2018 (1) TMI 741 - HC - Income Tax

Seeking relief u/s 119(2) - condonation of delay in filing return of income which could not be filed within the time prescribed under sub section (1) of Section 139 - Held that - Within few days after completion of the audit, the return was filed by the petitioner. In the impugned the order, the Board has observed that the presence of the petitioner for audit was not required. This observation is factually incorrect. The presence of the petitioner was necessary for answering various queries which the auditor may have. Moreover, the state of mind of the petitioner due to the tragic event has not been appreciated by the Board. Moreover, the fact that the business income of the petitioner grew during the relevant year is no ground at all to deny relief to the petitioner. What was required to be considered was whether the default in complying with the requirement was due to the circumstances beyond the control of the assessee. Even taking the findings recorded in the impugned order as correct, it is impossible to disbelieve the case of the petitioner that the default was due to the circumstances beyond his control. Thus, both the conditions (i) and (ii) of clause (c) of sub section (2) of section 119 of the said Act were fulfilled in the facts of the case. Considering the findings recorded, the Board has not considered the question whether it is desirable or expedient to relax the requirement for avoiding genuine hardship. For this limited purpose, the application will have to be remanded to the Board (first respondent) for reconsideration.

Issues Involved:
1. Condonation of Delay in Filing Return of Income
2. Application of Section 119(2)(b) and 119(2)(c) of the Income Tax Act, 1961
3. Interpretation and Application of Section 80AC of the Income Tax Act, 1961

Detailed Analysis:

1. Condonation of Delay in Filing Return of Income:

The petitioner filed a return of income electronically on 26th February 2008 for the assessment year 2007-08, which was beyond the time prescribed under sub-section (1) of Section 139 of the Income Tax Act, 1961. The delay was attributed to a tragic accident involving the petitioner’s elder brother, which led to a prolonged search and rescue operation. The petitioner claimed that due to this unfortunate event, he was unable to complete and hand over the books of accounts for tax audit on time, resulting in the delayed filing of the return.

2. Application of Section 119(2)(b) and 119(2)(c) of the Income Tax Act, 1961:

The petitioner invoked powers under clauses (b) and (c) of sub-section (2) of section 119, seeking condonation of delay. The application was rejected on the grounds that:
- No satisfactory explanation was provided by the petitioner during the show-cause notice and personal hearing.
- Clause (c) of sub-section (2) of Section 119 could not be applied as it does not permit relaxation of any requirement of Section 80AC.
- The petitioner’s business activities continued to grow during the relevant period, indicating that the tragic event did not adversely affect the business.

The court observed that the Board has the power to relax any requirement under Chapter IV or Chapter VI-A to avoid genuine hardship, provided the default was due to circumstances beyond the control of the assessee, and the requirement was complied with before the completion of assessment. The petitioner met these conditions as the return was filed before the assessment order dated 31st December 2009.

3. Interpretation and Application of Section 80AC of the Income Tax Act, 1961:

Section 80AC stipulates that for claiming deductions under Section 80IB, the return must be filed on or before the due date specified under sub-section (1) of Section 139. The court noted that the power under clause (b) of sub-section (2) of Section 119 does not extend to relaxing the time limit specified under Section 139(1). However, clause (c) allows the Board to relax such requirements to avoid genuine hardship, subject to specific conditions.

The court found that the petitioner’s circumstances—engrossed in the search for his brother and dealing with the tragic event—constituted circumstances beyond his control, fulfilling the conditions under clause (c). The Board’s observations that the petitioner’s presence was not required for the audit and that the business income grew during the period were deemed irrelevant to the petitioner’s genuine hardship.

Conclusion:

The court set aside the impugned order dated 18th April 2012 and remanded the application to the Board for reconsideration under clause (c) of sub-section (2) of Section 119, directing the Board to pass an appropriate order within three months. The rule was made partly absolute with no order as to costs.

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