2015 (10) TMI 25 - HC - Income Tax

Court orders extension of e-filing deadline to prevent undue hardship to taxpayers

The court held that the Board should exercise its discretionary powers under Section 119 to alleviate undue hardship to assessees. Due to the delayed ... Section 119 - discretionary power to relax rigour of fiscal law - duty to make e filing utilities available - beneficial power to avoid undue hardship - judicial review of executive policy decisions - arbitrariness as ground for interferenceSection 119 - discretionary power to relax rigour of fiscal law - duty to make e filing utilities available - beneficial power to avoid undue hardship - Whether the Central Board of Direct Taxes was obliged in the facts to exercise its discretion under Section 119 to extend the due date for e filing of income tax returns where the e filing utilities for Forms ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 were made available only on 7th August, 2015. - HELD THAT: - The Court accepted that rule 12 requires e filing and that assessees ordinarily have the period from 1 April to 30 September to compile and file returns, but that this period was substantially curtailed because the relevant utilities were provided only on 7th August, 2015. Section 119 confers a beneficial power on the Board to issue directions and relax procedural rigour so as to avoid undue hardship; that power is discretionary but not unfettered and may be exercised when conditions justifying relief are shown to exist. The Court noted prior orders directing similar relief for the preceding year and observed that the present blackout (non availability of utilities until 7th August) made it impossible to file returns earlier and that hardship to assessees could be ameliorated without causing prejudice to revenue by an appropriately qualified extension (with interest consequences preserved as necessary). Having regard to the default on the part of the Department in providing utilities and the absence of prejudice to revenue, the Board's refusal to exercise its discretionary power in the circumstances was not acceptable and warranted judicial intervention to require exercise of powers under Section 119 to extend the due date. [Paras 16, 17, 18, 19, 25]The petition is allowed in part; the Board is directed to issue a notification under Section 119 extending the due date for e filing of returns which were due on 30th September, 2015 to 31st October, 2015.Judicial review of executive policy decisions - arbitrariness as ground for interference - separation of powers - Whether the Court should refrain from interfering with the Board's policy decision declining to extend the due date, having regard to principles of limited judicial review of policy and administrative decisions. - HELD THAT: - The Court acknowledged the settled principle that courts ordinarily do not sit in appeal over administrative or policy decisions and that judicial review is confined to well defined grounds such as arbitrariness, perversity or mala fides. However, it held that where facts demonstrate genuine hardship caused by default of the authority and the statutory power (Section 119) is intended to avoid such hardship, the Court may require the authority to exercise its discretion. The existence of conflicting decisions of other High Courts did not bar this Court from applying its view; the Court referred to precedents recognising limits of interference but concluded that the present facts justified intervention because the circumstances arose from the Department's failure to make utilities available and relief could be granted without prejudicing revenue. [Paras 8, 13, 14, 22, 24]The Court exercised limited judicial review and granted relief notwithstanding the Board's policy decision, finding that intervention was warranted to prevent arbitrariness and undue hardship.Final Conclusion: Writ petition partly allowed: respondents directed to notify under Section 119 of the Act an extension of the due date for e filing of returns due on 30th September, 2015 to 31st October, 2015; respondents to endeavour that forms and utilities for e filing be ordinarily made available on 1st April of the assessment year. Issues Involved:1. Mandatory e-filing of income tax returns.2. Delay in providing utility/software for e-filing returns.3. Extension of due date for filing income tax returns.4. Hardship to assessees due to delayed utility availability.5. Board's discretion under Section 119 of the Income Tax Act.6. Judicial review of policy decisions.Detailed Analysis:1. Mandatory E-filing of Income Tax Returns:The petitioners, a Trust and its President, challenged the mandatory requirement for assessees to electronically file income tax returns from assessment year 2013-14 onwards. This requirement was enforced through a notification dated 01.05.2013.2. Delay in Providing Utility/Software for E-filing Returns:For assessment year 2015-16, the utility software for filing income tax returns (Forms ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7) was made available only on 07.08.2015. This delay caused significant confusion and hardship among Chartered Accountants and assessees, as they were unable to file returns from 1st April to 7th August 2015.3. Extension of Due Date for Filing Income Tax Returns:The petitioners sought an extension of the due date for filing income tax returns from 30.09.2015 to 30.11.2015 due to the delayed availability of the e-filing utility. They argued that the delay curtailed the statutory period of 180 days available for filing returns, causing immense prejudice to assessees.4. Hardship to Assessees Due to Delayed Utility Availability:The petitioners contended that the delay in providing the utility was not the fault of the assessees. They highlighted that the assessees were unaware of the changes in the forms until they were notified, making it impossible to file returns earlier. They emphasized that the Board had previously extended the due date for filing tax audit reports but not for income tax returns, causing undue hardship.5. Board's Discretion Under Section 119 of the Income Tax Act:The petitioners argued that the Central Board of Direct Taxes (CBDT) has discretionary powers under Section 119 of the Income Tax Act to extend the due date for filing returns to alleviate genuine hardship. They cited a previous judgment where the court directed the CBDT to extend the due date for filing returns due to similar circumstances.6. Judicial Review of Policy Decisions:The respondents contended that the petition was more in the nature of a public interest litigation and that no cause of action for infringement of any constitutional article was shown. They argued that the Board's decision not to extend the due date was a policy decision and should not be interfered with by the court. They also cited decisions from other High Courts (Delhi, Karnataka, Rajasthan) that had not granted relief in similar petitions.Judgment:The court held that the Board's discretionary powers under Section 119 are beneficial and should be exercised to alleviate undue hardship to assessees. The court observed that the delay in providing the utility curtailed the statutory period for filing returns, causing hardship to assessees. The court directed the Board to extend the due date for e-filing income tax returns from 30.09.2015 to 31.10.2015. The court also emphasized that the Board should ensure that forms and utilities for e-filing returns are made available on 1st April of the assessment year to avoid such situations in the future. The petition was partly allowed, and the rule was made absolute to the extent of extending the due date for e-filing returns.