Non-resident taxpayer wins challenge against rejection of delayed income tax return filing due to COVID-19 hardships

Gujarat HC allowed petitioner's writ petition challenging rejection of condonation application under Section 119(2)(b) for delayed filing of income tax return for AY 2020-21. Court found genuine hardship as non-resident petitioner in USA was prevented from filing return due to COVID-19 travel restrictions and purchaser's delayed TDS deposit until June 2022. HC quashed impugned order and directed condonation of delay, permitting belated return filing for claiming refund based on submitted income computation and long-term capital gains calculation.

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ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the petitioner demonstrated "genuine hardship" sufficient to warrant condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961.
• Whether the respondent's decision to reject the petitioner's application for condonation of delay in filing the income tax return for Assessment Year 2020-2021 was justified.

ISSUE-WISE DETAILED ANALYSIS

1. Genuine Hardship and Condonation of Delay under Section 119(2)(b) of the Income Tax Act, 1961

Relevant Legal Framework and Precedents: Section 119(2)(b) of the Income Tax Act, 1961, empowers the authorities to condone delays in filing returns if the taxpayer can demonstrate genuine hardship. The phrase "genuine hardship" is to be construed liberally, but the burden of proof lies with the taxpayer.

Court's Interpretation and Reasoning: The Court recognized that the petitioner, a non-resident Indian, faced difficulties due to the Covid-19 pandemic, which restricted international travel and impacted the ability to file returns. The Court noted that the petitioner's inability to file the return was also due to the late reflection of TDS credit in Form 26AS, which was beyond the petitioner's control.

Key Evidence and Findings: The petitioner provided evidence of travel restrictions due to Covid-19 and the late deposit of TDS by the property purchaser, which was only reflected in Form 26AS after the due date for filing the return. The petitioner also submitted a computation of income and capital gains in response to the notice issued by the respondent.

Application of Law to Facts: The Court applied the principle of liberal interpretation of "genuine hardship" and found that the petitioner's circumstances, including the pandemic and the late TDS deposit, constituted genuine hardship. The Court found that these factors justified the condonation of delay.

Treatment of Competing Arguments: The respondent argued that the petitioner could have filed the return online from anywhere in the world and that the delay was not justified. However, the Court found that the petitioner's inability to file the return was due to factors beyond their control, such as the late TDS deposit and travel restrictions.

Conclusions: The Court concluded that the petitioner demonstrated genuine hardship and that the delay in filing the return should be condoned. The Court found the respondent's rejection of the application to be unjustified.

SIGNIFICANT HOLDINGS

The Court held that the circumstances faced by the petitioner, including the Covid-19 pandemic and the late TDS deposit by the property purchaser, constituted genuine hardship under Section 119(2)(b) of the Income Tax Act, 1961. The Court quashed the impugned order and directed the respondent to pass a fresh order condoning the delay in filing the return for Assessment Year 2020-2021.

Core Principles Established:

• The phrase "genuine hardship" under Section 119(2)(b) should be interpreted liberally, taking into account unforeseen circumstances like a pandemic.
• Taxpayers should not be penalized for delays resulting from factors beyond their control, such as late TDS deposits by third parties.

Final Determinations on Each Issue:

• The petitioner demonstrated genuine hardship sufficient to warrant condonation of delay.
• The respondent's decision to reject the application for condonation of delay was not justified.
• The Court directed the respondent to pass a fresh order condoning the delay within twelve weeks.

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