2011 (12) TMI 542 - HC - Income Tax

Delay in filing returns - Refund of the TDS denied - inaction of the Income-tax authorities in not processing the returns of Income-tax for the assessment years 1995-96 to 1998-99 on the ground of delay in filing those returns - Held that - The attitude of the Revenue to say the least is in defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at. True no specific or express provision is engrafted in this section to deal with refund of TDS erroneously deducted when there is admittedly no due from the assessee. But then this is precisely the reason in my considered view for enacting section 119(1)(b) of the Act this is in the nature of an inherent power granted to the Central Board of Direct Taxes to entrust any Income-tax authority other than a Commissioner (Appeals) to admit an application or claim for exemption refund even belatedly and dispose of the same in accordance with law. Parliament was obviously not unmindful of the possibility of future occurrence of innumerable situations which are likely to cause genuine hardships to citizens in course of collection of revenue such as the one herein but which could not be foreseen by it at the time of enacting the legislation and it is apparently with a view to meet such exigencies that section 119(1)(b) of the Act was engrafted. In my judgment section 119(1)(b) is the appropriate provision to deal with cases of this nature. No other issue remains for consideration. For what has been stated in the foregoing this writ petition succeeds. The petitioner is entitled to condonation of the delay in filing the claim for refund. Resultantly the respondent authorities are directed to process the application of the petitioner trust for refund 8, 93, 773 and refund the amount in accordance with law along with interest at the rate of 12 per cent. per annum with effect from the date when the application for refund was first filed before respondent No. 2.

Issues Involved:
1. Inaction of Income-tax authorities in processing delayed returns.
2. Denial of refund of TDS amount deducted by financial institutions.
3. Validity of returns filed beyond the statutory time limit.
4. Rejection of the application for TDS refunds by the Assessing Officer.
5. Dismissal of appeal by the appellate authority.
6. Filing of applications under section 119(2) of the Income-tax Act.
7. Refusal of the Commissioner of Income-tax to condone the delay.
8. Entitlement of the petitioner to the refund of TDS.
9. Technicality versus genuine hardship in refund claims.
10. Applicability of section 119(2)(b) of the Income-tax Act.

Detailed Analysis:

1. Inaction of Income-tax authorities in processing delayed returns:
The petitioner, a recognized trust, filed returns for assessment years 1995-96 to 1998-99 to claim refunds of TDS amounts deducted by financial institutions. The Income-tax authorities did not process these returns due to the delay in filing, resulting in the denial of refund of Rs. 8,93,773.

2. Denial of refund of TDS amount deducted by financial institutions:
The petitioner argued that the income generated was exempt under section 10(25)(ii) of the Income-tax Act, as it was for a recognized provident fund. Despite this, financial institutions deducted TDS from the income earned from fixed deposits, prompting the petitioner to file returns to claim refunds.

3. Validity of returns filed beyond the statutory time limit:
The Assessing Officer rejected the returns as invalid due to late filing. The petitioner contended that since the income was exempt and not chargeable to tax, there was no initial requirement to file returns under section 139 of the Act.

4. Rejection of the application for TDS refunds by the Assessing Officer:
The petitioner's application for TDS refunds was rejected on September 22, 2000, by the Assessing Officer on the grounds of the returns being filed beyond the permissible time limit.

5. Dismissal of appeal by the appellate authority:
The petitioner's appeal against the rejection was dismissed on March 25, 2004, by the appellate authority, citing incompetence and lack of jurisdiction, and advised the petitioner to seek remedy under section 119 of the Act.

6. Filing of applications under section 119(2) of the Income-tax Act:
Subsequently, the petitioner filed applications under section 119(2) on May 21, 2004, for condonation of delay and refund of TDS. Despite multiple reminders, no action was taken by the authorities, and the application was transferred to the Commissioner of Income-tax.

7. Refusal of the Commissioner of Income-tax to condone the delay:
The Commissioner of Income-tax refused to condone the delay on June 9, 2010, stating that the case did not involve genuine hardship as required under section 119(2)(b) of the Act.

8. Entitlement of the petitioner to the refund of TDS:
The court noted that the Revenue authorities did not dispute the petitioner's entitlement to the refund but denied it on technical grounds. The court questioned whether the authorities could use technicalities to deny a legitimate refund.

9. Technicality versus genuine hardship in refund claims:
Citing precedents from the Kerala High Court and Madras High Court, the judgment emphasized that genuine hardship under section 119(2) refers to financial hardship caused by not condoning the delay, regardless of whether the delay is meticulously explained.

10. Applicability of section 119(2)(b) of the Income-tax Act:
The court held that section 119(2)(b) was designed to address genuine hardships and should be applied to condone delays in filing refund claims when the taxpayer has no liability. The Revenue's refusal to refund was deemed irrational and contrary to the purpose of section 119(2)(b).

Conclusion:
The writ petition was allowed, and the court directed the respondent authorities to process the petitioner's refund application for Rs. 8,93,773 along with interest at 12% per annum from the date of the initial refund application. The entire process was to be completed within three months from the receipt of the judgment.

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