2025 (9) TMI 1040 - HC - Income Tax

Order quashed for mechanically rejecting 12-day ITR delay; remand for de novo review under Section 119(2)(b) applying genuine-hardship principles

Udit Goyal Versus Principal Commissioner Of Income Tax Delhi 12

DELHI HC set aside the PCIT's order rejecting an application to condone a 12-day delay in filing the ITR and remanded the matter for de novo ... Rejection of application filed seeking condonation of delay of twelve days in filing the ITR - HELD THAT:- The exercise of power by the authority is regulated by empowering the various officers on the basis of monetary effect. The Principal Commissioner of Income Tax (‘PCIT’) had considered the application filed by the assessee seeking condonation of delay and has primarily stated that in the month of December 2021, the metro, trains and buses were running with 50% capacity and as such the assessee had enough time to file his ITR. Hence, the non-filing of the ITR does not seem to be genuine. The conclusion of the PCIT is in the light of the provisions of the CBDT Circular No. 09/2015 dated 09.06.2015 to hold that there was no genuine hardship in filing the return of the income. Supreme Court in the case of B.M Malani [2008 (10) TMI 2 - SUPREME COURT] on which reliance was placed by the learned counsel for the petitioner has interpreted the word ‘hardship’ and held in paragraph 16 that ‘genuine’ means not fake or counterfeit, real; not pretending. Supreme Court held, the ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof, and the legal conspectus attending thereto. For the said purpose, another well-known principle namely, a person cannot take advantage of his own wrong may also have to be borne in mind. The Gujarat High Court in the case of Gujarat Electric Co. Ltd.[2001 (1) TMI 10 - GUJARAT HIGH COURT] has held that the CBDT was not justified in rejecting the claim for refund on the ground that a case of genuine hardship was not made out by the petitioner and delay in claiming the relief was not satisfactorily explained. CBDT Circular No. 09/2015 highlights the fact that while considering the case under Section 119(2)(b), it is to be seen that the case is of genuine hardship on merits. PCIT who admittedly exercises powers under Section 119(2)(b) of the Act acts as a quasi-judicial body, is under an obligation to pass a reasoned order. PCIT has not dealt with the various averments made by the petitioner/applicant and has rejected the application for condonation of delay in a mechanical manner, which, according to us, is clearly unsustainable. Suffice to state, the leaned counsel for the petitioner has also relied upon the other judgments as mentioned above. We do not find it necessary to deal with the same, as they reiterate the position of law as noted by us in the above paragraphs. In the case in hand the return was filed with a delay of twelve days only and it is not a case where the return was signed much in advance, unlike the case of Lava International Limited. [2024 (6) TMI 544 - DELHI HIGH COURT] In any case, we have already held that the impugned order herein passed by the respondent is without considering the averments made by the petitioner in the application and to that extent, is an unreasoned order. Accordingly, we set aside the impugned order and remand the matter back to the concerned PCIT for a de novo consideration to decide the application, keeping in view our observations made above. ISSUES PRESENTED AND CONSIDERED 1. Whether the income-tax authority was justified in rejecting an application under Section 119(2)(b) of the Income-tax Act seeking condonation of a 12-day delay in filing an income-tax return for AY 2021-22 on grounds of hardship caused by the COVID-19 pandemic. 2. Whether an order under Section 119(2)(b) must record reasons addressing the applicant's averments and explain the satisfaction (or dissatisfaction) of the authority that 'genuine hardship' existed. 3. Whether the impugned order, insofar as it mechanically rejects condonation without considered reasoning, is sustainable and requires remand for fresh consideration. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework: Section 119(2)(b) empowers the Board to authorize income-tax authorities to admit claims/applications after prescribed time limits 'for avoiding genuine hardship' and to deal with them on merits. CBDT Circular No. 09/2015 gives guidance that condonation under Section 119(2)(b) is to be considered where a case of genuine hardship on merits is made out. Issue 1 - Precedent treatment: Courts have construed 'genuine hardship' liberally in appropriate cases to advance substantial justice (Bombay and Madras High Courts decisions noted). Supreme Court decisions interpret 'genuine' as real, not feigned; authorities must guard against a party taking advantage of its own wrong. Earlier decisions emphasise that condonation power is remedial to prevent meritorious matters being thrown out for non-deliberate delay. Issue 1 - Interpretation and reasoning: The Court examined the factual matrix: the return due date was extended several times up to 31.12.2021 and the return was filed on 12.01.2022 - a delay of 12 days. The applicant's averments detailed reduced office functioning, staff illness and operational disruption attributable to the pandemic waves and referenced extensions and orders (including CBDT Circular No. 01/2022 and the Supreme Court's suo motu orders) that acknowledged pandemic-related difficulties. The tax authority's conclusion rested on an observation that certain public services were functioning (metros, buses at reduced capacity) and that the assessee had sufficient time, and therefore there was no genuine hardship per CBDT Circular No. 09/2015. Issue 1 - Ratio vs. Obiter: Ratio - where an applicant furnishes specific averments of pandemic-related operational disruption and invokes extant pandemic relief measures, a 12-day delay cannot be dismissed without consideration; an authority must evaluate sufficiency of reasons, not merely the merits of the underlying claim. Obiter - general observations about the scope of pandemic measures and timeline extensions as indicia of leniency in certain categories of taxpayers. Issue 1 - Conclusion: The authority's rejection of condonation based on a high-level observation that some services were operating and that the applicant had 'enough time' is inadequate. The impugned rejection is unsustainable on the facts because it did not engage with the applicant's specific, pleaded circumstances or the surrounding pandemic relief context. Issue 2 - Legal framework: An officer exercising quasi-judicial powers under Section 119(2)(b) must act in a reasoned manner. Judicial precedent requires statutory orders to contain the grounds on which discretion was exercised, and those grounds must be discernible from the order itself; reasons cannot be supplied subsequently to cure a reasonless order (referencing principles in Mohinder Singh Gill and related authority). Issue 2 - Precedent treatment: This Court's precedents and cited High Court authorities hold that orders under Section 119(2)(b) must record rationale and engage with the applicant's factual assertions; mechanical or formulaic rejections without addressing material averments have been set aside and remanded for fresh consideration. Issue 2 - Interpretation and reasoning: The impugned order merely states that 'there was no genuine hardship' and relies on the CBDT Circular as support, but does not address the detailed averments about staff illness, office shutdowns, and contemporaneous extensions/orders relied upon by the applicant. The PCIT's brief recital that metros and buses were running at 50% capacity does not demonstrate application of mind to the applicant's facts or explain why those facts did not constitute hardship. Issue 2 - Ratio vs. Obiter: Ratio - an order under Section 119(2)(b) that lacks reasoning addressing material factual averments is legally deficient and must be set aside; the authority must re-consider the application de novo with reasons. Obiter - the precise quantum or length of delay that may be condoned depends on case-specific evaluation. Issue 2 - Conclusion: The impugned order is a mechanical rejection devoid of reasoned analysis as required of a quasi-judicial exercise of power; it cannot stand and must be set aside and remitted for fresh, reasoned consideration. Issue 3 - Relief and consequential disposition: Given the deficiencies identified, remand is the appropriate remedy. The Court declined to adjudicate the merits of the carry-forward claim itself, noting CPC's disallowance of long-term capital loss in belated returns, and directed the appropriate income-tax authority to reconsider the condonation application afresh in light of the applicant's averments, applicable circulars/orders and settled principles requiring reasoned orders. Issue 3 - Ratio vs. Obiter: Ratio - remand for de novo consideration is warranted where an authority's order rejecting condonation under Section 119(2)(b) fails to address material averments and gives no reasoning. Obiter - specific comparisons with other cases where facts differed (e.g., where returns were signed earlier and filed much later) underscore that applicability turns on fact-sensitive evaluation. Issue 3 - Conclusion: The impugned order is set aside; the matter is remitted to the competent authority for fresh consideration in accordance with law, requiring that the authority record reasons addressing the applicant's factual claims and the question of genuine hardship under Section 119(2)(b).