2009 (12) TMI 36 - HC - Income Tax

Delay in filing an appeal refund is arising out of such return - The assessee filed his return of income for the first time for A.Y. 2000-01 claiming that the Short Term Capital Gains on sale of shares of Indian Companies qualify to be investment income u/s.115C of the Act, taxable at a flat rate of 20% and claimed a refund of Rs.20,78,871/-. Needless to mention that prior to filing this return on 24th September, 2003, the assessee did not file any return for any assessment year. The return of income for A.Y.2000-01 had become barred by limitation on 31st March, 2002 and therefore, the return was filed on 24th September, 2003 along with an application u/s.119(2)(b) for condonation of delay in filing of return and claiming refund. held that - Whether the refund claim is correct and genuine, the authority must satisfy itself that the applicant has a prima facie correct and genuine claim, does not mean that the authority should examine the merits of the refund claim closely and come to a conclusion that the applicant s claim is bound to succeed. This would amount to prejudging the case on merits. All that the authority has to see is that on the face of it the person applying for refund after condonation of delay has a case which needs consideration and which is not bound to fail by virtue of some apparent defect. At this stage, the authority is not expected to go deep into the niceties of law. While determining whether refund claim is correct and genuine, the relevant consideration is whether on the evidence led, it was possible to arrive at the conclusion in question and not whether that was the only conclusion which could be arrived at on that evidence. matter remanded for fresh consideration.

Summary

Issues involved:
1. Condonation of delay in filing the return for claiming a refund for the A.Y. 2000-01 under section 119(2)(b) of the Income Tax Act, 1961.

Detailed Analysis:
The petitioner, a Nonresident Indian settled in Hong Kong, invested in shares of Indian companies and earned Short Term Capital Gains during the A.Y. 2000-01. The concerned bank deducted tax at source, and the petitioner claimed a refund of Rs. 20,78,871. The return was filed after the limitation period had expired, along with an application for condonation of delay. The grounds for seeking condonation included the petitioner's belief that filing was not required due to TDS deductions, the legal obligation under the Income Tax Act, potential penalties for non-filing, and the nature of the income derived from shares in Indian companies as specified assets under section 115C(f) of the Act.

The impugned order rejected the condonation request based on CBDT Instruction No.13/2006, emphasizing the need for genuine hardship and correctness of the refund claim. The respondent found that circumstances preventing timely filing were not demonstrated and that the income from asset sales did not qualify as derived income. The petitioner challenged this decision through an Article 226 writ petition.

During the proceedings, the petitioner argued genuine hardship due to lack of awareness about Indian tax laws, citing relevant case laws. The respondent defended the impugned order, urging dismissal of the petition.

The Court considered the term "genuine hardship" in light of legal principles and dictionary definitions, emphasizing that a liberal interpretation should be applied. Refusal to condone delay could result in injustice, and the authority should focus on substantive justice rather than technicalities. The Court referred to previous judgments highlighting the importance of considering genuine hardship and correct refund claims without prejudging on merits. Ultimately, the Court set aside the impugned order and remitted the matter for fresh consideration, directing a review of hardship and refund claim genuineness.

In conclusion, the Court's decision emphasized the need for a just and liberal approach in evaluating condonation of delay requests, ensuring that genuine hardship and refund claim correctness are properly assessed without prejudging on merits.