2024 (5) TMI 595 - HC - Income Tax

Court Prioritizes Substantial Justice, Condones Income Return Delay, Quashes Order, Remands for Fresh Assessment.

The HC condoned the delay in filing the income return, emphasizing substantial justice over technicalities. It set aside the CBDT's rejection of the ... Rectification of mistake u/s 254 - Deduction u/s 80IB - Delay in filing of return of income (ITR) - ITAT rejected the application for rectification - HELD THAT:- Though we would agree with the view expressed by the ITAT that in the order dated 4th May 2022 there was no error, the ITAT failed to appreciate the spirit in which the order dated 23rd August 2022 was passed by the Hon’ble High Court. The High Court had very categorically observed that the authority should refrain from over analysis which leads to paralysis of justice. High Court in its order [2022 (12) TMI 1019 - BOMBAY HIGH COURT], condoned the delay by observing that the Income Tax Authority should consider the claim for deduction u/s 80IB (10) of the Act for AY 2011-12 made by Petitioner in accordance with law, as if there was no delay in filing the return - By an order pronounced [2023 (7) TMI 1405 - ITAT PUNE] the Tribunal rejected the MA by observing that the High Court states the Income Tax Authority and the ITAT is not an authority and there was no apparent mistake in its order as required within the four corners of Section 254 (2) of the Act. It is this order, which is impugned in this Petition HELD THAT:- Though we would agree with the view expressed by the ITAT that in the order [2020 (5) TMI 718 - ITAT PUNE] there was no error, the ITAT failed to appreciate the spirit in which the order dated 23rd August 2022 was passed by the Hon’ble High Court. The High Court had very categorically observed that the authority should refrain from over analysis which leads to paralysis of justice. Therefore, the delay having been condoned by the High Court, we hereby quash and set aside the assessment order and remand the matter to the stage of AO who shall pass fresh assessment order in accordance with law by considering the claim for deduction under Section 80IB (10) of the Act for AY 2011-12 made by Petitioner as if there was no delay in filing the return. In fact, what we understand from paragraph 22 of the order dated 23rd August 2022 of the High Court is that the matter was being remanded to the AO. Instead, Petitioner has approached the ITAT by filing an application under Section 254 (2) of the Act. AO shall pass fresh assessment order on or before 31st August 2024 and before he passes any order, shall give a personal hearing to Petitioner, notice whereof shall be communicated atleast five working days in advance. The assessment order shall be a reasoned order dealing with all submissions of Petitioner. Issues involved:The issues involved in the judgment are the condonation of delay in filing the return of income, denial of deduction under Section 80IB of the Income Tax Act, 1961, rejection of application under Section 119 (2) (b) of the Act by the Central Board of Direct Taxes, and the subsequent legal proceedings challenging the assessment order.Condonation of delay in filing the return of income:The Petitioner entered into a joint venture agreement and did not file its return of income for Assessment Year 2011-12 on time. Consequently, the Petitioner was denied a deduction under Section 80IB of the Income Tax Act due to the belated filing. The Commissioner of Income Tax (Appeals) upheld the denial, leading to an appeal before the Income Tax Appellate Tribunal. The Central Board of Direct Taxes rejected the Petitioner's application for condonation of delay. However, the High Court, in its order dated 23rd August 2022, condoned the delay and directed the Income Tax Authority to consider the deduction claim as if there was no delay in filing the return.Rejection of application under Section 119 (2) (b) of the Act:The Central Board of Direct Taxes rejected the Petitioner's application under Section 119 (2) (b) for condonation of delay in filing the return. The High Court set aside this rejection, emphasizing that substantial injustice would be caused if the order was not overturned. The Court highlighted that technical considerations should not impede substantial justice, especially when there was no deliberate negligence or mala fide intent involved in the delayed filing.Challenge to the assessment order and remand to the Assessing Officer:Following the High Court's order condoning the delay, the Petitioner filed a Miscellaneous Application before the Tribunal seeking to recall its previous order. The Tribunal rejected this application, stating that there was no apparent mistake in its earlier decision. However, the High Court, noting the spirit of its previous order, quashed the assessment order and remanded the matter to the Assessing Officer for fresh assessment. The Court directed the Assessing Officer to consider the deduction claim under Section 80IB (10) for AY 2011-12 without factoring in the delay in filing the return.Conclusion:The High Court's judgment in this case focused on the importance of substantial justice and the need to avoid over-analysis that could lead to a paralysis of justice. By condoning the delay in filing the return of income and setting aside the assessment order, the Court ensured that the Petitioner's claim for deduction under Section 80IB (10) would be considered without the impact of the delayed filing. The decision highlighted the significance of fairness and due process in tax assessments, ultimately leading to the quashing of the original assessment order and subsequent decisions by the CIT(A) and the ITAT.