2016 (10) TMI 403 - HC - Income Tax

Condonation of delay - whether the Commissioner was justified in denying an application to condone the delay in accepting the returns? - Held that - There are some materials to indicate that the assessee was under severe financial crises. He had to close down his business, his registration under the Kerala Value Added Tax Act has been cancelled, he was involved in cases for dishonour of cheques. These are all materials which ought to have been considered for the purpose of arriving at a conclusion as to whether the delay is condonable or not. As fairly submitted by the petitioner that as per the circulars issued by the Board, the Commissioner gets jurisdiction to condone delay, only if the application for condonation of delay is filed within the six years from the last date of the end of the assessment year. Having regard to the aforesaid factual situation, it is apparent that the application for condoning the delay in respect of assessment year 2008-09, is alone within the six years period. Under such circumstances, it will only be appropriate to condone delay for filing return as far as the assessment year 2008-09 are concerned. Therefore, taking into account the over all factual circumstances involved in the matter, this writ petition is disposed of as under. (i) Ext.P10 order to the extent that the delay is not condoned for the assessment year 2008-09 is set aside. (ii) The delay in filing the return for the year 2008-09 is condoned. (iii) The assessing officer shall consider the return filed by the petitioner for the assessment year 2008-09 and finalise the assessment, as expeditiously as possible and not later than three months from the date of receipt of a copy of this judgment.

Summary

Issues:
1. Challenge to Ext.P10 order rejecting application under Section 119 (2) (b) of the Income Tax Act, 1961.
2. Delay in filing return due to business closure, litigations, health condition.
3. Lack of evidence or explanation for delay as per Ext.P10 order.
4. Financial difficulties evidenced by notices from bank, tax cancellation, legal proceedings.
5. Claim for refund of TDS due to delay in filing return.
6. Justification for delay in filing return based on financial crises.
7. Interpretation of Section 119 (2) (b) for condoning delay in accepting returns.

Analysis:
The petitioner challenged the Ext.P10 order that rejected an application under Section 119 (2) (b) of the Income Tax Act, 1961, citing reasons for the delay in filing returns for the assessment years 2007-08 and 2008-09. The petitioner explained that business closure, litigations with financial institutions and creditors, and poor health prevented timely filing. However, the Commissioner, per Ext.P10 order, found the evidence insufficient to justify the delay, leading to the challenge.

The petitioner presented evidence of financial difficulties, including a bank notice demanding payment, tax registration cancellation, and legal convictions, along with medical records indicating poor health. The petitioner sought refund of TDS, emphasizing the adverse impact if returns were not accepted. The Department, represented by counsel, supported the Commissioner's decision, citing lack of material justifying the delay.

The key issue was whether the Commissioner's denial of the application to condone the delay was justified under Section 119 (2) (b). Referring to precedent, the court noted that severe financial crises, as evidenced in the petitioner's case, could constitute genuine hardship warranting delay condonation. The court highlighted the need to consider all relevant materials, such as business closure and legal issues, in assessing condonability.

The court acknowledged the circulars requiring condonation applications within six years from the end of the assessment year. Given the circumstances, the court decided to set aside the Ext.P10 order for the assessment year 2008-09 and condoned the delay in filing the return for that year. The assessing officer was directed to finalize the assessment promptly, within three months from the judgment's receipt, considering the filed return for the year 2008-09.