Income tax return filing delay condoned due to pending AAR applications under Section 245R(2) proviso

The HC allowed petitioner's application for condonation of delay in filing income tax returns seeking refund. Petitioner explained delay until 16.08.2016 was due to pending AAR applications, asserting bona fide belief that filing returns would jeopardize advance ruling rights under Section 245R(2) proviso. Court found this assertion credible and constituted genuine hardship under Section 119(2)(b). Despite additional delay until 04.03.2017, court accepted petitioner's explanation based on previous AAR rulings indicating non-taxability in India. The impugned orders were quashed and delay condoned upon payment of Rs. 50,000 costs, without expressing opinion on refund merits.

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Issues Involved:
1. Preliminary objection regarding authorization of Chartered Accountants.
2. Whether the delay in filing returns of income seeking refund should be condoned under Section 119(2)(b) of the Income Tax Act.
3. Interpretation of Section 245R(2) of the Income Tax Act concerning pending applications before the AAR and its impact on filing returns.

Summary:

Preliminary Objection:
The respondents raised a preliminary objection that the writ petition should not have been filed by the Chartered Accountants of the petitioner, as the authorization did not extend to court proceedings. The court found that the authorization was broad enough to include these proceedings and dismissed the objection, stating that any breach of the ethics code could not be the basis to reject the petition.

Condonation of Delay:
The petitioner, a company incorporated in Singapore, sought to condone the delay in filing returns for AY 2012-13 and 2013-14, asserting that it was under a bona fide belief that filing returns would result in rejection of its applications before the AAR, as per the proviso to Section 245(R)(1) of the Income Tax Act. The court examined whether the delay was justified under Section 119(2)(b), which allows the Board to condone delay to avoid genuine hardship.

Interpretation of Section 245R(2):
The petitioner argued that filing returns would be considered as a proceeding pending before the assessing officer, potentially leading to the rejection of its AAR applications. The court noted that the Supreme Court's decision in Sin Oceanic was based on consent and did not interpret the proviso to Section 245R(2). The court found that the petitioner's belief was credible and that the delay in obtaining the digital signature certificate (DSC) of a foreign director was a reasonable explanation for the delay from 16.08.2016 to 04.03.2017.

Conclusion:
The court concluded that the petitioner had made a case for genuine hardship under Section 119(2)(b) and that the applications to condone delay should be allowed. The orders impugned were quashed, and the delay was condoned subject to payment of Rs. 50,000/- as costs in each petition to the Tamil Nadu State Legal Services Authority. The Assessing Officer was directed to process the returns after ensuring compliance with the conditional order. Both writ petitions were allowed on these terms, with no order as to costs, and connected miscellaneous petitions were closed.

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