.Y. 2016-17. The application stated that the assessee received notice of demand of Rs.1,67,41,980/-from CPC, Bangalore under reference no. CPC/1617/C94/1803900360 dated 28.08.2018. The reason provided therein by CPC for raising of demand was non filing of Audit report in Form 10B. The assessee thereafter filed Form 10B on 02.09.2018 and submitted application for Condonation of delay.

2. As no specific reason was given in the application for the delay in filing Audit Report in Form No.10B, show cause notice was issued to the assessee vide letter dated 23.10.2018. In response to the show cause notice the assessee submitted a detailed reply vide letter dated 12.11.2018 filed in this office on 13.11.2018. The assessee, in its reply, further submitted that the assessee trust is primarily running a school named Ishvarlal Gulabbhai Desai Vidya Sankul providing education to the children from slum and low income group and it has been regularly filing its return of income and Form 10B on time. It was under the impression that the statutory auditors of the Trust would have filed Form 10B for A.Y. 2016-17 on time. However, it was only on receipt of notice of demand from CRC, Bangalore that it realized that Form 10B has not been filed by its auditor. Applicant Trust has also filed an affidavit duly signed by one of its trustees namely Shri Parimal Gunvantlal Desai affirming on solemn above facts of the case. It has also relied upon the Judgement of ITAT, Mumbai Bench ‘E’ rendered in the case of ITO, Mumbai v. Shri Kikabhai Premchand Trust (2010)42 SOT 403 (Mum.) submitting that the facts are squarely applicable to the facts of its case. The assesse was granted one more opportunity of being heard, vide this office letter dated 26.12.2018 to procuce documentary evidence to substantiate its claim. However, in response thereto, the assessee, vide letter dated 09.01.2019 sought adjournment of the hearing. Acceding to the request of the applicant, another letter was issued on 05.04.2019 to submit documentary evidence to present its case. The Trustee and Secretary namely Shri Parimal Desai attended on 18.04.2019 and stated that it relied on its earlier submission filed on 13.11.2018.

3. The reply of the assessee is carefully examined in light of CBDT’s circular no.10/2019 dated 22.05.2019. In para 4(ii) of the said circular, it has been emphasized that the Commissioner shall satisfy himself that the assessee was prevented by reasonable cause from such belated application in filing Form no. 10B within the stipulated time. After going through the submission of the applicant, it is found that it does not meet the criteria of Para 4(ii) of reasonable cause which prevented it from timely compliance. In the present case, Form no. 10B was to be e-filed on or before 17.10.2016 but it was e-filed on 02.09.2018, after a gap of 23 months, more so when filing of return of income for Assessment years i.e. 2017-18 was over. Simply saying that the trustees of the trust remained under the impression that the auditor of the trust would have filed Form no.J0B audit report in Form no. J0B could not be filed is not acceptable.

4. It should be noted the Legislature has provided time limits for certain obligations under the Act and these time limits have to be observed to be able to claim certain deductions, allowances and avoid interest and penalty. If these time limits were to be relaxed in a particular case, mere fact that a default occurred due to some reason is not enough to establish the claim of genuine hardship. Discipline on time limits regarding uploading Audit report in Form no.J0B online have to be complied and respected, unless compelling and good reasons are shown and established for grant of extension of time. Extension of time cannot be claimed as a vested right on mere asking and on the basis of vague assertions without proof.

5. In determining whether genuine hardship is caused to the assessee, one has to see whether the delay in filing audit report in Form no.J0B electronically was due to a reasonable cause or not. In this case, delay is stated to be attributed to the Auditor. However in such a case one has to see whether the assessee pursued the matter due to diligence to get his audit report in Form no. J0B uploaded in time.

6. There is no details and evidences on record filed by the assessee in supoort of such contention. When the other functions of filing of return of income and other formalities were being taken care of by the said auditor then why such failure can be attributed on the accountant ? The said plea taken by the applicant is therefore, unaccepted. Moreover, the assessee’s activities are of high volume as is evident from the facts that in the year under consideration, the assessee has shown gross income of Rs.3,85,99,831/- and amount applied towards charitable purposes in India was Rs.3,82,80,458/-. This magnitude itself speaks that the trustees of the trust could have paid attention for making the legal compliances. Thus, the sole condition applicable to the facts of the case mentioned in circular no. 10/2019 does not get fulfilled. Thus the reason cannot be taken as ‘Genuine Hardship’ which prevented it from timely compliance. Further, the case law relied upon by the applicant i.e. ITO(E) (11)(1), Mumbai vs Sir Kikabhai Premchand Trust rendered by ITAT, Mumbai Bench ‘E’ is not applicable to the facts of the case as in the above case.

7. Having gone through the above facts, I am of the opinion that the assessee has not shown any genuine hardship on account of which the lapse occurred. It has merely passed on the blame on the auditors that too without any supporting evidences. By assigning any work to any extemal agency the onus of statutory duty does not get shifted. As per provisions of section 12A(1)(b) of I.T. Act, the assessee should have ensured that the audit report duly signed by the accountant, as defined in Explanation below sub-section (2) of section 288 of the Act, is submitted alongwith the retum of income on time. As the lapse is on the part of the assessee without any genuine cause, there is no reason for which Condonation can be granted. Therefore, in exercise of the powers conferred on me u/s 119(2)(b) of the Act, I hereby reject the Condonation application for delay in filing the Form No.10B for the A.Y. 2016-17.”

25. The rectification application also came to be rejected vide order dated 12^th February 2020. The order reads thus :

“The applicant trust vide letter filed in this office on 19.9.2018 has requested to condone the delay in filing of Form 10B for A.Y. 2016-17 on account of the reasons mentioned in the application. The assessee has attached copy of documents to substantiate its claim. The said application of the assessee was disposed off by an order dated 19.8.2019, by the then Commissioner of Income Tax (Exemptions), Ahmedabad, wherein the application of the assessee was rejected.

2. The assessee vide application dated 9.9.2019 requested for rectification of the order dated 19.8.2019. Accordingly, the assessee was given an opportunity of being heard on 27.11.2019. The assessee requested for adjournment. Accordingly, an another opportunity of being heard was given on 10.12.2019. The assessee again requested for adjournment vide letter dated 10.12.2019. Therefore, a final opportunity was given to the assessee on 9.1.2020. In response the representative of the assessee attended and case discussed. Further, the assessee furnished a letter dated 13.1.2020, wherein it was submitted that Form No.10B was uploaded by the auditor of the assessee in the e-filing portal on 17.10.2016, however, as the trustees were unaware of the procedure they did not approve the Form No.10B by the due date. The Form No.10B was uploaded on 1.9.2018. The assessee has accordingly requested that the delay has occurred due to a bonafide reason and therefore, requested for rectification of the order dated 19.8.2019.

3. I have examined the submissions made by the assessee and also perused order dated 19.8.2019 passed u/s.119(2)(b) of the I.T. Act (which is sought to be rectified by the assessee). In para nos.5 & 6 of order dated 19.8.2019, detailed reasons have been given as to why the case of assessee is not covered under ‘reasonable cause’ as per the requirements of para no.4(ii) of CBDT Circular No.10/2019 dated 22.5.2019. The submissions made by the assessee were duly considered in this order before rejecting assessee’s contention (as is summarised in para no.7 of said order). The assessee has failed to point out as to how there is mistake apparent from records which may be rectified under Section 154 of the I.T. Act.

4. It is relevant to note that the Hon’ble Supreme Court in the case of T.S.Balaram, ITO vs. Volkart Bros (1971) 82 ITR 40 (SC) held that “a mistake apparent on the record” must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Further, ‘mistake’ means commission that is not designed and which is obvious and something which has two opinions or which is debatable as has been held in the case of CIT vs. Lakshmi Prasad Lahkar (1996) 220 ITR 100 (GAU).

5. After considering the submissions of the assessee and on perusal of documents on file it is seen there is no apparent mistake in the records, with regard to the order dated 19.8.2019, passed under section 119(2)(b) of the Income Tax Act, 1961, which requires rectification. Therefore, the application for rectification is rejected.”

26. Mr.Soparkar, the learned counsel is right in his submission that a fair and dispassionate view of the facts ought to have persuaded the respondent no.2, who possesses wide discretion in the matter under Section 119 of the Act, to condone the delay and allow the assessee to avail the said exemption under Section 12 of the Act being a public charitable trust.

27. We should look into the position of law as regards the subject matter of this writ-application :

(i) In Artist Tree Pvt. Ltd. vs. Central Board of Direct Taxes and others, (2014) 369 ITR 691 (Bombay). The relevant paragraphs 11 to 14 and 23 of the said judgment are quoted below for ready reference :

“11. The expression ‘genuine hardship’ came up for consideration of the Supreme Court in the case of B.M.Malani (supra), wherein, by reference to New Collins Concise English Dictionary, 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. The ingredients of genuine hardship, must be determined keeping in view the dictionary meaning thereof and legal conspectus attending thereto. For the said purpose, another well known principle, namely, that a person cannot take advantage of his own wrong, may also have to be borne in mind. Compulsion to pay any unjust dues per se would cause hardship. But a question as to whether the default in payment of the amount was due to circumstances beyond the control of the assessee, also bears consideration.

12. In the case of R. Seshammal (supra), the Madras High Court was pleased to observe as under (page 187 of 237 ITR):

“This is hardly the manner in which the State is expected to deal with the citizens, who in their anxiety to comply with all the requirements of the Act pay monies as advance tax to the State, even though the monies were not actually required to be paid by them and there after seek refund of the monies so paid by mistake after the proceedings under the Act are dropped by the authorities concerned. The State is not entitled to plead the hyper technical plea of limitation in such a situation to avoid return of the amounts. Section 119 of the Act vests ample power in the Board to render justice in such a situation. The Board has acted arbitrarily in rejecting the petitioner’s request for refund.”

13. In the case of Sitaldas Motwani (supra), this court has held that the expression “genuine hardship” used in section 119(2)(b) of the said Act should be construed liberally, particularly in matters of entertaining of applications seeking condonation of delay. This court was pleased to observe as under (page 228 of 323 ITR):

“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 October 12, 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 the merits. The expression ‘genuine’ has received a liberal meaning in view of the law laid down by the apex court referred to hereinabove 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 an 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 the merits after hearing the parties. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a 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 the cause of justice. If refund is legitimately due to the applicant, mere delay should not defeat the claim for refund.”

14. In the case of Bombay Mercantile Co-operative Bank Ltd. (supra), this court again observed that it is well settled that in matters of condonation of delay highly pedantic approach should be eschewed and a justice-oriented should be adopted. It also observed that a party should not be made to suffer on account of technicalities.

23. In the light of the aforesaid discussion, we are of the opinion that an acceptable explanation was offered by the petitioner and a case of genuine hardship was made out. The refusal by the Central Board of Direct Taxes to condone the delay was a result of adoption of an unduly restrictive approach. The Central Board of Direct Taxes appears to have proceeded on the basis that the delay was deliberate, when from the explanation offered by the petitioner, it is clear that the delay was neither deliberate nor on account of culpable negligence or any mala fides. Therefore, the impugned order dated May 16, 2006, made by the Central Board of Direct Taxes refusing to condone the delay in filing the return of income for the assessment year 1997-98 is liable to be set aside.”

(ii) In Jay Vijay Express Carriers vs. Commissioner of Income Tax-III, (2013) 34 taxmann.com.61 (Gujarat), in relevant paragraph 16 of the said judgment, this Court held as under :

“16. In our opinion, in the present case, there would be genuine hardship, if the time limit is not extended as otherwise, the entire claim of Rs.17,84,323/- would be destroyed. The petitioner would neither get deduction in the assessment year 2005-06 nor in the year 2008- 09 as per then prevailing Section 40(a)(ia) of the Act. In our opinion, the petitioner was neither lethargic nor lacking in bona fides in making the claim beyond the period of limitation, which should have a relevance to the desirability and expedience for exercising such power. Before proceeding further we may caution that undoubtedly such powers are not to be exercised in routine manner to extend limitation provided by the Act for various stages. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so for avoiding genuine hardship. In the present case, however, considering special facts, we are of the opinion that the Commissioner ought to have exercised such powers. It is true that the Appellate Commissioner recorded that the petitioner did not remain present in the appellate proceedings. However that by itself would not take away the petitioner’s case for genuine hardship nor contrary to what is vehemently contended before us by the counsel for the Revenue, convince us to hold that filing of revised return beyond limitation lacked bona fides.”

(iii) In the case of State of Jharkhand and others vs. Ambay Cements and another, (2005 Sales Tax Cases Vol.129). The relevant extract of the said judgment is quoted from the Head Note below for ready reference :

“An exception or an exempting provision in a taxing statute should be construed strictly. If the condition under which an exemption is granted stands changed on account of any subsequent event the exemption would not operate. (see paras 23 and 24)

Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. If the statute provide that a particular thing should be done, it should be done in the manner prescribed and not in any other way (see para 26).”

(iv) In the case of B.M.Malani vs. Commissioner of Income Tax and another, (2008) 219 CTR 313), the Court observed :

“8. The term ‘genuine’ as per the New Collins Concise English Dictionary is defined as under :

“’Genuine’ means not fake or counterfeit, real, not pretending (not bogus or merely a ruse).”

For interpretation of the aforementioned provision, the principle of purposive construction should be resorted to. Levy of interest although is statutory in nature, inter alia for recompensating the Revenue from loss suffered by non-deposit of tax by the assessee within the time specified therefor. The said principle should also be applied for the purpose of determining as to whether any hardship had been caused or not. A genuine hardship would, inter alia, mean a genuine difficulty. That per se would not lead to a conclusion that a person having large assets would never be in difficulty as he can sell those assets and pay the amount of interest levied.

The ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, another well-known principle, namely, a person cannot take advantage of his own wrong, may also have to be borne in mind. The said principle, it is conceded, has not been applied by the Courts below in this case, but we may take note of a few precedents operating in the field to highlight the aforementioned proposition of law. (See Priyanka Overseas (P) Ltd. & Anr. Vs. Union of India & Ors.1991 Suppl.(1)SCC 102, para 39, Union of India & Ors. Vs. Maj.Gen.(Retd.) Madan Lal Yadav (1996)4 SCC 127 at 142, paras 28 and 29, Ashok Kapil Vs. Sana Ullah (dead) & Ors. (1996) 6 SCC 342 at 345, para 7, Sushil Kumar vs. Rakesh Kumar (2003) 8 SCC 673 at 692, para 65, first sentence, Kusheshwar Prasad Singh vs. State of Bihar & Ors. (2007) 11 SCC 447, paras 13, 14 and 16).”

28. Section 119 of the Act is couched in very wide terms. The same is quoted below for ready reference :

Instructions to subordinate authorities:

“119. (1) the Board may, from time to time, issue such orders, instructions and directions to other income- tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:

xxx xxx xxx

(2) Without prejudice to the generality of the foregoing power:-

(a) xxx xxx xxx

(b) 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, authorize 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:”

29. We may also refer to a decision of the Karnataka High Court in the case of Dr. (Smt.) Sujatha Ramesh vs. Central Board of Direct Taxes, New Delhi, (2017)87 taxmann.com 228 (Karnataka), wherein the Court has observed as under :

“12. It is true that the so called reasons assigned by the respondent Central Board of Direct Taxes (CBDT) in the impugned order, on the face of it, do not appear to be whimsical or arbitrary reasons and it is equally true that such investment could be made by assessee very well before the cut off date also when she was physically present in India or even when she had gone back to USA on 20th February 2013. Nonetheless, the delay of six months in the circumstances in which it occurred, especially, in view of the fact that the investment condition was undisputably met by the assessee could have been condoned taking a judicious and holistic view of the facts. The wide powers of the Central Board of Direct Taxes or other higher authorities of the Department to whom such powers can be delegated under Section 119 of the Act, need not always take only a pro revenue approach in such matters. Their approach in such cases should be equitious, balancing and judicious which should reflect the application of mind to the facts of the case and before denying the genuine claim of the assessee on the grounds of mere delay in making such claim, something more than the user of innocuous terms as employed in the present case, should be forthcoming. Technically, strictly and literally speaking, the Board might be justified in denying the exemption from capital gains tax by rejecting such condonation application, but an assessee, who substantially satisfies the condition for availing such exemption should not be denied the same, merely on the bar of limitation, especially, when the legislature has conferred wide discretionary powers to condone such delay on the highest executive authority of the Central Board of Direct Taxes under the Act.

13. The general and wide powers given to the Board in this regard, “if it considers it desirable or expedient so to do for avoiding genuine hardship in any case……. ”, not only gives wide powers to the Board, but confers upon it a obligation to consider facts relevant for condonation of delay as well as the merit of the claim simultaneously. If the claim of exemption or other claim on merits is eminently a fit case for making such claim, it should not normally be defeated on the bar of limitation, particularly, when the delay or the time period for which condonation is sought is not abnormally large. It will of course depend upon the facts of the each case, where such a time period or the merit of the claim deserves such exercise of discretion in favour of the assessee under Section 119(2)(b) of the Act or not and therefore, no straight jacket formula or guidelines can be laid down in this regard. However, such orders passed by the Central Board of Direct Taxes being a quasi-judicial order is always open to judicial review by the higher constitutional courts. If the good conscience of the Courts is pricked, even though such orders rejecting the claims on the bar of limitation may appear to be prima facie tenable, the Courts may exercise their jurisdiction to set aside such orders and allow the claims on merits, setting aside the bar of limitation.

14. The present case is one of such nature, where the Court finds that the substantial conditions for claiming the exemption from capital gain tax stood satisfied and the prescribed investment was made by the assessee in the Bonds of the National Highways Authority, for the minimum lock-in period of three years also is an undisputed fact, and therefore, the delay in making such investment of six months deserved to be condoned, in view of the fact that, the assessee-petitioner, a Doctor by profession was traveling from India to USA a long distance country where she normally resided and came to India not only to meet her family members, but to sell the immoveable property belonging to her and sought to avail the genuine exemption from such tax liability upon making the investment in the prescribed investment in the form of Bonds of Infrastructure which she did make in the National Highways Authority.”

30. We may also refer to and rely upon a decision of the Delhi High Court in the case of G.V.Infosutions Pvt. Ltd. vs. Deputy Commissioner of Income Tax, Circle 10(2) and others, reported in (2019) 261 taxmann.com 482 (Delhi). We may quote the relevant observations thus :

“8. The rejection of the petitioner’s application under Section 119(2)(b) is only on the ground that according to the Chief Commissioner’s opinion the plea of omission by the auditor was not substantiated. This court has difficulty to understand what more plea or proof any assessee could have brought on record, to substantiate the inadvertence of its advisor. The net result of the impugned order is in effect that the petitioner’s claim of inadvertent mistake is sought to be characterised as not bonafide. The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. “Bonafide” is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the petitioner raises (concededly belatedly), there can not necessarily be independent proof or material to establish that the auditor in fact acted without diligence. The petitioner did not urge any other grounds such as illness of someone etc., which could reasonably have been substantiated by independent material. In the circumstances of the case, the petitioner, in our opinion, was able to show bonafide reasons why the refund claim could not be made in time.

9. The statute or period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities – including Revenue Authorities have to construe them in a reasonable manner. That was the effect and purport of this court’s decision in Indglonal Investment & Finance Ltd. (supra). This court is of the opinion that a similar approach is to be adopted in the circumstances of the case.”

31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no.2 might be justified in denying the exemption under Section 12 of the Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.

32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Limited, (1993) 201 ITR 325 (Gujarat), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either beore the Income Tax Officer or before the appellate authority by assigning sufficient cause.

33. In view of the above, this writ-application succeeds and is hereby allowed. The impugned order passed by the respondent no.2 dated 19^th August 2019 (Annexure-A to this writ-application) is hereby quashed and set-aside. The impugned rectification order at page-13 of the paper-book dated 12^th February 2020 is also hereby quashed and set-aside. The delay condonation application filed by the writ-applicant before the respondent no.2 is hereby allowed.

34. It is declared that the writ-applicant is entitled to seek exemption under Section 12 of the Act. The authorities below are directed to give effect to such exemption to the assessee and pass necessary consequential orders in this regard. However, as fairly submitted by Mr.Soparkar, the grant of benefit of exemption under Section 12 of the Act shall be subject to Section 143(2) and Section 142(1) respectively of the Act 1961.

The Civil Application stands disposed of.