Eight-minute e-filing delay in income tax return threatened loss carry-forward; rejection u/s119(2)(b) set aside, delay condoned

The dominant issue was whether rejection under s.119(2)(b) of the condonation application for an eight-minute delay in e-filing the return, resulting in denial of carry-forward of losses, was valid. The HC held that the audit report under s.44AB was uploaded within time and the taxpayer had logged into the portal before midnight; even assuming no portal glitch, an eight-minute delay was a sufficient cause when refusal would cause grave hardship by disallowing substantial carried-forward losses. The impugned rejection was set aside and the delay in filing the return for the relevant AY was condoned, restoring eligibility to claim carry-forward of losses.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the authority, while exercising power under Section 119(2)(b) of the Income Tax Act, 1961, was justified in refusing to condone an eight-minute delay in filing the return of income, thereby denying carry forward of business loss on the ground that no "reasonable/sufficient cause" was shown.

(ii) Whether, on the admitted facts regarding near-simultaneous compliance and the quantum of prejudice, the Court should exercise writ jurisdiction to quash the refusal order and itself condone the delay in filing the return for the relevant assessment year.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Legality of refusal to condone eight-minute delay under Section 119(2)(b) and rejection for want of sufficient cause

Legal framework: The Court proceeded on the basis that an application seeking condonation of delay in filing the return was made under Section 119(2)(b), and that the consequence of late filing was denial of carry forward of loss under Section 80 read with Section 139(1)/(3), as recorded in the judgment.

Interpretation and reasoning: The Court treated as undisputed that the tax audit report was uploaded within time at 11:44 p.m. on the due date, and that the return was uploaded at 12:08 a.m. the next day, resulting in only an eight-minute delay. The Court noted that the refusal order itself recorded that login occurred at 11:39 p.m. Despite these admitted circumstances, the refusal order concluded that no sufficient cause was shown; the Court found this conclusion surprising and unjustified on the facts. The Court further held that, even assuming the revenue's contention that there was no portal glitch, the delay remained minimal and warranted condonation.

Conclusion: The Court held that refusal to condone such a short delay, in the circumstances, was not justified and could not stand.

Issue (ii): Exercise of writ jurisdiction to quash the refusal order and condone delay considering hardship and prejudice

Interpretation and reasoning: The Court accepted that the effect of the refusal was denial of carry forward of business loss of approximately Rs. 21.32 crores, and held that "grave hardship" would be caused if such losses were disallowed merely because the return was filed eight minutes late. The Court considered that the factual timeline demonstrated substantial compliance on the due date and that the marginal delay did not warrant such severe consequences. On this basis, the Court exercised its jurisdiction to interfere with the impugned decision.

Conclusion: The Court quashed and set aside the order rejecting condonation and itself condoned the delay in filing the return for the relevant assessment year; the petition was allowed with no order as to costs.

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