2014 (12) TMI 191 - HC - Income Tax

Order u/s 119(2)(b) Rejection of application for condonation of delay of 22 months Held that - From time to time, the CBDT has been issuing instructions to effectuate exercise of powers u/s 119(2)(b) which includes, instruction No.12/2003 dated 30 October 2003 - In M/s. Bombay Mercantile Coop Bank Ltd. Versus The Central Board of Direct Taxes 2010 (9) TMI 23 - BOMBAY HIGH COURT it has been held that in matters of condonation of delay highly pedantic approach should be eschewed and a justice oriented should be adopted - It also observed that a party should not be made to suffer on account of technicalities - the CBDT in passing the order, has adopted an unduly technical or pedantic approach - the contention of the revenue that the effect of an order condoning delay in filing the returns, leave the ITO with no choice but to grant the refund as claimed, has no substance. The order of the CBDT also seeks to reject the application for condonation of delay on account of delay from the date of filing the Return of Income the assesse had no occasion to meet the same - the delay in filing of an application if not coupled with some rights being created in favour of others, should not by itself lead to rejection of the application - This is of course upon the Court being satisfied that there were good and sufficient reasons for the delay on the part of the applicant - a company dealing in Artifacts and finances, which has the benefit of services of professionals and auditors - an acceptable explanation was offered by the petitioner and a case of genuine hardship was made out - The refusal by the CBDT to condone the delay was a result of adoption of an unduly restrictive approach - The CBDT appears to have proceeded on the basis that the delay was deliberate, when from explanation offered by the petitioner, it is clear that the delay was neither deliberate, nor on account of culpable negligence or any mala fides thus, the order of the CBDT refusing to condone the delay in filing the Return of Income for the AY 1997-1998 is to be set aside delay condoned and Return of Income is directed to be admitted for consideration the AO is directed to scrutinize the Return of Income and examine the claim for refund on merits - Decided in favour of assesse.

Summary

Issues Involved:
1. Condonation of delay in filing the return of income.
2. Determination of genuine hardship under Section 119(2)(b) of the Income Tax Act, 1961.
3. Examination of the reasons for delay in filing the return.
4. Scrutiny and assessment of refund claims.

Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing the Return of Income:
The petitioner filed a return of income for the Assessment Year 1997-1998 on 14 September 1999, which was delayed by 22 months beyond the due date of 30 November 1997. The petitioner applied to the CBDT on 7 April 2002, seeking condonation of this delay under Section 119(2)(b) of the Income Tax Act, 1961. The CBDT rejected the application on 16 May 2006, citing lack of genuine reasons and habitual late filing by the petitioner.

2. Determination of Genuine Hardship under Section 119(2)(b) of the Income Tax Act, 1961:
Section 119(2)(b) empowers the CBDT to condone delays to avoid genuine hardship. The Supreme Court in B.M. Malani vs. Commissioner of Income Tax defined 'genuine hardship' as real and not fake or counterfeit, emphasizing the need to consider whether the delay was beyond the control of the assessee. The petitioner argued that the delay was due to the misplacement of TDS certificates during an office shift, which constitutes a genuine hardship.

3. Examination of the Reasons for Delay in Filing the Return:
The CBDT rejected the application on grounds that the petitioner was a habitual late filer and did not provide sufficient evidence for the delay. The petitioner contended that the delay was due to the misplacement of TDS certificates during an office shift. The court noted that the petitioner had consistently filed returns within the allowable time under Section 139(4) except for the Assessment Year 1997-1998 and had no objection to scrutiny assessment for determining the refund.

4. Scrutiny and Assessment of Refund Claims:
The court emphasized that the CBDT should adopt a liberal approach in matters of condonation of delay, as established in cases like Sitaldas K. Motwani vs. Director General of Income Tax and Bombay Mercantile Cooperative Bank Limited vs. Central Board of Direct Taxes. The court found that the CBDT's rejection was unduly technical and pedantic. The court directed the jurisdictional I.T.O./Assessing Officer to scrutinize the return and examine the refund claim on merits within six months.

Conclusion:
The court set aside the CBDT's order dated 16 May 2006, condoned the delay in filing the return for the Assessment Year 1997-1998, and directed the jurisdictional I.T.O./Assessing Officer to scrutinize the return and examine the refund claim on merits within six months. The court emphasized that the petitioner had provided an acceptable explanation for the delay and that a liberal approach should be adopted in such matters to ensure substantial justice.