Filing Delayed Returns, Power To Condone Delay Is Conferred On CBDT To Ensure Substantial Justice; Bombay High Court

Hence, the High Court observed that routinely passing the order without appreciating the reasons why the provisions for condonation of delay has been provided in the statute itself, defeats the cause of justice.

A Division Bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale reiterated that “CBDT should keep in mind, while considering an application of this nature, that the power to condone the delay has been conferred is to enable the authorities to do substantial justice to the parties by disposing the matters on merits and while considering these aspects, the authorities are expected to bear in mind that no applicant would stand to benefit by lodging delayed returns”. (Para 12)

As per the brief facts of the case, the assessee/ petitioner, an individual, got his books of accounts audited in Form No.10CCB and filed his return within due date u/s 139(1) claiming a deduction u/s 80-IC in respect of an industrial unit/ undertaking that petitioner was operating in the name and style of M/s Creative Industries in an export processing zone (EPZ) at Haridwar. However, the deduction was denied vide an intimation u/s 143(1) without any reason for the denial of said deduction. Accordingly, the assessee requested for a rectification of the intimation. Later, the CA of the assessee realized that the audit report was not uploaded online due to inadvertence, which possibly could be the reason for denial of deduction u/s 80IC, and therefore, the said audit report was uploaded. Since, petitioner's rectification application was not disposed, the petitioner filed an application u/s 264 seeking grant of deductions which were denied in the intimation u/s 143(1). The petitioner's application u/s 264 came to be dismissed on the ground that petitioner had not applied for revision within the limitation time prescribed and there was a delay of about 2 and ½ years.

Since almost six years passed after filing of rectification application, the assessee sought for condonation of delay and direction to ACIT to allow the rectification application. The condonation was however rejected on the ground that the reasons stated by petitioner, i.e, inadvertence on the part of the auditors/Chartered Accountants of petitioner in uploading Form 10CCB was very general in nature and no reasonable cause was shown to justify the genuine hardship being faced by petitioner. Hence, the assessee approached the High Court by way of present writ.

While emphasizing that there cannot be a straight-jacket formula to determine what is 'genuine hardship', the Bench stated that no assessee would stand to benefit by lodging its claim late, more so, where assessee would get tax advantage/benefit by way of deductions u/s 80IC of the Act.

The Bench clarified that certainly the fact that an assessee feels that he would be paying more tax if he does not get the advantage of deduction u/s 80IC, that will be certainly a 'genuine hardship'.

Referring to the decision in case of K. S. Bilawala & Ors. Vs. PCIT & Ors. [(2024) 158 taxmann.com 658 (Bombay)], the Bench reiterated that the phrase 'genuine hardship' used in Section 119(2)(b) of the Act should be considered liberally.

Hence, expressing disappointment over the conduct of the ACIT in not even replying to the assessee's concern regarding rectification application, the Bench directed the ACIT to dispose the pending application u/s 154 on merits.

At the same time, observing that ACIT was duty bound to pass orders on the application which has been pending for almost 6 years, instead of making baseless statements in the affidavit in reply, the High Court ordered the PCCIT to take disciplinary action against the ACIT for dereliction of duty and also directed Chairman of CBDT to take suitable actions in compliance with the directions given by this court.

Counsel for Petitioner/ Assessee: Rahul Sarda and S. S. Nargolkar

Counsel for Respondent/ Revenue: Ravi Rattesar

Case Title: Pankaj Kailash Agarwal verses ACIT

Case Number: Writ Petition No. 7783 of 2024

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