Tax authority's rejection of delay condonation application under Section 119(2)(b) quashed for mechanical dismissal without considering genuine hardship

The HC quashed the tax authority's rejection of an application under Section 119(2)(b) of the Income Tax Act for condonation of delay in filing revised return. The petitioner had inadvertently failed to claim past years' deficit against current income, resulting in tax liability instead of refund entitlement. After unsuccessful attempts through rectification under Section 154 and appeal under Section 250, the petitioner sought time extension. The HC held that the authority mechanically rejected the application without considering genuine hardship. Since the application was filed within the six-year limit prescribed by CBDT circular and demonstrated genuine hardship, the rejection was unsustainable. The writ petition was allowed.

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Issues Involved:
1. Condonation of delay in filing revised return u/s 119(2)(b) of the Income Tax Act, 1961.
2. Rejection of application for condonation of delay by the Income Tax Department.
3. Genuine hardship caused by non-filing of revised return.

Summary:

Issue 1: Condonation of delay in filing revised return u/s 119(2)(b) of the Income Tax Act, 1961
The petitioner, an educational and charitable trust registered u/s 12A(1)(aa) of the Income Tax Act, sought to quash the order dated 22.01.2024, which rejected their application for condonation of delay in filing the revised return of income for the assessment year 2021-22. The petitioner's original return filed on 15.03.2022 was disallowed due to a delay in filing the audit report in Form-10B, resulting in a demand of Rs. 5,47,24,100/-. The petitioner had an accumulated deficit of Rs. 5,41,52,906.70 which was not adjusted in the return, leading to an inadvertent mistake.

Issue 2: Rejection of application for condonation of delay by the Income Tax Department
The Assessing Officer rejected the rectification petition u/s 154 of the I.T. Act. Subsequently, the petitioner filed an application u/s 119(2)(b) for condonation of delay, which was rejected by the opposite party no.1 on 22.01.2024, stating that the genuine hardship for non-filing of the revised return was not justified.

Issue 3: Genuine hardship caused by non-filing of revised return
The petitioner argued that the rejection was arbitrary and contrary to the provisions of law. The petitioner highlighted the genuine hardship due to the non-adjustment of the past deficit and referenced various judgments supporting their claim. The court noted that the petitioner had demonstrated genuine hardship and that the rejection of the application for condonation of delay was not justified.

Conclusion:
The court quashed the order dated 22.01.2024 rejecting the application for condonation of delay in filing the revised return and directed the concerned authority to take follow-up action in accordance with the law. The writ petition was allowed without any order as to costs.

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