2025 (8) TMI 1614 - HC - Income Tax

Petition allowed under s.119(2)(b); matter remanded for fresh de novo consideration due to CA upload and illness

HC allowed the petition under s.119(2)(b) and remanded the matter for fresh de novo consideration after finding the CA had uploaded audited P&L and ... Application u/s 119(2)(b) praying for condonation of delay in filing original return of income - HELD THAT:- It is apparent that the Chartered Accountant has already uploaded and filed audited Profit and Loss Account and Balance Sheet which was duly sent on 13.01.2022 before the deemed date of filing tax audit report and the designated Chartered Accountant was ill and therefore, the last date to file return was missed. However, the respondent did not consider such facts while rejecting the application to condone delay while exercising powers under section 119(2)(b) of the Act. Petition succeeds and is accordingly allowed - The matter is remanded back to the respondent to pass a fresh de novo order to condone delay in filing the return of income for AY 2021-2022. ISSUES PRESENTED AND CONSIDERED 1. Whether the rejection of an application for condonation of delay in filing return of income under section 119(2)(b) of the Income Tax Act, 1961 was justified where the delay was alleged to have been caused by the Chartered Accountant's failure to upload the return and by illness of the designated CA. 2. Whether a petitioner relying on mistake or inadvertence of an external agent (chartered accountant) and accompanying supporting material (certificate/letter) can establish 'genuine hardship' warranting exercise of powers under section 119(2)(b). 3. Whether the tax authority's approach in rejecting a condonation application can be characterised as impermissibly 'pedantic' when technical compliance (tax audit report uploaded before due date) and entitlement to a refund exist, requiring a justice-oriented approach. 4. The extent to which prior administrative instructions/circulars and court decisions bearing on condonation of delay (including liberal construction of 'genuine hardship') are applicable to the facts and must guide fresh consideration under section 119(2)(b). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of rejection under section 119(2)(b) where delay attributed to CA's failure and illness Legal framework: Section 119(2)(b) confers power on revenue authorities to condone delay in filing returns/applications; exercise is discretionary but governed by principles of substantive justice and consideration of bona fide/genuine hardship. Precedent treatment: The Court relied on earlier decisions emphasising liberal construction of 'genuine hardship' and rejection of highly pedantic approaches, and on administrative circulars which condone delay where audit reports were obtained before filing deadlines but uploaded later. Interpretation and reasoning: The Court examined documentary material showing the tax audit report and audited accounts uploaded before the deemed date and a certificate from the CA admitting failure to upload the return due to illness. The authority's rejection rested on absence of supporting medical evidence and on the proposition that partners had responsibility to e-verify via OTP/Digital Signature. The Court found that the respondent did not adequately consider the uploaded audit report and the attendant circumstances, and adopted an overly technical approach in rejecting the application. Ratio vs. Obiter: Ratio - where an audit report/audited accounts were uploaded prior to the due date and the delay in uploading the return was caused by the CA's inadvertence and illness, the authority must consider condonation under section 119(2)(b) with a justice-oriented approach. Obiter - criticisms of lack of specific medical bills/prescriptions as determinative may be persuasive but are not elevated into a rigid evidentiary rule. Conclusion: The Court held the rejection was not justified and remanded for de novo consideration; the authority should reassess condonation in light of the audit report uploaded prior to due date and supporting admissions by the CA, rather than dismissing the plea on pedantic grounds. Issue 2 - Sufficiency of mistake/inadvertence of CA and supporting certificate to establish 'genuine hardship' Legal framework: 'Genuine hardship' under section 119(2)(b) is to be construed liberally to effect substantial justice; absence of mala fide or deliberate delay and existence of bona fide reasons may justify condonation. Precedent treatment: The Court invoked authorities stating that courts/authorities should prefer substantial justice over technical dismissals and that delay is not presumed deliberate; prior judgments have condoned delays where external agency's inadvertence or illness prevented timely compliance. Interpretation and reasoning: The Court observed that applicants ordinarily do not benefit from delay and that where documentary evidence (audit report upload, CA's admission) explains non-filing, the authority must not summarily reject the plea for lack of perfect medical documentation. The partner's statutory role in verification does not automatically negate a bona fide belief that the return was filed when the audit report and the CA's communications suggested filing had been done. Ratio vs. Obiter: Ratio - admission by the tax auditor/CA of failure to upload and contemporaneous audit documentation can constitute sufficient grounds to establish reasonable cause/genuine hardship for condonation; Obiter - the precise quantum or form of medical evidence required is fact-sensitive and not rigidly prescribed. Conclusion: Mistake or inadvertence by the CA, supported by admissions and timing of audit report, can amount to genuine hardship warranting exercise of power under section 119(2)(b), subject to case-specific evaluation by the authority. Issue 3 - Permissible scope of authority's scrutiny and avoidance of a 'pedantic' approach Legal framework: Discretion under section 119(2)(b) must be exercised to advance substantive justice; administrative circulars and judicial decisions counsel against hyper-technical rejections that thwart merit-based relief. Precedent treatment: The Court relied on decisions warning against pedantic approaches and endorsing a justice-oriented assessment that prioritises merits and bona fides over procedural technicalities, especially where denial would defeat refund claims or other substantive rights. Interpretation and reasoning: The respondent's findings emphasized procedural niceties (partner verification via OTP, routine departmental messages) and lack of corroborative medical receipts, treating those as conclusive disproof of bonafides. The Court held this amounted to an impermissibly narrow review because it ignored the uploaded audit report and a plausible explanation for non-uploading of the return, and because the petitioner stood to lose an admitted refund if relief were withheld. Ratio vs. Obiter: Ratio - authorities should not adopt an overly pedantic posture in condonation matters where documentary evidence and bona fide explanations exist; Obiter - routine departmental communications and technical verification steps are relevant but not dispositive when considered against the totality of circumstances. Conclusion: The authority's pedantic approach was impermissible; a justice-oriented reassessment is required. Issue 4 - Applicability of circulars and precedents in guiding fresh consideration Legal framework: CBDT circulars and judicial rulings are relevant guides for uniformity and to inform discretionary exercise under section 119(2)(b); similar fact situations merit analogous treatment. Precedent treatment: The Court cited administrative circulars and decisions that condoned delays where audit reports existed prior to filing deadlines and where inadvertent non-uploading occurred due to sick/absent staff; such authorities favour liberal exercise of condonation powers. Interpretation and reasoning: Although certain circulars were issued for specific assessment years, the Court accepted the analogous application of their rationale to the present facts. Prior decisions emphasising liberal construction of 'genuine hardship' and preferring substantial justice were held directly applicable. Ratio vs. Obiter: Ratio - administrative instructions and judicial precedents that endorse liberal condonation are binding in principle and should inform de novo consideration; Obiter - precise year-specific applicability of a circular does not rigidly limit analogous application to analogous factual matrices. Conclusion: The respondent must consider the petition afresh in light of guiding circulars and judicial approach favouring liberal condonation where warranted by facts. Overall disposition: The Court quashed the impugned order rejecting condonation and remanded the matter for fresh de novo consideration under section 119(2)(b), directing that the authority address the uploaded audit report, the CA's admission of failure/illness, entitlement to refund, and apply a justice-oriented, non-pedantic approach consistent with precedents and administrative guidance.