Delay in filing ITR Form 10-B and Form-10 condoned under Section 139(4) due to COVID-19 difficulties

MP HC allowed condonation of delay in filing ITR Form 10-B and Form-10. The due date was 15.2.2021 under Section 139(4) but forms were filed on 9.3.2021. The court relied on SC's suo motu cognizance regarding COVID-19 difficulties, which extended limitation periods from 15.3.2020 to 28.2.2022, granting all persons 90 days from 1.3.2022. Since the limitation expired during the protected period, petitioner was entitled to condonation. The impugned order dated 22.7.2022 was quashed and the application under Section 119(2)(b) was allowed.

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1. ISSUES PRESENTED and CONSIDERED

- Whether the delay in filing Form 10-B and Form 10, along with the Income Tax Return (ITR) for the assessment year 2020-21, can be condoned under Section 119(2) of the Income Tax Act, given the delay was caused by circumstances related to the Covid-19 pandemic.

- Whether the Circulars dated 3.1.2020 and the Apex Court's Suo Motu Writ Petition (Civil) No.3/2020 orders extending limitation periods due to Covid-19 apply to the filing of ITR and related forms under the Income Tax Act.

- Whether the Commissioner of Income Tax was justified in rejecting the petitioner's application for condonation of delay in filing the said forms and ITR.

- The applicability and effect of judicial precedents and circulars on the condonation of delay in filing statutory returns by charitable institutions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of delay in filing Form 10-B, Form 10, and ITR under Section 119(2) of the Income Tax Act

The relevant legal framework includes Section 119(2) of the Income Tax Act, which empowers the Commissioner to condone delay in filing applications or returns if there is a reasonable cause for the delay. The petitioner relied on Circulars No. 2/2020 and 3/2020 dated 3.1.2020, which authorized Commissioners to condone delays up to 365 days for certain filings.

The petitioner submitted that the delay was due to the Covid-19 pandemic, which caused closure of school premises and prevented timely audit completion, thereby constituting a reasonable cause. The petitioner filed applications for condonation of delay on 8.2.2021 and 11.7.2022, which were rejected by the Commissioner.

The Court noted that the delay in filing was 22 days beyond the due date of 15.2.2021 for the ITR and related forms. The petitioner's explanation was supported by the extraordinary circumstances of the pandemic and consequent lockdowns, which were beyond the petitioner's control.

In applying the law to facts, the Court emphasized that the Commissioner's rejection was mechanical and did not consider the effect of the Circulars and the Apex Court's orders extending limitation periods during the pandemic. The Court held that the Commissioner ought to have exercised discretion under Section 119(2) in favor of the petitioner.

Issue 2: Applicability of Apex Court's Suo Motu Writ Petition (Civil) No.3/2020 orders on limitation extension to Income Tax Return filings

The Apex Court had suo motu extended limitation periods for all proceedings, including petitions, suits, applications, appeals, and quasi-judicial proceedings, from 15.3.2020 to 14.3.2021, later extended up to 28.2.2022 due to successive waves of Covid-19. The final order dated 10.1.2022 provided a uniform 90-day limitation period from 1.3.2022 for all cases where limitation expired during the extended period.

The respondents contended that these orders did not cover filing of Income Tax Returns, as they do not fall under the categories mentioned by the Apex Court. However, the Court interpreted the Apex Court's orders as granting benefit of limitation extension to all persons and all types of proceedings before any authority, without exception.

The Court reproduced Para 5(III) of the Apex Court's order, which explicitly states that all persons are entitled to the extended limitation period regardless of the nature of proceedings. Since the limitation for filing Form 10, Form 10-B, and ITR expired during the extended period, the petitioner was entitled to avail the benefit of the extended limitation.

Issue 3: Treatment of precedents and competing arguments on condonation of delay

The petitioner cited several decisions of the Apex Court, this High Court, and other High Courts where delay in filing Form 10 and related returns was condoned on similar grounds, including pandemic-related difficulties. The respondents relied on a Division Bench decision from Bombay High Court which declined condonation of delay beyond the due date but did not consider the Apex Court's later orders extending limitation periods.

The Court found that the Division Bench decision was distinguishable and did not override the Apex Court's suo motu orders. The Court held that the petitioner's case fell squarely within the ambit of the extended limitation period and the Circulars authorizing condonation of delay.

Issue 4: Application of law to facts and final determination

The Court applied the legal principles and facts, noting the petitioner's timely filing of applications for condonation and the pandemic-related reasons preventing timely filing. The Court concluded that the petitioner was entitled to condonation of delay under Section 119(2) read with the Circulars and the Apex Court's orders.

The impugned order rejecting condonation was quashed, and the petitioner's applications for condonation of delay in filing Form 10, Form 10-B, and ITR were allowed.

3. SIGNIFICANT HOLDINGS

"In cases where the limitation would have expired during the period between 15.3.2020 till 28.2.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply."

"The Commissioner was directed to admit such belated application for condonation of delay and to adjudicate such application under Section 119(2) on merit by satisfying themselves that the Assessee was prevented by reasonable cause from filing application."

"The impugned order dated 22.7.2022 is quashed. The application under Section 119(2)(b) of the Income Tax Act for condonation of delay in filing Form 10, Form 10-B & ITR is hereby allowed."

Core principles established include:

• The extension of limitation granted by the Apex Court suo motu during the Covid-19 pandemic applies to all persons and all types of proceedings before any authority, including filing of Income Tax Returns and related forms.
• The Commissioner's discretion under Section 119(2) must be exercised considering Circulars and judicial orders extending limitation periods, especially in pandemic-related circumstances.
• Delay caused by extraordinary circumstances such as Covid-19 lockdowns constitutes a reasonable cause for condonation of delay in filing statutory returns.
• Mechanical rejection of condonation applications without considering relevant circulars and judicial pronouncements is impermissible.

The final determination was that the petitioner's delay in filing Form 10, Form 10-B, and ITR for AY 2020-21 was condoned, and the impugned order rejecting condonation was set aside.

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