2022 (12) TMI 1019 - HC - Income Tax

Court overturns CBDT denial of condonation for late tax return, directs consideration of deduction claim. Upholds Vivad Se Vishwas application.

The court set aside the CBDT's order rejecting the petitioner's application for condonation of delay in filing the Income Tax Return for AY 2011-12. The ... Deductions u/s 80IB(10) - delayed filing of return - omission on the part of tax consultant due to severe ill health of his son - intimation issued u/s 143 (1) by application of Section 80AC for the reason that the return of income had been filed beyond the time permitted u/s 139 (1) - condonation of delay in filing the application under Section 119 (2)(b) - HELD THAT:- The affidavit of the income tax consultant which has neither been disputed nor controverted by the respondents is sufficient cause for condonation of delay in filing the application under Section 119 (2)(b) of the Act. Besides it is not in dispute that the return for AY 2011-12 was in fact filed by the petitioner albeit 365 days later on 30th September, 2012. That in respect of the other years from 2010-11 to 2013-14 except 2011-12, the income tax authorities have allowed the deduction under Section 80 IB (10) through the petitioner. Substantial injustice would be caused to the petitioner if the order dated 7th May, 2021 is not set aside. This is clearly a case falling within the phrase “genuine hardship”. As mentioned above. Technical consideration above cannot come in the way of substantial justice. It is neither an allegation of malafide nor an allegation that the delay has been deliberate. We do not find that the omission to file petitioner’s return by the income tax consultant to be an act of negligence. Any person in his situation would have been mentally disturbed. The very fact that not only the petitioner’s ITR was not filed in time, there were also 28 others whose return filing was delayed beyond the due date. The authorities should refrain from over analysis which leads to paralysis of justice. We are, therefore, of the view that the impugned order dated 7th May 2021 deserves to be set aside and is hereby set aside. The income tax authority to act accordingly and consider the claim for deduction under Section 80 IB(10) for AY 2011-12 made by the petitioner in accordance with law, as if there was no delay in filing the return. The authorities under the DTVSV Act also to act in accordance with the said findings and amend Form 3 in respect of the amounts to be paid by the petitioner. Issues Involved:1. Delay in filing Income Tax Return (ITR) for AY 2011-12.2. Rejection of application for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961.3. Entitlement to deduction under Section 80 IB(10) of the Income Tax Act for AY 2011-12.4. Impact of the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV) on the petitioner's case.5. Evaluation of 'genuine hardship' and 'reasonable cause' for delay.Detailed Analysis:1. Delay in Filing Income Tax Return (ITR) for AY 2011-12:The petitioner, a firm engaged in real estate, failed to file its ITR for AY 2011-12 within the prescribed time due to the tax consultant's personal issues, including his son's health problems. The return was filed on 30th September 2012, with a delay of 365 days.2. Rejection of Application for Condonation of Delay under Section 119(2)(b):The Central Board of Direct Taxes (CBDT) rejected the petitioner's application for condonation of delay, citing that the reasons provided were not sufficient or valid. The CBDT emphasized that the petitioner should have been aware of the legal requirements and could not shift the responsibility to the tax consultant. The application was filed after more than five years, which was considered inordinate and unjustifiable.3. Entitlement to Deduction under Section 80 IB(10) for AY 2011-12:The petitioner claimed a deduction under Section 80 IB(10) for AY 2011-12, which was disallowed due to the late filing of the return. The petitioner had successfully claimed similar deductions for other assessment years (2010-11, 2012-13, and 2013-14). The ITAT allowed the deduction on the grounds that the issue was debatable and could not be rejected under Section 143(1).4. Impact of the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV):The petitioner opted for benefits under the DTVSV Act, 2020, and filed an application under Forms 1 and 2, receiving Form 3, which required payment of a specified demand. The respondents argued that since the petitioner availed of the DTVSV benefits, the petition should be dismissed.5. Evaluation of 'Genuine Hardship' and 'Reasonable Cause' for Delay:The court considered whether the delay caused genuine hardship and whether there was a reasonable cause. The court referred to several precedents emphasizing a liberal interpretation of 'genuine hardship' to ensure substantive justice. The court noted that the petitioner's tax consultant's affidavit detailing his son's health issues and the consequent oversight in filing the return was not disputed by the respondents. The court observed that substantial justice should not be defeated by technical considerations of delay, especially when there is no deliberate delay or negligence.Conclusion:The court set aside the CBDT's order dated 7th May 2021, rejecting the petitioner's application for condonation of delay. The court directed the income tax authority to consider the claim for deduction under Section 80 IB(10) for AY 2011-12 as if there was no delay in filing the return. The authorities under the DTVSV Act were also instructed to amend Form 3 accordingly. The petition was allowed, emphasizing that technicalities should not obstruct substantial justice.