2024 (4) TMI 549 - HC - Income Tax

Auditor's inadvertent failure to upload Form 10CCB online constitutes genuine hardship warranting condonation under Section 80IC

Pankaj Kailash Agarwal Versus Assistant Commissioner Of Income Tax Officer, 17 (1) Mumbai, Central Board of Direct Taxes, Principal Commissioner of Income Tax-17, Mumbai

The Bombay HC allowed the petition challenging refusal to condone delay in uploading Form 10CCB for claiming deductions under Section 80IC. The Court held ... Deductions u/s 80IC - audit report in Form 10 CCB, due to inadvertence, had not been uploaded online on time - Power of CBDT to condone delay u/s 119 - Rectification u/s 154 - as argued inadvertence/ oversight in uploading Form No. 10 CCB by the auditor/ the Chartered Accountants of petitioner were circumstances beyond the control of petitioner and would constitute a reasonable cause for not uploading Form No. 10 CCB along with the return of income - Petitioner submitted hat refusal to exercise of powers u/s 119 of the Act by respondent no. 2 on a pedantic and narrow interpretation of the expression 'genuine hardship' to mean only a case of 'severe financial crises' is unwarranted. HELD THAT:- We would agree with Petitioner that no assessee would stand to benefit by lodging its claim late. Moreso, in case of the nature at hand, where assessee would get tax advantage/benefit by way of deductions u/s 80IC of the Act. Of course, there cannot be a straight jacket formula to determine what is ‘genuine hardship’. In our view, certainly the fact that an assessee feels that he would be paying more tax if he does not get the advantage of deduction under Section 80IC of the Act, that will be certainly a ‘genuine hardship’. The Court in K. S. Bilawala & Ors. [2024 (1) TMI 950 - BOMBAY HIGH COURT] has held that the phrase ‘genuine hardship’ used in Section 119(2)(b) of the Act should be considered liberally. CBDT should keep in mind, while considering an application of this nature, that the power to condone the delay has been conferred is to enable the authorities to do substantial justice to the parties by disposing the matters on merits and while considering these aspects, the authorities are expected to bear in mind that no applicant would stand to benefit by lodging delayed returns. The court also held that refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when the delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Legislature has conferred power on respondent no. 3 to condone the delay to enable the authorities to do substantive justice to the parties by disposing the matter on merits. Routinely passing the order without appreciating the reasons why the provisions for condonation of delay has been provided in the act, defeats the cause of justice. In the circumstances, we hereby quash and set aside the impugned order. Application filed by petitioner for rectification of the intimation rejected - We have to note our disappointment with the conduct of respondent no. 1 in not even replying to petitioner. Respondent no. 1 was duty bound to pass orders on the application which has been pending for almost 6 years, instead of making such baseless statements in the affidavit in reply. Perhaps, respondent no. 1 thinks that he or she is not accountable to any citizen of this country. Copy of this order shall be placed before the PCCIT to take disciplinary action against respondent no. 1 for dereliction of duty. In view of the above, respondent no. 1 shall on or before 31st May 2024, dispose the pending application under Section 154 of the Act on merits and before passing any order shall give a personal hearing to petitioner, notice whereof shall be communicated at-least five working days in advance. Issues Involved1. Non-disposal of the application u/s 154 of the Income Tax Act, 1961.2. Denial of deduction u/s 80-IC of the Income Tax Act, 1961.3. Rejection of the application u/s 264 of the Income Tax Act due to delay.4. Refusal to condone the delay by the CBDT u/s 119(2)(b) of the Income Tax Act.5. Interpretation of 'genuine hardship' in the context of condonation of delay.Summary of JudgmentIssue 1: Non-disposal of the application u/s 154 of the Income Tax Act, 1961The petitioner alleged that the Jurisdictional Assessing Officer (JAO) failed to dispose of the application for rectification of mistakes apparent from the record u/s 154 of the Income Tax Act, 1961, despite numerous reminders. The court noted the dereliction of duty by the JAO for not addressing the application pending for almost six years and directed the JAO to dispose of the application on or before 31st May 2024.Issue 2: Denial of deduction u/s 80-IC of the Income Tax Act, 1961The petitioner claimed a deduction u/s 80-IC for an industrial unit in an EPZ at Haridwar, which was denied in the intimation u/s 143(1) dated 29th March 2018. The petitioner contended that the denial was due to the non-uploading of Form 10 CCB by the Chartered Accountants, which was an inadvertent error. The court emphasized that the petitioner should not be penalized for such technical errors and that the objective of the Act is not to penalize an assessee for inadvertent mistakes.Issue 3: Rejection of the application u/s 264 of the Income Tax Act due to delayThe petitioner's application u/s 264 was dismissed on the grounds of delay. The court acknowledged that the petitioner continued to pursue the pending rectification application and that the delay was due to circumstances beyond the petitioner's control, such as the oversight by the Chartered Accountants.Issue 4: Refusal to condone the delay by the CBDT u/s 119(2)(b) of the Income Tax ActThe petitioner's application for condonation of delay u/s 119(2)(b) was rejected by the CBDT on the grounds that the reasons stated were general and did not justify genuine hardship. The court quashed and set aside the impugned order dated 1st September 2023, stating that the refusal was based on a narrow interpretation of 'genuine hardship' and that the CBDT failed to consider the application in its proper perspective.Issue 5: Interpretation of 'genuine hardship' in the context of condonation of delayThe court held that 'genuine hardship' should be construed liberally and that the authorities should bear in mind that no applicant benefits from lodging claims late. The court cited several precedents to emphasize that the approach should be justice-oriented to advance the cause of justice and that mere delay should not defeat a legitimate claim.ConclusionThe court directed the JAO to dispose of the pending application u/s 154 on merits and provided a timeline for the same. It also highlighted the need for the CBDT to comply with judicial orders and take appropriate actions to ensure justice. The petition was disposed of with specific instructions to the respondents.