CBDT authorized to consider refund applications post-deadline under Income-tax Act

The High Court held that the Central Board of Direct Taxes (CBDT) has the authority under section 119(2) of the Income-tax Act to admit a refund application even after the expiration of the period specified in section 239, in order to prevent genuine hardship. The court overruled a previous decision and confirmed the CBDT's power to relax the conditions outlined in section 239 through instructions under section 119. The case was referred to a Division Bench for further proceedings.

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Issues Involved:
1. Whether the conditions prescribed in section 239 of the Income-tax Act, 1961, are amenable to relaxation by the Central Board of Direct Taxes (CBDT) through instructions under section 119 of the Act.

Detailed Analysis:

Issue 1: Relaxation of Conditions Prescribed in Section 239 by CBDT under Section 119

Background:
- The petitioner filed a refund claim for the assessment year 1995-96 under section 237 of the Income-tax Act, 1961.
- The claim was made after the limitation period prescribed in section 239, leading the petitioner to seek condonation of delay under section 119(2)(b).
- The CBDT rejected the application without providing reasons, prompting the petitioner to challenge this decision.

Contentions by Assessee's Counsel:
- Article 245 of the Constitution: Permits the Legislature to delegate powers to administrative agencies.
- Doctrine of Unjust Enrichment: Articles 265 and 300A of the Constitution mandate that tax collected without entitlement must be refunded.
- Section 237 and 239: Section 237 mandates a refund of excess tax, while section 239 prescribes the procedure and time limit for claiming such refunds.
- Section 119(2)(b): Provides the Board with the power to admit a belated claim for refund, similar to section 5 of the Limitation Act.

Contentions by Revenue's Counsel:
- Section 119(2)(b): Specifically allows the Board to admit a refund application after the expiry of the specified period to avoid genuine hardship.
- Judicial Precedents: Cited multiple cases where the Board's power to condone delay under section 119(2)(b) was upheld.

Legal Provisions and Judicial Interpretations:
- Section 237: Entitles a person to a refund of excess tax paid.
- Section 239: Prescribes the form, manner, and time limit for making a refund claim.
- Section 119: Empowers the Board to issue orders, instructions, and directions for proper administration of the Act, including relaxation of provisions to avoid genuine hardship.

Supreme Court Observations:
- Azadi Bachao Andolan (2003) 263 ITR 706: Section 119 is an enabling power for the CBDT to ensure fair enforcement of the Act, even if it means relaxing certain provisions.
- UCO Bank v. CIT (1999) 237 ITR 889: The Board's power under section 119 includes the ability to tone down the rigour of the law to avoid undue hardship.

High Court's Analysis:
- Interpretation of Section 119(2)(b): The power to admit a belated claim for refund is in line with the principles of avoiding genuine hardship and does not interfere with the assessment process or the discretion of appellate authorities.
- Comparison with Limitation Act: Section 5 of the Limitation Act allows for condoning delays, and section 239 does not expressly exclude this provision. Thus, section 119(2) effectively incorporates section 5 of the Limitation Act.

Conclusion:
- The High Court concluded that the CBDT has the power under section 119(2) to admit a refund application even after the expiry of the period prescribed under section 239 to avoid genuine hardship.
- The decision in Niranjan Dass [2004] 266 ITR 489 (P&H), which held otherwise, was overruled.

Final Judgment:
- The reference was answered in the affirmative, confirming the Board's power to relax the conditions prescribed in section 239 through instructions under section 119.
- The case was directed to be placed before the Division Bench for further proceedings.

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