2020 (6) TMI 78 - HC - Income Tax

Court overturns order rejecting delay in filing tax returns, directs reassessment of deduction claim under Section 80IAB.

M/s. IG3 Infra Limited, Versus Deputy Commissioner of Income-tax Chennai, Central Board of Direct Taxes, Union of India,

The court set aside the impugned order rejecting the application for condoning the delay in filing Income Tax Returns and directed the Deputy Commissioner ... Benefit of deduction u/s 80IAB - Belated filing of returns - reasons given by the petitioner for filing the returns belatedly under Section 139 was apparently, on account of paucity of funds and account of the amendment to Section 115JB - HELD THAT:- In this case, the unnamed Chartered Accountant had purportedly advised the petitioner to delay in filing returns. He could also have not signed the report of audit in the prescribed form. It is perhaps the report of the Chartered Accountant who finalized the account for the petitioner later was made available for the assessment and the return was filed belatedly. Explanation offered by the petitioner that in view of amendment to Section 115JB created confusion and that there was paucity of fund for payment of tax under the aforesaid provision which resulted in delay in filing of the returns is of no significance as by not filing the returns in time, the petitioner has not gained any advantage. Petitioner had put to jeopardy to its claim for the benefit of deduction under Section 80IAB of the Income Tax Act, 1961. Though the delay has not been properly explained, issue as to whether the petitioner was otherwise entitled to benefit of the deduction, but for failure to file such return would require examination independently.There is a genuine hardship as the petitioner failed to file return on time to avail the benefit of the deduction. By condoning the delay, the 2nd respondent would be merely allowing the Assessing Officer to examine the petitioner’s claim for the benefit of deduction under Section 80IAB of the Act, on merits and nothing more. By permitting the Assessing Officer to scrutinize the Income Tax Return filed belatedly by the petition, the 2nd respondent is not really asking the Assessing Officer to straight away allow the benefit of deduction under 80IAB of the Act. Set aside the impugned order and direct the 1st respondent Deputy Commissioner of Income Tax to examine the claim of the petitioner on merits as to whether the petitioner was otherwise entitled to the benefit of deduction under Section 80IAB. Issues Involved:1. Challenge to the impugned order rejecting the application for condoning the delay in filing Income Tax Returns.2. Entitlement to deduction under Section 80IAB of the Income Tax Act, 1961.3. Examination of whether the delay in filing returns was due to genuine hardship.Issue-wise Detailed Analysis:1. Challenge to the Impugned Order Rejecting the Application for Condoning the Delay in Filing Income Tax Returns:The petitioner challenged the impugned order dated 31.05.2016, passed by the 2nd respondent, which rejected the applications filed on 07.05.2015 and 22.12.2015 for condoning the delay in filing Income Tax Returns for the Assessment Years 2012-13 and 2013-14. The petitioner had previously approached the court (W.P.No.5435 of 2016) seeking a direction for the 2nd respondent to dispose of the petitions after granting a hearing opportunity. The court directed the 2nd respondent to dispose of the petitions on merits within three weeks. The 2nd respondent subsequently rejected the petitions, leading to the current writ petition.2. Entitlement to Deduction under Section 80IAB of the Income Tax Act, 1961:The petitioner filed Income Tax Returns with delays of 14 months for AY 2012-13 and 5 months for AY 2013-14. The delays were attributed to a paucity of funds and an assumption that the IT system would not accept returns without tax payment, based on advice from the Chartered Accountant. The petitioner argued that the delay should not affect the legitimate claim for deduction under Section 80IAB if otherwise entitled. The 2nd respondent rejected this explanation, citing a lack of documentary evidence to substantiate the Chartered Accountant's advice.The petitioner relied on precedents, including the Bombay High Court's decision in *Bombay Mercantile Cooperative Bank Ltd vs. Central Board of Direct Taxes* and the Supreme Court's decision in *Concord of India Insurance Co. Ltd. Vs. Smt. Nirmala Devi & Others*, which discussed the scope of condoning delays due to legal advice. The petitioner had availed of Section 80IAB benefits for AYs 2009-10, 2010-11, and 2011-12, and orders were passed allowing the deduction.3. Examination of Whether the Delay in Filing Returns Was Due to Genuine Hardship:The court considered the arguments and noted that under Section 119(2)(b) of the Income Tax Act, the 1st respondent has the power to issue instructions to subordinate authorities to avoid genuine hardship, allowing claims for exemptions, deductions, refunds, or other reliefs even after the specified period. The court emphasized that the power to condone delays lies with the 2nd respondent Board under Section 119(2)(b).The court observed that the petitioner’s explanation for the delay, including confusion due to an amendment to Section 115JB and a lack of funds, was insignificant as it did not provide any advantage to the petitioner. The petitioner jeopardized the claim for deduction under Section 80IAB by not filing returns on time. The court acknowledged genuine hardship due to the failure to file returns on time and stated that condoning the delay would allow the Assessing Officer to examine the claim for deduction on merits.The court set aside the impugned order and directed the 1st respondent Deputy Commissioner of Income Tax to examine the claim on merits within three months, considering whether the petitioner was otherwise entitled to the deduction under Section 80IAB.Conclusion:The writ petition was allowed, and the impugned order was set aside. The 1st respondent was directed to pass appropriate orders on the merits of the petitioner’s claim for deduction under Section 80IAB within three months. The connected Miscellaneous Petition was closed without costs.