2026 (3) TMI 1191 - HC - Income Tax

Delay condonation for late tax return granted where director disputes delayed audit; return allowed as s.139(4) filing.

Petition challenges refusal to condone a 169 day delay in filing the income tax return for AY 2022 23; court applied the discretionary standard for delay ... Condonation of delay in filing return u/s 119(2)(b) - reasonable cause arising from internal corporate disputes and pending NCLT proceedings - treatment of belated filing as return u/s 139(4) of the Income Tax Act - Delay of 169 days in filing the return for A.Y. 2022-23 HELD THAT: - The Court found that, except for the year under dispute, the petitioner had a continuous history of timely filings and that internal disputes between the company's directors, which culminated in proceedings before the NCLT and delayed finalisation of financial statements, constituted a reasonable cause for the delay. Court noted that supporting documents for the NCLT proceedings were placed on record in the second application and, having considered these facts, held that the criteria for condonation u/s 119(2)(b) were satisfied. The Court therefore set aside the orders rejecting the earlier applications and directed that the belated return be allowed to be uploaded and treated as a return u/s 139(4). [Paras 10, 11] Final Conclusion: The High Court quashed the orders refusing condonation, held that the petitioner's directoral disputes and pending NCLT proceedings constituted reasonable cause for the delay, condoned 169 day delay and permitted filing of the return within four weeks, to be treated as a return u/s 139(4), with directions to reopen the e filing window. Issues: Whether the delay of 169 days in filing the return of income for Assessment Year 2022-23 should be condoned under section 119(2)(b) of the Income-tax Act, 1961 and the petitioner be permitted to upload the return on the e-filing portal as a return under section 139(4) of the Act.Analysis: The petitioner admittedly has a history of timely filings for prior and subsequent assessment years, and the only default concerns AY 2022-23. The audit report was furnished late because financial statements could not be finalised due to internal disputes between directors which led to proceedings before the National Company Law Tribunal. The audit report was ultimately filed and the petitioner sought condonation under section 119(2)(b) along with supporting documents. The revenue authority rejected the applications on the ground that the reasons did not amount to genuine hardship or reasonable cause and that relevant documents were not placed earlier. The petition record shows the delay and the NCLT-related disputes which prevented finalisation of accounts and thereby delayed the tax audit and return filing. Balancing the petitioner's otherwise consistent compliance, the nature of the cause of delay (internal disputes affecting finalisation of financial statements), and the prejudice that would follow from denial (loss of substantial tax claim), the delay is a matter fit for exercise of discretionary relief under section 119(2)(b). The impugned orders rejecting condonation are therefore unsustainable.Conclusion: The delay of 169 days in filing the return for AY 2022-23 is condoned. The impugned orders dated 11th December, 2024 and 10th March, 2025 are quashed and set aside. The petitioner is permitted to upload the return within four weeks from the date of uploading of this order and the return shall be treated as a return under section 139(4) of the Income-tax Act, 1961; the department is directed to open the e-filing window for that period.