1998 (10) TMI 26 - HC - Income Tax

Court remands tax matter for fresh consideration on belated filing of income tax returns.

Bhavani Mills Ltd. Versus Member (It & J), Central Board Of Direct Taxes And Others

Bhavani Mills Ltd. Versus Member (It & J), Central Board Of Direct Taxes And Others - [2000] 243 ITR 636, 163 CTR 296, 105 TAXMANN 335 Issues:1. Belated filing of income tax returns by a textile mill claiming carry forward of business loss and unabsorbed depreciation.2. Application for condonation of delay in filing returns under section 119(2)(b) of the Income-tax Act, 1961.3. Rejection of the condonation application by the Central Board of Direct Taxes.4. Consideration of exceptional circumstances and undue hardship for granting relief under section 119(2)(b).5. Lack of provision for special tax treatment for carry forward of loss in the scheme framed by the Board for Industrial and Financial Reconstruction.6. Remand of the matter to the Board for fresh consideration for the assessment year 1989-90.Analysis:The judgment revolves around a textile mill that filed income tax returns belatedly, seeking carry forward of business loss and unabsorbed depreciation for specific assessment years. The returns were lodged under section 139(3) of the Income-tax Act due to exceeding the filing deadlines set by section 139(1). The mill later applied for condonation of the delay, citing labor unrest and its status as a sick company. The Central Board of Direct Taxes rejected the application, emphasizing that condonation might undermine section 139(3) of the Act. The court noted that the Board's refusal to exercise its power under section 119(2)(b) without considering the circumstances was improper.The judgment highlighted the importance of examining the specific circumstances to determine whether relief should be granted under section 119(2)(b), focusing on the undue hardship faced by the assessee. It pointed out that the Board for Industrial and Financial Reconstruction had the authority to frame a scheme that could override certain provisions of the Income-tax Act regarding the treatment of losses incurred by sick companies. However, in this case, the scheme did not provide for special tax treatment for carry forward of loss, and the mill failed to seek an amendment to include such a provision.The court emphasized that the primary consideration for relief under section 119(2)(b) is undue hardship and noted that the mill's failure to act promptly or seek suitable provisions in the scheme did not warrant equitable relief for certain assessment years. It specifically addressed the assessment year 1989-90, where the delay was minimal, and remanded the matter to the Board for fresh consideration. Ultimately, the judgment disposed of the writ petition with observations on the specific assessment year and dismissed associated applications.This detailed analysis of the judgment provides a comprehensive overview of the issues addressed, the legal principles applied, and the court's decision regarding the belated filing of income tax returns and the subsequent application for condonation of delay.