TaxTMI 
TaxTMI 
2026 (1) TMI 554
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.... pertaining to the Assessment Years 2018-19 to 2022-23, exercising power under Section 119(2)(b) of the Income Tax Act, 1961, the petitioner has approached this Court by filing this writ petition craving to invoke extraordinary jurisdiction under Article 226/227 of the Constitution of India with the following prayer(s): "Under the above mentioned facts and in the circumstances of the present case, it is most respectfully prayed that this Hon'ble Court may be graciously pleased to admit this petition, call for and peruse the relevant records and after hearing, be pleased to: (i) Issue Rule Nisi calling upon the opposite parties No. 1 and 2 to show cause as to why Annexure-3 to the writ petition shall not be quashed and the opposite parties to show cause as to why appropriate directions shall not be issued to condone the delay and to allow the petitioner to file return of income along with audit report and to allow deductions/exemptions available to the petitioner's society; (ii) And if the opposite parties fail to show cause or show insufficient cause, then make the rule absolute by quashing Annexure-3; (iii) And further be pleased to pass such ot....
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....ntment of auditor to conduct audit of the financial statements, because of acute shortage of staff, the Auditor-General of Co-operative Societies (for short, "AGCS") vide Letter No. 2AI-01/2019, dated 19.07.2019 instructed to engage Chartered Accountant firm and thereafter, the Directorate of Cooperative Audit, Odisha, Bhubaneswar, issued a Letter No. 4777/VI(9)79/ 2019/Audit-6, dated 07.08.2019 indicating: "*** due to acute shortage of departmental auditors and being engaged in conducting audit of priority societies as per the annual programme, it is not possible to divert them from their programmed assignment and approved thereon. ... However, if you want to get your society audited, it can be done through engagement of Chartered Accountant firm. Audit authorization is to be issued accordingly by this Directorate in favour of the concerned audit firm duly resolved by the General Body from out of panel approved/maintained with Auditor General of Cooperative Societies, Odisha." 2.3. The Governing Body passed resolution to get the audit done by a firm of Chartered Accountants from the empanelled auditors selected by the Empanelment Committee duly approved by the Director....
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....d instructions in the matter, on his consent the matter was taken up for final hearing. 3.2. Heard Sri Rudra Prasad Kar, learned Senior Advocate assisted by Sri Himansu Bhusan Jena, learned Advocate for the petitioner and Sri Subash Chandra Mohanty, learned Senior Standing Counsel for the opposite parties. 3.3. Hearing being concluded, the matter stood reserved for preparation and pronouncement of Judgment. Arguments: 4. Reiterating the difficulties of the petitioner faced due to non-engagement of auditor(s) for conducting audit as required under Section 62 of the OCS Act by the AGCS, Sri Rudra Prasad Kar, learned Senior Advocate submitted that there has been non-application of mind by the PCCIT in appreciating the facts in proper perspective and, thereby he has failed to exercise judicial discretion appropriately. Elaborating further he strenuously urged that when the Central Board of Direct Taxed vide Circular No. 13 of 2023, dated 26.07.2023 has conferred wide discretionary power to condone the delay on the factual demonstration of "genuine hardship" on account of sufficient and reasonable cause, non-consideration of such material placed on record would warrant indul....
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....statutory requirement within the period stipulated therein. It was the assessee who was required to get its accounts audited and failure to do so invites rigours of provisions of the IT Act. Having delayed in approaching the AGCS, the reason for the delay ascribed by the petitioner in the application under Section 119(2)(b) of the IT Act is not palatable. 5.2. The past record is a relevant factor that weighed on the mind of the PCCIT while rejecting the application for condonation of delay. It is submitted by Sri Subash Chandra Mohanty, learned Senior Standing Counsel that the petitioner activated the process to get the accounts audited only after it was served with notice under Section 148 for the Assessment Years 2018-19 and 2019-20. Analysis and discussions: 6. Diligently considered the arguments of the Senior Counsel for the petitioner and reply of learned Senior Standing Counsel appearing for opposite parties. 6.1. A cooperative society is entitled to claim deductions inter alia in the case of a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members under Section 80P of the IT Act from the gross total incom....
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....e delay could be attributed to the petitioner and it was within the control of the petitioner to avoid the delay. It is manifestation of fact on record that the auditors as envisaged under Section 62 of the OCS Act were not available and/or the AGCS could not entrust the audit to any of the panel auditors at the relevant point of time. 6.6. Realizing the plight of cooperative societies in claiming deductions to which they are entitled under Section 80P of the IT Act, and acknowledging the delay in the completion of the audit process for the Assessment Years 2018-19 to 2022-23 under Section 62 of the OCS Act, the Central Board of Direct Taxes issued the following circular: "F.No. 173/21/2023-ITA-I Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Circular No. 13 of 2023 New Delhi the 26th July, 2023 Sub.: Condonation of delay under clause (b) of sub-section (2) of Section 119 of the Income-tax Act, 1961 for returns of income claiming deduction under Section 80P of the Act for various assessment years from Assessment Year 2018-19 to Assessment Year 2022-23- Reg. ....
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.... returns of income claiming deduction u/s 80P of the Act, filed either in the Board or in field formation for the Assessment Years 2018-19 to 2022-23 and decide such applications on merits in accordance with the law where such person is required to get his accounts audited under respective State Laws. 6. In the context of para-5 above, the CCsIT/DGsIT while deciding such applications for condonation of delay in furnishing return of income, shall satisfy themselves that the applicant's case is a fit case for condonation under the existing provisions of the Act. The CCsIT/DGsIT shall examine the following while deciding such applications: (i) the delay in furnishing the return of income within the due date under sub-section (1) of Section 139 of the Act was caused due to circumstances beyond the control of the assessee with appropriate documentary evidence/s; (ii) where delay in furnishing return of income was caused due to delay in getting the accounts audited by statutory auditors appointed under the respective State Law under which such person is required to get his accounts audited, the date of completion of audit vis-a-vis the due date of furnishing th....
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.... 80P of the Act for various assessment years from AY 2018-19 to AY 2022-23, have made application before CBDT regarding condonation of delay in furnishing return of income and to treat such returns as 'returns furnished within the due date under sub-section (1) of Section 139 of the Act stating that delay in furnishing return of income was caused due to delay in getting the accounts audited under respective State Laws. 4. In line with above and in order to mitigate genuine hardship of cooperative societies with reference to Para-3 above, CBDT vide Circular No. 13/2021 dated 26 July 2023 has authorized Chief Commissioners of Income-tax (CCsIT)/Directors General of Income-tax (DGsIT) to deal with such applications of condonation of delay (copy enclosed). 5. In case your cooperative society was not able to avail the benefit of deduction available under Section 80P of the IT Act on account of delay in furnishing the return of income within the due date under sub-section (1) of Section 139 of the Act and the delay was caused due to circumstances beyond your control or due to delay in getting the accounts audited by statutory auditors appointed under the respective Stat....
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....ship of the cooperative society in claiming benefit under Section 80P of IT Act on account of delay in appointment of auditors in view of Section 62 of the OCS Act, the Circular dated 03.08.2023 of Ministry of Cooperation in tune with Central Board of Direct Taxes Circular dated 26.07.2023 has been issued requesting the Chairman and the Secretary of all the Cooperative Societies to ensure that the accounts of society are audited by statutory auditors appointed under the respective State Law before the due date of furnishing the return of income under sub-section (1) of Section 139 of the IT Act and file returns of income in time so that the cooperative society would be eligible for the benefits of deductions as per Section 80P of the IT Act. This apart, it is impressed upon all the concerned that if there is delay caused due to circumstances beyond control of the cooperative society or due to delay in getting the accounts audited by statutory auditors appointed under the OCS Act, an application could be moved before the CCIT/DGIT along with documentary evidences for passing appropriate order in the matter. 6.12. On scrutiny of the documents forming part of pleading of the instan....
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.... New Collins Concise English Dictionary is defined as under: 'Genuine' means not fake or counterfeit, real, not pretending (not bogus or merely a ruse)' For interpretation of the aforementioned provision^2, the principle of purposive construction should be resorted to. Levy of interest although is statutory in nature, inter alia for re-compensating the revenue from loss suffered by non-deposit of tax by the assessee within the time specified therefor. The said principle should also be applied for the purpose of determining as to whether any hardship had been caused or not. A genuine hardship would, inter alia, mean a genuine difficulty. That per se would not lead to a conclusion that a person having large assets would never be in difficulty as he can sell those assets and pay the amount of interest levied. 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 said principle, it is conceded, has not been applied by the c....
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.... explained, more particularly when the returns could not be filed in time due to the ill health of the officer who was looking after the taxation matters of the petitioner.' The Madras High Court in the case of R. Seshammal Vrs. ITO, (1999) 237 ITR 185, was pleased to observe as under (page 187) : 'This is hardly the manner in which the State is expected to deal with the citizens, who in their anxiety to comply with all the requirements of the Act pay monies as advance tax to the State, even though the monies were not actually required to be paid by them and thereafter seek refund of the monies so paid by mistake after the proceedings under the Act are dropped by the authorities concerned. The State is not entitled to plead the hyper-technical plea of limitation in such a situation to avoid return of the amounts. Section 119 of the Act vests ample power in the Board to render justice in such a situation. The Board has acted arbitrarily in rejecting the petitioner's request for refund.' 15. The phrase "genuine hardship" used in Section 119(2)(b) should have been construed liberally even when the petitioner has complied with all the conditions mentioned in ....
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.... at on that evidence. 17. Having said so, turning to the facts of the matter giving rise to the present petition, we are satisfied that respondent No. 1 did not consider the prayer for condonation of delay in its proper perspective. As such, it needs consideration afresh." 6.17. In Pankaj Kailash Agarwal Vrs. CIT, (2024) 464 ITR 65 (Bom) = 2024 SCC OnLine Bom 1025 following pertinent discussions are made: "12. We would agree with Mr. Sarda that no assessee would stand to benefit by lodging its claim late. More so, in the case of the nature at hand, where the assessee would get tax advantage/benefit by way of deduction under Section 80-IC of the Act. Of course, there cannot be a straitjacket formula to determine what is "genuine hardship". In our view, certainly the fact that an assessee feels that he would be paying more tax if he does not get the advantage of deduction under Section 80-IC of the Act, that will be certainly a "genuine hardship". It would be apposite to reproduce paragraph 4 of the judgment in K.S. Bilawala Vrs. Pr. CIT, (2024) 463 ITR 766 (Bom), which reads as under: '4. There cannot be a straitjacket formula to determine what....
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.... was followed by this court in Artist Tree (P.) Ltd. Vrs. CBDT, (2014) 369 ITR 691 (Bom) relied upon by Mr. Walve, where paragraph Nos.19, 21 and 23 read as under: '19. The circumstance that the accounts were duly audited way back on September 14, 1997, is not a circumstance that can be held against the petitioner. This circumstance, on the contrary adds force to the explanation furnished by the petitioner that the delay in filing of returns was only on account of misplacement or the TDS certificates, which the petitioner was advised, has to be necessarily filed along with the return of income in view of the provisions contained in Section 139 of the said Act read along with the Income-tax Rules, 1962 and in particular the report in the prescribed forms of return of income then in vogue which required an assessee to attach the TDS certificates for the refund being claimed. The explanation furnished is that on account of shifting of registered office, it is possible that TDS certificates which may have been addressed to the earlier office, got misplaced. There is nothing counterfeit or bogus in the explanation offered. It cannot be said that the petitioner has obtained any ....
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....must be governed by considerations of public policy, public interest and public good. Discretion is governed by a maxim 'discretio est discernere per legen quid sit justum' (discretion consists in knowing what is just in law). Discretion in general is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution, to discern between falsity and truth, between shadow and substance, between equity and colourable glosses and pretences and not to do according to the will and private affections or ill-will. It has to be done according to the rules of reasons and justice, not according to private opinion. It has to be done according to law and not humour. It is not to be arbitrary, vague and fanciful, but legal and regular. [See, Vijay Power Generators Ltd. Vrs. CST, (2000) 120 STC 377 (Del)]. 6.21. In K.K. Gopalan & Co. Vrs. Assistant Commissioner (Assessment) II, Sales Tax Office, Special Circle, Thrissur, (2000) 118 STC 111 (Ker), the Court observed as follows: "Penalty can be imposed where there has been deliberate defiance of any statutory provis....
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....ce of such facts and circumstances as are sufficient in themselves to justify satisfaction of the authority. [Vide, Collector of Customs Vrs. Ahmadalieva Nodira, (2004) 3 SCC 549]. 6.24. As the period under consideration is Assessment Years 2018-19 to 2022-23, which involves pandemic period, this Court, taking into consideration circumstances during force majeure at that point of time during 2020 to 2022, in the case of Action Research for Health and Socio-economic Development Vrs. Central Board of Direct Taxes, MANU/OR/0478/2025 in the context of Section 119(2)(b) of the IT Act posited that leniency is required to be shown by the authorities as the assessee did undergo genuine hardship and such fact constitutes sufficient cause for consideration of application for condonation of delay. 6.25. With the aforesaid legal perspective, when Section 119(2)(b) of the IT Act^3 is construed, it is unambiguous that said provision has vested in the authority with the discretion to consider "genuine hardship" as a ground to condone the delay and to admit an application or claim for any exemption, deduction, refund or any other relief under the Act after the expiry of the period specified ....
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.... of tax avoidance or tax evasion, which comes into the light in the course of verification and having bearing either in the relevant Assessment Year or establishing connection of relevant Assessment Year with other Assessment Year(s). Paragraph 6.1 of the Circular dated 26.07.2023 clarifies said clause (iii) of paragraph 6 to the effect that it "would require further necessary action as per law". 6.28. In this regard, Sri Rudra Prasad Kar, learned Senior Advocate, has called upon this Court to ponder paragraph 5 of the application under Section 119(2)(b) of the IT Act for condonation of delay. This is to demonstrate that the petitioner, a registered society, had no intention to evade tax nor did it ever show laxity in approaching the appropriate authority for engaging a Chartered Accountant. For better comprehension, said paragraph of the application (Annexure-2) is reproduced hereunder: "Based on the aforesaid facts, the sequence of events are as flows: (i) RBI Letter dated 10th July, 2019 to do the audit for the F.Y. 2014-15 to 2018-19. Copy enclosed as Annexure-1. (ii) AGCS vide Letter No. 2AI-01/2019, dated 19th July, 2019 instructed to engage Depa....
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....ter the expiry of the period specified by or under this Act if sufficient grounds are made out. To effectuate such power, that the Central Board of Direct Taxes had issued the Circular No. 8 of 2001 [(2001) 249 ITR (St.) 112]. It is in the context of the said statutory provision as well as the circular that the reasons mentioned by the petitioner in the application for condonation of delay have to be considered. As indicated above, the principal reason cited by the petitioner is that the statutory auditors were appointed by the Central Registrar on September 3, 2001, and that the said statutory auditors completed the audit on November 15, 2001 and the tax auditors completed the audit on November 28, 2001 and, therefore, there was a delay in filing the return. It would have to be noted that, the petitioner is a Multi-State Co-operative Bank operating under the Multi-State Co-operative Societies Act 1984. The power to appoint the statutory auditors is that of the Central Registrar, who is the Registrar of Co-operative Societies, Maharashtra State. The said authority had appointed the statutory auditors on September 3, 2001. It appears that the said authority appointed chartered accou....
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....of the claim simultaneously. If the claim of exemption or other claim on merits is eminently a fit case for making such claim, it should not normally be defeated on the bar of limitation, particularly, when the delay or the time period for which condonation is sought is not abnormally large. It will of course depend upon the facts of the each case, where such a time period or the merit of the claim deserves such exercise of discretion in favour of the assessee under section 119(2)(b) of the Act or not and therefore, no straitjacket formula or guidelines can be laid down in this regard. However, such orders passed by the Central Board of Direct Taxes being a quasi judicial order is always open to judicial review by the higher constitutional courts. If the good conscience of the courts is pricked, even though such orders rejecting the claims on the bar of limitation may appear to be prima facie tenable, the courts may exercise their jurisdiction to set aside such orders and allow the claims on merits, setting aside the bar of limitation." 6.33. Another facet of the matter can be taken into consideration is that the provision relating furnishing of audit report with the return is t....
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....ty of the events which on a meaningful reading thereof would complete the chain of the events, provided it comes within the ambit of "sufficient cause" appearing in the statutory provisions. 5. Neither the Court nor the authority should take up pedantic approach in finding out the fault in an application for condonation of delay with an intent to achieve the dismissal thereof, but must adopt a liberal and justice oriented approach so that the justice may be imparted and the issue raised is decided on merit." 6.35. As an analogy, reference may be had to the decision of this Court rendered in the case of Sahu Trading Co. Vrs. State of Orissa, (1983) 54 STC 122 (Ori) for the proposition that the evidence to avail benefit entitled to be availed under the statute can be adduced even before the Appellate Authority. Relevant portion of the said Judgment is quoted hereunder: "The decision of this Court has been upheld in appeal by the Supreme Court in the case of State of Orissa Vrs. Babu Lal Chappolia, (1966) 18 STC 17 (SC). The court held that the Assistant Commissioner while exercising his powers under Section 23(2) of the Odisha Sales Tax Act, 1947, was virtually i....
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....r note, in the present case, the petitioner has made out a case disclosing "genuine hardship" constituting "sufficient cause" for condonation of delay. So far as the merits of the claim of the petitioner for condonation of delay in concerned, this Court finds that though the petitioner is bound to get its accounts audited under Section 62 of the OCS Act, the delay in completion of audit by the auditor appointed under the Act is not attributable to the petitioner. The argument of the learned Senior Standing Counsel that the delay being inordinate could not be condoned cannot be found favour with inasmuch as the documents enclosed to the application under Section 119(2)(b) of the IT Act read with the Central Board of Direct Taxes Circular followed by the Letter of the Ministry of Cooperation make it clear that there was default on the part of the AGCS in providing for auditors at the relevant period. Besides showing sufficient cause for delay in preparing the audit reports for the Assessment Years in question, which are now ready for filing along with returns, the assessee could establish "genuine hardship". If the discretion conferred under Section 119(2)(b) of the IT Act is not exe....
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.... Commissioner of Income-tax, Delhi, (1986) 160 ITR 920 (SC) = AIR 1986 SC 2111, it is well-settled that the statutory authorities are required under law to apply relevant provisions of the Odisha Sales Tax Act for the purpose of determining the true figure of the assessee's taxable income and thereafter, the tax liability. Merely because the assessee failed to disclose any particular part of turnover does not amount to relieving the statutory authority from such an obligation. In course of 12(8) assessment, the assessing authority was required to re-determine the gross turnover as well as taxable turnover and in course of such determination, he was statutorily bound to give deduction as admissible in law to the assessee. The assessing authority cannot justify such omission on the ground of the assessee having suppressed any part of his turnover." 7.4. Considering the aforementioned views favouring the assessee, and in light of the legal discussions concerning the exercise of discretionary power, this Court finds it expedient to hold that the petitioner, in the present case, is not in default for not being able to furnish its returns along with the audit report(s) within the peri....
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....Society or class of Societies: Provided that the Auditor-General of the Co-operative Societies, Orissa may engage one or more Chartered Accountants to cause the audit of the accounts of the Co-operative Society and the fees shall be paid by the Society both to the Chartered Accountant and the Government for the audit of its accounts for each Co-operative year at such rate as may be fixed by the Government. (ii) The Auditor-General may, of his own motion or on a requisition from the Registrar and shall, on a directive from the State Government, arrange for special audit, re-audit or concurrent audit of the accounts of any Society or class of Societies on day-to-day or such other basis as may be directed. (iii) The Auditor-General shall so arrange the audit that the same Auditor shall not audit the accounts of the same Society for two consecutive Co-operative Years. (iv) A Society having an annual business turnover of more than twenty-five lakhs, shall arrange for internal audit of its account on a day-to-day basis or on such basis as may be directed by the Auditor-General. (2) The audit under sub-section (1) shall be conducted according to the rules and shall include-....