2025 (1) TMI 245 - HC - Income Tax

Delay condoned for refund claim under Section 119(2)(b) despite exceeding six-year limit due to compelling circumstances

The Bombay HC allowed a petition challenging rejection of a condonation of delay application under Section 119(2)(b). The tax authority rejected the ... Delay in filing the application u/a 119 (2) (b) - respondent no. 1 rejected the application seeking condonation of delay filed u/s 119 (2) (b) as it was beyond the period of six years from the end of the Assessment Year as stipulated in the CBDT Circular No. 09/2015 thereby holding that the same is not maintainable - HELD THAT:- We find the petitioner has been diligent enough in pursuing the claim for a refund. In fact, it is material to note that the payments made to the petitioner by the Government of UP were delayed on account of the dispute which had to be referred to arbitration. Pursuant to the arbitral award payments were made to the petitioner in different tranches. The petitioner had filed a claim for refund with respondent No. 3 within the stipulated period. However, respondent No. 3 did not have jurisdiction to process the claim as the same was for more than Rs. 10,00,000/-. The claim of the petitioner for the Assessment Year 2015-16 in respect of the very same contract was processed and refund was granted. In the meantime, there was outbreak of COVID pandemic. We are satisfied that a case making out compelling circumstances for filing the return belatedly is made out in the application filed by the petitioner. In the present facts, the petitioner has made out a case for condoning the delay in filing the application u/s 119 (2) (b) before the CBDT. There are adequate circumstances on record justifying the delay in filing application and hence, looking at the compelling reasons for the delay in filing the application the claim of the applicant ought to have been considered by the respondents on merits. Petition is accordingly allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the Central Board of Direct Taxes (CBDT) was justified in rejecting the petitioner's application for condonation of delay in filing the return of income for the Assessment Year 2014-15 under Section 119(2)(b) of the Income Tax Act, 1961.Whether the CBDT Circular No. 09/2015, which limits the condonation of delay to six years from the end of the relevant assessment year, applies to the petitioner's case.Whether the petitioner demonstrated 'genuine hardship' that would warrant the condonation of delay under Section 119(2)(b).Whether the CBDT's reliance on Circular No. 09/2015 is binding on itself when exercising powers under Section 119(2)(b).2. ISSUE-WISE DETAILED ANALYSISIssue 1: Justification for Rejection of Condonation ApplicationLegal Framework and Precedents: Section 119(2)(b) of the Income Tax Act allows the CBDT to condone delays to avoid genuine hardship. The CBDT Circular No. 09/2015 limits condonation applications to six years from the end of the relevant assessment year.Court's Interpretation and Reasoning: The court noted that the CBDT's rejection was based on the application being beyond the six-year limit and the absence of compelling reasons for the delay.Key Evidence and Findings: The petitioner had filed the application for condonation of delay on 28.02.2022, which was beyond the six-year limit from the end of the Assessment Year 2014-15.Application of Law to Facts: The court examined whether the delay was due to circumstances beyond the petitioner's control, such as the arbitration process and the COVID-19 pandemic.Treatment of Competing Arguments: The respondent argued that the application was time-barred and lacked compelling reasons. The petitioner claimed that the delay was due to unavoidable circumstances and that the refund was legitimately due.Conclusions: The court found that the petitioner had demonstrated genuine hardship and had been diligent in pursuing the refund claim, warranting a reconsideration of the application on its merits.Issue 2: Applicability of CBDT Circular No. 09/2015Legal Framework and Precedents: Circular No. 09/2015 restricts condonation applications to within six years from the relevant assessment year.Court's Interpretation and Reasoning: The court referred to precedents indicating that CBDT circulars are binding on subordinate authorities but not on the CBDT itself when exercising powers under Section 119(2)(b).Key Evidence and Findings: The court noted that the petitioner's initial application for condonation was within the six-year limit, but jurisdictional issues delayed its processing.Application of Law to Facts: The court considered whether the circular's limitation should prevent the CBDT from exercising its discretion under Section 119(2)(b).Treatment of Competing Arguments: The respondent emphasized the circular's binding nature, while the petitioner argued for a liberal interpretation of 'genuine hardship.'Conclusions: The court concluded that the circular should not preclude the CBDT from considering the application on its merits, given the petitioner's circumstances.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes: 'The phrase 'genuine hardship' used in Section 119(2)(b) should have been construed liberally even when the petitioner has complied with all the conditions mentioned in Circular dated 12th October, 1993.'Core Principles Established: The CBDT has the discretion to condone delays beyond the six-year limit if genuine hardship is demonstrated, and circulars are not binding on the CBDT in exercising this discretion.Final Determinations on Each Issue: The court quashed the impugned order dated 19.01.2024 and directed the CBDT to consider the petitioner's application under Section 119(2)(b) on its merits, acknowledging the demonstrated genuine hardship and compelling circumstances.The judgment underscores the importance of a liberal interpretation of 'genuine hardship' and the discretionary power of the CBDT to condone delays in the interest of justice, especially when procedural obstacles and external circumstances have contributed to the delay.