Condonation of delay u/s 119(2)(b) for mistake of chartered accountant allowed. limitation when lead to hardships, should be construed in a reasonable manner-High Court
ABCAUS Case Law Citation:
ABCAUS 2770 (2019) (02) HC
Important Case Laws Cited/relied upon by the parties
CIT versus Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2008) 14 SCC 208
Commissioner of Income Tax, West Bengal vs. Central India Industries Ltd. (1971) 82 ITR 555)
Commissioner of Income Tax Vs. Shelly Products and Anr., (2003) 261 ITR 367
Indglonal Investment & Finance Ltd. vs. Income Tax Officer, [2012 343 ITR 44(Delhi)
The petitioner was aggrieved by an order of the Commissioner of Income Tax, rejecting its application under Section 119(2)(b) for condoning the delay in filing a refund application.
The case of the Petitioner as made out in its application was that its Chartered Accountant had inadvertently overlooked the TDS amounts, as a consequence it could not have sought appropriate refund at the first instance or even claimed it before the period of seeking refund had expired.
The Chief Commissioner observed that the assessee had not filed the revised ITR to claim refund. He further observed that the assessee was a company which had availed services of independent auditor, inhouse finance professional and Chartered Accountant engaged for the purpose of filing ITRs and other compliance issues for the year under consideration and for subsequent years.
The CIT noted that both, under the Company Act as well as under the Income Tax Act, the assessee company was liable to record each transaction i.e. gross receipt, net receipt, tax deducted at source and expenses etc. and get its accounts audited.
In view of the above the CIT disbelieved that the claim of the assessee company that even after having gone through the process of audit, credit of said TDS could not be made at the time of filing of return of income or during time available to file the revised return of income for bonafide reason could not be accepted in absence of any verifiable credible material evidence in support of the claim.
Accordingly, the CIT rejected the application.
The Hon’ble High Court observed that the CIT rejected the petitioner’s application under Section 119(2)(b) only on the ground that the plea of omission by the auditor was not substantiated. The High Court expressed surprise and questioned the action of the CIT as to what more plea or proof any assessee could have brought on record, to substantiate the inadvertence of its advisor.
The Hon’ble High Court noted that the net result of the impugned order was that the petitioner’s claim of inadvertent mistake was sought to be characterised as not bonafide. The court opined that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case.
According to the Court, “bonafide” is to be understood in the context of the circumstance of any case and in the instant case beyond a plea that the petitioner raised there could not necessarily be independent proof or material to establish that the auditor in fact acted without diligence.
The Hon’ble High Court noted that the petitioner did not urge any other grounds such as illness of someone etc., which could reasonably have been substantiated by independent material. In the circumstances of the case, the Court opined that the petitioner was able to show bonafide reasons why the refund claim could not be made in time.
The Hon’ble High Court pointed out that the Statute or period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities – including Revenue Authorities have to construe them in a reasonable manner.
The Hon’ble High Court set aside and quashed the impugned order dated rejecting the petitioner’s application under Section 119(2)(b) and allowed the application for condonation of delay.
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