2011 (1) TMI 102 - HC - Income Tax

Condonation of delay in filing of return CBDT power to condone delay to avoid genuine hardship to assessee Delay of filing return due to bifurcation of state Genuine hardship if loss is not carried forward CBDT ought to have considered assessee s explanation Matter remanded

Summary

Issues Involved:
1. Condonation of delay in filing returns for assessment years 2000-01 and 2002-03.
2. Impact of bifurcation of the M.P. State Electricity Board on the delay.
3. Consideration of genuine hardship caused by not condoning the delay.

Detailed Analysis:

Issue 1: Condonation of Delay in Filing Returns for Assessment Years 2000-01 and 2002-03

The petitioner, M.P. State Electricity Board, filed returns for the assessment year 2000-01 on March 28, 2002, while the due date was November 30, 2000. The Central Board of Direct Taxes (CBDT) rejected the condonation of delay under section 119(2)(b) of the Income-tax Act, 1961, for assessment years 2000-01 and 2002-03. The petitioner contended that the delay was due to multiple accounting units and complicated government regulations. Additionally, the bifurcation of the Board following the Madhya Pradesh Reorganisation Act, 2000, was cited as a reason for the delay. However, the CBDT found these reasons unconvincing, noting that the bifurcation occurred after the accounting year ended and that the accounts were prepared by October 31, 2000.

Issue 2: Impact of Bifurcation of the M.P. State Electricity Board on the Delay

The petitioner argued that the bifurcation of the erstwhile State of Madhya Pradesh into Madhya Pradesh and Chhattisgarh, effective from November 1, 2000, led to the delay in filing returns. The CBDT dismissed this argument, stating that the bifurcation did not affect the accounts for the assessment year 2000-01, as the accounting year ended on March 31, 2000. The High Court highlighted that the CBDT failed to consider the provision under section 58 of the Madhya Pradesh Reorganisation Act, which allowed a one-year period for the apportionment of assets and liabilities between the successor states.

Issue 3: Consideration of Genuine Hardship Caused by Not Condoning the Delay

The petitioner claimed a loss of Rs. 1500 crores for the accounting year 1999-00 and argued that not condoning the delay would prevent carrying forward this loss, causing significant hardship. The High Court noted that the CBDT did not consider whether the petitioner would suffer genuine hardship if the delay was not condoned, as required under section 119(2)(b) of the Income-tax Act. The Court emphasized the importance of this consideration and found that the CBDT's order was silent on this critical aspect.

Conclusion and Directions:

The High Court set aside the CBDT's orders for the assessment years 2000-01 and 2002-03, allowing the petitioner to file a supplementary application with additional grounds and supporting affidavit within 30 days. The CBDT was directed to restore the case file, consider the new application, and decide on the condonation of delay while also assessing whether genuine hardship would be caused to the petitioner if the delay was not condoned. If the delay is condoned, the CBDT is to pass consequential orders in accordance with the law. No costs were awarded for these petitions.