Quashing order rejecting s.119(2)(b) application; 1,257-day delay in filing Form 10B condoned for charitable trust due to adviser error

Bombay HC quashed the order rejecting an application under s.119(2)(b) and condoned a 1,257-day delay in filing Form 10B by a longstanding charitable trust. The court held there was no mala fide, the trust had timely filed returns in other years, and the failure for AY 2016-17 was likely human error attributable to the trust's professional adviser and departmental handling. The HC found the tax authority ought to have exercised its discretionary power equitably, set aside the impugned order dated 25/10/2023 and condoned the delay.

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Issues involved:
The issues involved in this case are the delay in filing Form 10B by a charitable trust for Assessment Year 2016-17, the rejection of the application for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961, and the subsequent legal challenge against the impugned order.

Delay in Filing Form 10B:
The petitioner, a charitable trust registered under the Bombay Public Trusts Act, 1950, filed its return of income for AY 2016-17 declaring income at 'Nil' and claiming a refund. However, the petitioner failed to file Form 10B along with the return, which was eventually filed after a delay of about 1257 days. The application for condonation of delay under Section 119(2)(b) of the Income Tax Act was rejected by an order dated 25th October 2023, leading to the current legal challenge.

Reasons for Delay and Rejection:
The petitioner attributed the delay in filing Form 10B to the refusal of the Departmental staff to acknowledge manual submission and the subsequent requirement to file online. However, the explanation was not accepted as sufficient cause for condoning the delay. The respondent rejected claims of 'Oversight' and 'Inadvertent error' as reasons for the delay, stating that the petitioner should have been aware of the rules and regulations, given its history of filing returns and Form 10B in previous years.

Legal Precedents and Equitable Considerations:
In citing the case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption), the court emphasized the need for an equitable, balancing, and judicious approach in such matters. The court highlighted the absence of mala fide intentions on the part of the petitioner and stressed that denial of exemption solely based on a procedural lapse could be unjust, especially when discretionary powers exist to condone such delays. The court also referred to a similar case where an auditor's oversight was accepted as a reasonable cause, underscoring the importance of considering genuine hardships in tax matters.

Court's Decision and Rationale:
The court, after considering the circumstances, concluded that the delay was not intentional or deliberate. It noted that the petitioner should not be penalized for errors committed by professionals engaged on its behalf. Consequently, the court allowed the Writ Petition, quashed the impugned order, and directed the condonation of the delay in filing Form 10B. The respondent was instructed to process the petitioner's returns based on the timely filing of Form 10B as per the court's order.

Significant Legal Reference:
The court's decision was influenced by the principles outlined in previous judgments, emphasizing the need for a reasonable and equitable interpretation of tax laws, especially in cases involving genuine errors or oversights. The court's ruling underscores the importance of considering individual circumstances and avoiding undue hardship on taxpayers due to procedural lapses.

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