Delayed income-tax refund claim u/s119(2)(b) and CBDT circular conditions-rejection quashed; claim must be heard on merits.

The dominant issue was whether refusal to condone delay in a refund claim under s. 237, despite satisfaction of CBDT Circular F. No. 225/208/93-ITA-II, was lawful under s. 119(2)(b) of the Income-tax Act. The HC held that "genuine hardship" in s. 119(2)(b) must be construed liberally and, where the circular's conditions were undisputedly met and the delay was satisfactorily explained, the authority ought to admit the claim and examine it on merits rather than reject it on a technical ground. Consequently, the CBDT order rejecting condonation/refund was quashed; however, no mandamus for immediate refund was issued since the claim had not been adjudicated on merits, and the claimant waived interest.

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Issues Involved:
The judgment involves the rejection of a refund claim under section 237 of the Income-tax Act, 1961, and the subsequent petition filed under article 226 of the Constitution seeking to quash the order and obtain the refund with interest.

Refund Claim Rejection:
The petitioner, a limited company, filed belated returns for assessment years 1990-91 and 1991-92, claiming refunds of Rs.19,805 and Rs.32,206, respectively. The claim was not granted, leading to a petition to quash the rejection order dated May 17, 2000, by the Member, Central Board of Direct Taxes.

Petitioner's Argument:
The petitioner contended that the rejection of the refund claim was unlawful as the conditions in Circular F.No. 225/208/93ITA-II were met, and the claim should have been accepted under section 119(2)(b) of the Income-tax Act, 1961. Reference was made to a relevant case to support the argument.

Revenue's Defense:
The respondents argued that the delay in claiming the refund was not adequately explained by the petitioner, justifying the rejection. They asserted that the Board exercised discretion reasonably and that genuine hardship was not established.

Court's Analysis:
The court noted the petitioner's explanation for the delay, citing the ill health of the principal officer due to tuberculosis and typhoid. Section 119(2)(b) empowers the Board to authorize late refund claims, as per a circular from October 12, 1993. The court referenced a Madras High Court decision emphasizing the Board's power to render justice in such situations.

Judgment:
Applying the principles from the Madras High Court decision, the court found the Board unjustified in rejecting the refund claim based on genuine hardship and delay explanations. The court ruled in favor of the petitioner, setting aside the rejection order and directing respondent No.1 to reconsider the refund claim promptly. The court clarified that interest on the refund amount was not sought by the petitioner. The order was set aside, and the petition succeeded without costs.

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