2025 (3) TMI 1168 - HC - Income Tax

Court Overturns Order, Allows Fresh Review of Delay in Filing 2021-22 Tax Returns Due to COVID-19 Hardships

The HC set aside the impugned order rejecting the petitioner's request for condonation of delay in filing Income Tax Returns for the assessment year ... Rejecting petitioner’s application filed u/s 119 (2) (b) refusing to condone the delay in filing Income Tax Returns - HELD THAT:-Under Section 119 the delay could be condoned if the assessee makes out that the condonation of delay sought is in respect of genuine claim and if condonation of delay is refused, the assessee would suffer genuine hardship. In the instant case, the reasons stated by the petitioner-Private Limited Company is that they had moved to their native place due to pandemic and they were also suffering from medical problems. During pandemic, every person has suffered and when the hardship during pandemic period is pleaded, the Authorities shall be liberal in considering such grounds. As deem it appropriate to set aside the order at Annexure-A, rejecting the application filed by the petitioner u/s 119 (2) (b) of 1961 Act, remanding the matter to the second respondent to consider afresh, with liberty to the petitioner to place on record the documents if any, in support of its contention. ISSUES PRESENTED and CONSIDEREDThe primary legal issue considered in this judgment is whether the petitioner, a Private Limited Company, is entitled to have its delay in filing Income Tax Returns for the assessment year 2021-22 condoned under Section 119(2)(b) of the Income Tax Act, 1961. The core questions include: Whether the petitioner demonstrated 'genuine hardship' as required under Section 119(2)(b) for condonation of delay. Whether the impugned order rejecting the application for condonation of delay was a non-speaking order lacking proper reasoning. Whether the circumstances surrounding the COVID-19 pandemic justified the petitioner's failure to file returns within the extended deadlines.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsSection 119(2)(b) of the Income Tax Act, 1961, empowers the authorities to condone delays in filing returns if the assessee can demonstrate that the delay is in respect of a genuine claim and that refusing condonation would result in genuine hardship. The legal framework emphasizes a liberal interpretation in favor of the taxpayer when genuine hardship is established.Court's Interpretation and ReasoningThe Court noted that the petitioner failed to file the return within the prescribed or extended deadlines, which had been extended multiple times due to the COVID-19 pandemic. The petitioner argued that the pandemic caused significant operational disruptions, including employee unavailability and medical issues, which prevented timely filing.The Court observed that the impugned order, which rejected the condonation request, lacked a detailed explanation and did not adequately consider the reasons provided by the petitioner. The Court emphasized that during the pandemic, many entities faced unprecedented challenges, and authorities should adopt a liberal approach in considering such grounds.Key Evidence and FindingsThe petitioner submitted that their inability to file the return was due to the non-availability of staff and medical issues during the pandemic. The Court acknowledged these challenges as genuine and noted that the petitioner's reasons were not duly considered by the second respondent in the initial order.Application of Law to FactsThe Court applied Section 119(2)(b) to the petitioner's circumstances, highlighting that the pandemic's impact constituted a valid reason for delay. The Court found that the petitioner had a legitimate claim for condonation, which warranted a reconsideration by the authorities.Treatment of Competing ArgumentsThe respondents argued that the petitioner failed to demonstrate genuine hardship and that the repeated extensions provided ample opportunity to file returns. However, the Court found the petitioner's explanations credible and determined that the respondents' dismissal of the condonation request was premature and lacked sufficient reasoning.ConclusionsThe Court concluded that the order rejecting the condonation request was not adequately reasoned and failed to consider the pandemic's impact on the petitioner. The Court set aside the impugned order and remanded the matter for fresh consideration, allowing the petitioner to submit additional supporting documents.SIGNIFICANT HOLDINGSThe Court established the principle that during extraordinary circumstances such as a pandemic, authorities should adopt a more lenient approach in assessing claims of genuine hardship under Section 119(2)(b). The Court held: 'During pandemic, every person has suffered and when the hardship during pandemic period is pleaded, the Authorities shall be liberal in considering such grounds.'The final determination was to set aside the impugned order and remit the matter back to the second respondent for reconsideration, with instructions to consider any additional evidence provided by the petitioner.The Court's decision underscores the importance of a detailed and reasoned approach when assessing applications for condonation of delay, particularly in light of extraordinary circumstances such as the COVID-19 pandemic.