2013 (7) TMI 358 - HC - Income Tax

Condonation of delay delay in filing of returns Held that - The explanation that it had no expertise in the field of income tax and the refunds of tax deducted at source by the customers who purchased the agricultural produce of farmer members. Regard being had to the nature of business of the petitioner and the persons managing the Co-operative Institution, the Explanation offered cannot, but be said to constitute sufficient cause to condone the delay and therefore, its rejection is perverse. Deduction u/s 80P(2)(iii) - the assesse is into the activity of the sale of agricultural produce of its members is the only source of income Held that - He would be entitled to a deduction under Section 80P (2)(iii) of the Act, but it is for the department to process the return filed by the petitioner and effect refund, if the assesse is entitled to in law - If in the processing of the return, it is found that the petitioner is liable to be charged to tax and a demand raised, it is needless to state that the petitioner cannot advance the plea of limitation in the matter of recovery of the said tax appeal decided in the favor of the assesse.

Summary

Issues:
1. Delay in filing returns for assessment years 1999-00 and 2000-01.
2. Condonation of delay under Section 119(2)(b) of the Income Tax Act.
3. Application of Section 80P(2)(iii) for deduction of income from the marketing of agricultural produce.
4. Refunds under Section 237 and limitation for claim of refund under Section 239 of the Act.
5. Compliance with audit requirements and proviso to Section 44AB of the Act.
6. Non-application of mind by the 1st respondent in rejecting the processing of returns.
7. Consideration of condonation of delay for assessment years 1999-2000 and 2000-01.
8. Sufficiency of cause for delay and entitlement to refund under Section 80P(2)(iii).

Analysis:
The petitioner, a Co-operative Society assisting farmers in selling produce, faced delays in filing returns for assessment years 1999-00 and 2000-01 due to challenges in audit reports. Seeking exemption under Section 80P(2)(iii), the petitioner filed returns in 2004 with an application for delay condonation under Section 119(2)(b). The initial rejection led to a writ petition, citing precedents empowering the CBDT to condone delays in certain cases. The subsequent rejection by the 1st respondent was based on failure to file returns on unaudited books and non-entertainment of the return for 1999-00 as per Board instructions.

The Court analyzed relevant provisions of the Income Tax Act and the KCS Act, emphasizing the importance of audit compliance and refund procedures. The petitioner's compliance with audit requirements and challenges faced in audit reports were crucial in determining the delay condonation. The Court highlighted the necessity of applying the law correctly and considering the circumstances leading to the delay.

The judgment addressed the non-application of mind by the 1st respondent in rejecting the processing of returns and emphasized the need for a thorough review of the petitioner's case. The Court found errors in the respondent's decision-making process and highlighted the petitioner's entitlement to a fair assessment and refund under Section 80P(2)(iii).

Ultimately, the Court allowed the petitions, quashed the respondent's order, condoned the delay in filing returns for the specified assessment years, and directed the respondent to process the petitioner's returns in accordance with the law. The judgment underscored the importance of fair treatment, proper application of laws, and the petitioner's right to seek refunds if entitled under the law.