Internal Dispute Among Directors Of Company Not 'Genuine Hardship' Preventing Timely Filing Of ITR: Delhi High Court

The Delhi High Court has held that internal disputes between the Directors of a company is not 'genuine hardship' under Section 119(2)(b) of the Income Tax Act 1961, preventing timely filing of its Income Tax Return, particularly in absence of convincing evidence.A division bench of Justices V. Kameswar Rao and Madhu Jain observed,“The internal dispute among the Directors of the company is not a genuine hardship, which can be the ground on which the delay can be condoned. Even otherwise, we are of the view, the dispute between the Directors, when the company is an ongoing concern cannot be the reason to not to file the ITR which is a statutory obligation on the part of the company.”The Court further noted that the plea of dispute amongst the Directors was not borne out from the record and no document was filed evidencing the same.Section 119(2)(b) permits condonation of delay in filing ITR only in cases of genuine hardship.The Petitioner here, engaged digital marketing and related services, filed its ITR for the Assessment Year 2018-19 with a delay of 30 months. It filed an application for condonation of delay with claim of carry forward of business loss, stating that due to an inter se dispute amongst the directors, the return could not be filed.Revenue argued that internal dispute among the directors of a company is not genuine hardship as a company has a separate identity, separate from its directors. It was further contended that engaging a CA for filing the ITR is not something that is affected by dispute amongst the Directors. The Petitioner in response insisted that there was complete lack of cohesion among the Directors, due to which many persons kept resigning and it consequently led to the delay in filing the ITR. It was argued that even though a company is a separate legal identity, in practical reality, the management of a company is inherently dependent on its Directors and as such, financial and operational hardship caused by the dispute made it impossible to ensure timely compliance. The High Court, stating that the Company's submission “is not at all convincing”, rejected its plea. It observed,“The Court in Sitaldas K. Motwani (supra), has explained the scope of „genuine hardship‟ and held the same must be construed liberally, owing to the legislative intent behind the provision to impart justice to the parties but such liberal construction to allow a delay of 30 months on a generic reason would amount to travesty of the very legislative intent itself.”Appearance: For the Petitioner : Mr. Santosh Kumar, Sr. Adv. with Mr. Medhurendra Sharma and Mr. Rajiv Ranjan Mishra, Advocates. For the Respondents : Ms. Bakshi Vinita, SPC for UOI. Mr. Vipul Agrawal, SSC, Ms. Sakshi Sehawal, Mr. Akshat Singh, JSCs and Mr. Gaoraang Ranjan and Ms. Harshita Kotru, Advocates.Case title: M/S Sirez Limited v. Union Of India & Ors.Case no.: W.P.(C) 405/2024Click here to read order

Internal Dispute Among Directors Of Company Not 'Genuine Hardship' Preventing Timely Filing Of ITR: Delhi High Court

Kapil Dhyani

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