2025 (11) TMI 341 - HC - Income Tax

Delay in filing AY 2020-21 return condoned under s.119(2)(b); NRI allowed to file due to COVID travel restrictions

HC quashed the impugned order under s.119(2)(b) and held that delay in filing the return for AY 2020-21 should be condoned. The petitioner, an NRI ... Delay in filling return of income - petitioner is an individual and a Non- Resident Indian (N.R.I) residing permanently in Nairobi since the year 1965 - due to COVID period and due to travel restrictions, the petitioner could not visit India for the purpose of filing of Return of Income - HELD THAT:- The respondent ought to have condoned the delay in filing the Return of Income for the Assessment Year 2020-21 as that was the period of genuine COVID hardships. It is also not in dispute that the petitioner has furnished computation of income along with reply. It is also not in dispute that the purchaser of the property has deposited the TDS which is also reflected in Form 26AS. Therefore, the application preferred by the applicant could not have been rejected. As relying on YOGESH RASIKLAL CHANDRANI THROUGH POA BHARAT JAYSUKHRAM CHANDRANI [2025 (3) TMI 1279 - GUJARAT HIGH COURT] the impugned order passed u/s 119(2)(b) of the Act is not tenable and is accordingly quashed and set aside and the delay caused in filing Return of Income for the Assessment Year 2020-21 is required to be condoned and the petitioner is permitted to file the Return of Income for the Assessment Year 2020-21. ISSUES PRESENTED AND CONSIDERED 1. Whether delay in filing the return of income for the assessment year could be condoned under Section 119(2)(b) of the Income Tax Act where the assessee, a non-resident, was prevented by COVID-19 travel restrictions from filing the return within the statutory time under Section 139(5). 2. Whether inconvenience or delay in deposit/credit of TDS by the purchaser (resulting in Form 26AS reflecting TDS in an earlier assessment year) negates a claim of genuine hardship warranting exercise of powers under Section 119(2)(b). 3. Whether the authority's rejection of an application under Section 119(2)(b) is liable to be quashed where the assessee has furnished computation of income and supporting material and TDS is reflected in Form 26AS. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to condone delay under Section 119(2)(b) on account of COVID-19 impediment Legal framework: Section 119(2)(b) confers power on the tax authority to condone delay and pass such orders as may be necessary in relation to the Act. Section 139(5) prescribes the period for filing belated returns and conditions for condonation of delay are subject to statutory provision and administrative discretion under Section 119. Precedent treatment: The Court relied on earlier decisions of the same Court where condonation was granted to non-resident taxpayers prevented by COVID-19 from filing returns within time; those decisions were followed in reasoning here (see cross-reference to later paragraph on precedent treatment and reliance on similar facts). Interpretation and reasoning: The Court treated genuine prevention from filing caused by COVID-19 travel restrictions as constituting 'genuine hardship' within the ambit of Section 119(2)(b). The factual finding that the petitioner was a non-resident staying abroad, left India in June 2020, and was unable to return because of pandemic travel restrictions was accepted as a legitimate ground for condonation. The Court emphasized that administrative discretion under Section 119 must be exercised reasonably when hardship is demonstrated. Ratio vs. Obiter: Ratio - where genuine prevention to file returns due to COVID-19 is established, the power under Section 119(2)(b) to condone delay ought to be exercised to permit belated filing. Obiter - general comments on governmental relaxations during pandemic do not bind future similar fact determinations beyond the stated ratio. Conclusions: The Court concluded that genuine COVID-19 related hardship entitled the petitioner to relief under Section 119(2)(b), mandating condonation of delay and permitting belated filing for the relevant assessment year. Issue 2 - Effect of timing/crediting of TDS and Form 26AS entries on entitlement to condonation and refund claim Legal framework: Tax deducted at source and its credit to the taxpayer is evidenced in Form 26AS; entitlement to claim refund depends on filing the return and relevant TDS being credited in the appropriate assessment year. Administrative action under Section 119 cannot be negated solely because of delayed deposit/credit by third parties. Precedent treatment: The Court relied on a previous similar decision where delayed deposit of TDS by purchaser led to inability to file return and claim refund; that decision was followed to the extent that late TDS deposit/credit can be a material factor supporting condonation (see cross-reference to precedent extract reproduced in judgment). Interpretation and reasoning: The Court observed that where purchaser has deposited TDS and Form 26AS reflects the TDS (albeit timing issues), the taxpayer cannot be faulted for inability to file earlier if prevented by pandemic restrictions. The Court treated the presence of TDS credit in Form 26AS and available computation of income as supportive of a bona fide claim. The respondent's contention that inconvenience is not equivalent to genuine hardship was rejected because the facts showed actual prevention from accessing India and completing statutory filing. Ratio vs. Obiter: Ratio - delayed deposit/credit of TDS by third parties, when coupled with genuine inability to be physically present to file return, supports exercise of powers under Section 119(2)(b) for condonation. Obiter - distinctions between mere inconvenience and genuine hardship noted but fact-specific. Conclusions: The Court concluded that the existence of TDS deposited by the purchaser and reflected in Form 26AS, together with demonstrated COVID-19 prevention, supported condonation and did not justify rejection of the application under Section 119(2)(b). Issue 3 - Judicial review of administrative order rejecting Section 119(2)(b) application where supporting material is on record Legal framework: Administrative action under Section 119 is amenable to judicial review on conventional grounds - perversity, non-application or misapplication of mind, and failure to consider relevant material. The Court may quash and remit for fresh decision where exercise of discretion is found to be unreasonable. Precedent treatment: The Court applied prior decisions of this Court as binding precedents on the question of condonation in COVID-19 circumstances and on the supervisory power to quash orders where discretion was not reasonably exercised. Interpretation and reasoning: The Court found that the authority had opportunities (notice, personal hearing) yet rejected the application despite undisputed facts: petitioner's non-resident status, COVID-19 prevention, submission of computation of income, and TDS deposit by purchaser. The Court held the impugned order to be not tenable (perverse) because the authority did not adequately account for those facts and relevant precedents. Consequently, judicial intervention to set aside the order and direct de novo decision was warranted. Ratio vs. Obiter: Ratio - where administrative rejection under Section 119(2)(b) ignores uncontroverted material demonstrating genuine hardship and relevant precedents, the Court will quash the order and direct fresh consideration. Obiter - procedural expectations regarding timelines for fresh decision (e.g., twelve weeks) are remedial directions specific to the case. Conclusions: The impugned order rejecting condonation was quashed; the authority was directed to condone delay and permit belated filing, or to pass a fresh de novo order within a prescribed timeframe, reflecting reasonable exercise of discretion. Cross-references 1. Issue 1 and Issue 2 are interlinked: the demonstration of COVID-19 prevention (Issue 1) and presence of TDS/Form 26AS and income computation (Issue 2) together form the factual basis obliging exercise of discretion under Section 119(2)(b) (Issue 3). 2. The decision follows and applies earlier similar decisions of this Court addressing condonation during the COVID-19 pandemic; those precedents were treated as directly relevant and followed in the ratio.