Powers and statutory discretion conferred on the commissioner of income tax to condone delay u/s 119(2)(b) ought to be judiciously exercised so that undue hardship to the assessee is avoided – High Court
In a recent judgment, Hon’ble Bombay High Court has observed that powers and statutory discretion conferred on the commissioner of income tax to condone delay under Section 119(2)(b) of the Income Tax Act, 1961 ought to be judiciously exercised so that undue hardship to the assessee is avoided.
ABCAUS Case Law Citation:
4356 (2024) (12) abcaus.in HC
In the instant case, the assessee had filed a Writ Petition challenging the order passed by the Commissioner of Income Tax (Exemption) for not condoning the delay under section 119(2)(b) of the Income Tax Act, 1961 (the Act) due to belated filing of Form 9A.
The petitioner was a trust registered with the Income Tax Department (ITD) under section 12A of the Act. The objects of the petitioner were to establish, promote, set up, run, maintain and grant-aid and other financial assistance to educational institutions for development of human knowledge. The petitioner was running a School/College for last eighteen years.
The petitioner trust filed its Nil return of income under Section 139(1) of the Act along with Form 10B for the A.Y. 2017-2018, after claiming exemption under Section 11 of the Act. The petitioner also filed its revised return claiming exemption under Section 11 of the Act. The revised return was selected for scrutiny.
During the course of assessment proceedings, the petitioner uploaded a revised computation of income with a view to rectify certain computation mistakes namely (i) Claim of depreciation on fixed assets under Section 11(6) of the IT Act; (ii) Expenses claimed towards capital expenditure along with deduction i.e., by way of filing Form 9A exercising option under clause (2) to ‘Explanation 1’ to Section 11(1) of the IT Act, being interest amount accrued but not received. The assessment in the petitioner’s case was completed.
A trust registered under Section 12A/12AB is required to apply at least 85% of its income for charitable/religious purposes every year. In cases where a trust is not able to apply 85% of its income for charitable or religious purposes in India, such income shall be deemed to be applied if the trust furnishes Form 9A.
The petitioner had filed Form 9A belatedly (after a delay of 799 days) on the Income Tax portal, alongwith an application for condonation of delay in filing the said Form 9A. According to the petitioner, it was able to file the said Form 9A due to change in procedure, from manual to electronic filing which was the main reason for such delay.
In this regard, the petitioner relied upon CBDT Circular No. 7 of 2018, dated 20 December 2018 issued under Section 119(2)(b) of the IT Act. The said provision empowers the Commissioner to admit belated application for condonation of delay in filing Form 9A and decide such application on merits, in situations where the assessee was prevented by reasonable cause from filing such applications in Form 9A and Form 10, within the stipulated time.
The CBDT had issued another Circular No. 30 of 2019 under Section 119 (2)(b) of the IT Act dated 17 December 2019 extending the applicability of the earlier Circular to the assessment year in question i.e. A.Y. 2017-2018. In fact, the petitioner had filed the Form 9A on the Income Tax portal just after 3 days of the issuance of the CBDT Circular dated 17 December 2020. Further the CBDT then issued Circular No. 6 of 2019, dated 19 February 2020 in the context of condonation of delay under Section 119(2)(b) of the Act applicable for the A.Y. 2018-2019. This was on similar reasoning/basis set out in the earlier CBDT Circulars applicable for A.Y. 2016-2017 and A.Y. 2017-2018, respectively.
However, the CIT(E) passed the impugned order under section 119(2)(b) of the Act rejecting the application of the petitioner for condonation of delay in filing Form 9A. Such rejection by the said respondent was mainly on the ground that delay in filing Form 9A was not mere procedural lapse on the part of the petitioner that lead to belated filing of Form 9A.
Before the Hon’ble High Court, the Petitioner Trust placed reliance on the judgments of Delhi High Court, Bombay High Court,
However, according to the Income Tax Department, the petitioner was not taking the compliance under the Act seriously. The petitioner had failed to furnish any proof, documentary or otherwise in support of its case for condonation of delay in filing Form 9A. The petitioner failed to even file the said Form 9A within time, electronically, as required due to change in procedure. It sat over such compliance and filed it belatedly after a gross delay of 799 days. Regarding deductions denied it was the stand that the petitioner had claimed such deduction only during the course of assessment proceedings, only when the assessing officer, specifically asked for the same, which lacked bonafides.
The Hon’ble High Court observed that a perusal of the provisions of section 119(2)(b) makes it clear that the legislature has specifically conferred power to the Commissioner of Income Tax to admit an application to claim any exemption, refund or relief after the expiry of the specified period under the Act which shall be dealt with in accordance with law. Such provision has been introduced with a view to avoid genuine hardship to the assesses who have come forward with an intent to pay tax and abide by the mandate of the Act, but for reasons beyond control are prevented from adhering to statutory timelines.
The Hon’ble High Court further noted that CBDT has issued several circulars on the subject which re-enforces the legislative intent to permit condonation of delay in filing Form 9A and 10 under Section 119(2)(b) authorizing Commissioners of Income Tax to admit such applications and decide on merit, in cases where the assesses were prevented to file the said forms in time, after showing sufficient cause. Thus, the legislative intent discernible from above Circulars of CBDT issued from time to time under Section 119(2)(b), providing for condonation of delay in filing Form 9A and 10 by the assesses with unambiguous language and purport to avoid, prevent, mitigate hardship to them. It is on such basis that the petitioner addressed letters/application to the CIT(E). However, the reasoning and justification of the petitioner brought out in the said letters have been overlooked by the jurisdictional assessing officer in his order impugned mainly on the ground that non filing of Form 9A was not a procedural lapse.
The Hon’ble High Court opined that approach of the CIT(E) would in fact, instead of mitigating hardship to assesses in genuine cases, would augment the same. Such approach would discourage genuine assesses from coming forward to file their return of income, if their genuine applications, like the present one, are rejected in such arbitrary manner on mere ipse dixit of the assessing officer. The reasoning in the impugned order, was not in sync, harmony with the clear legislative intent to avoid hardship under Section 119 (2)(b) and the Circulars issued under the said provision.
The Hon’ble High Court opined that no benefit would accrue to the petitioner by the belated filing of Form 9A and or no harm it would cause to the revenue. Moreover, as held by the Delhi High Court, the CBDT by a recent Circular No.17 of 2022 dated 17 July 2022, provided that the Commissioners were authorised to condone delay beyond 365 days upto 3 years in filing Form 9A and 10 for the A.Y. 2018-19. In the present case, the delay is of 799 days on the part of the petitioner in filing Form 9A supported by sufficient cause, deserved to be condoned.
The Hon’ble High Court observed that the powers and statutory discretion conferred on the commissioners to condone delay under Section 119(2)(b) of the Act ought to be judiciously exercised so that undue hardship to the assessee is avoided. Instead, the impugned order made it evident that the assessing officer had mixed up issues of the petitioner claiming deductions towards deprecation and capital expenditure made and duly disclosed by it during the assessment proceedings with intentional delay in belated filing of Form 9A attributed to the petitioner. In fact, the chart relied on by the petitioner setting out the revised computation of income by the assessee not being accepted by the respondents in light of delayed filing of Form 9A by the petitioner, would lead to undue financial burden, hardship foisted upon the petitioner-trust. Such vital aspect ought to have weighed with the respondents in considering and deciding the aspect of hardship, while rejecting its application for condonation of delay.
The Hon’ble High Court held that the legal, jurisprudential principles reiterated in the judgments were clearly applicable to the case in hand. A contrary view would militate against the true meaning, purport and language of Section 119(2)(b) of the Act which aims at mitigating hardships and ensuring substantial justice to genuine assessee who should not be non-suited purely on hyper technical ground and ipse dixit of the assessing officer. It is therefore not possible for us to sustain the impugned order.
Accordingly, the Petition was allowed.
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