2020 (2) TMI 1096 - HC - Income Tax

Delay in filing returns u/s 139 - Denial of benefit / exemption u/s 10B - EOU unit - Power of CBDT to condone the delay u/s 119(2)(b) - not filing returns for the two years in time - HELD THAT - To claim the benefit of Section 10B an assessee is required to file the returns by the due date prescribed u/s 139. In this case, the last date for filing the return fell on 30.9.2008 and 30.9.2009 respectively. However, the returns were filed by the petitioner belatedly on 7.1.2009 and 20.11.2009. By filing the returns belatedly, the petitioner did not gain anything. On the contrary, the petitioner risked losing the benefit of deduction under Section 10 B of the Income Tax Act, 1961. An assessing officer has no powers to condone the delay in filing returns under Section 139 (1) of the Income Tax Act, 1961 for allowing deduction under Section 10 B of the Income Tax Act, 1961 . Therefore, mandatory it was for the petitioner to have filed the returns in time to claim deduction under Section 10B of the Act. Only the 2nd respondent has been vested with the powers to grant relaxation, if strict application of any provisions of the Income Tax Act, 1961 results in denial of any legitimate benefit which may otherwise be available to an assessee. The claim for deduction under Section 10 B is dependent on the returns filed by the due date as per Section 139 (1) of the Income Tax Act, 1961. However, the failure on the part of the petitioner to claim deduction on account of the delay comes in the legitimate way of the petitioner claiming deduction. The failure to file the returns in time has to be construed liberally to allow the benefit, provided such applications are made within a reasonable time. In this case, the assessment orders have been passed for the respective assessment years on 28.12.2010 and on 26.12.2011. While passing the assessment order, the assessing officer could have extended the benefit to the petitioner but for the delay in filing returns in time. Legitimate export incentives that are genuinely available to an 100% Export Oriented Unit should not be denied if such unit is otherwise entitled to such relief on merits. Failure on the part of the petitioner to file such returns in time ought to have been condoned by the 2nd respondent. After all the procedures are meant only to discipline and regulate the conduct of assessts. However, strict application of procedure should not come in the grant of legitimate export incentive to an assessee. Allow the above writ petitions by directing the 5th respondent to complete the reassessment on merits by accepting the returns filed by the petitioner belatedly for the purpose of grant of deduction under Section 10 B of the Income Tax Act, 1961. In case, the petitioner is otherwise entitled to the benefit of the deduction under the aforesaid provision but for the delay in filing the returns, the second respondent is directed to allow the benefit and pass appropriate orders is in accordance with law.

Summary

Issues:
Delay in filing income tax returns for assessment years 2008-09 and 2009-10 leading to denial of deduction under Section 10B of the Income Tax Act, 1961.

Analysis:
1. The petitioner, a 100% Export Oriented Unit, filed income tax returns belatedly due to data corruption in the computer system, resulting in a delay of 143 days for 2008-09 and 50 days for 2009-10.
2. The petitioner claimed that the delay was unintentional, causing denial of legitimate benefits under Section 10B of the Income Tax Act, 1961.
3. The petitioner argued that the delay did not provide any advantage and requested condonation under Section 119(2)(b) of the Act.
4. The petitioner relied on the advice of a Chartered Accountant and cited technical issues and the Managing Director's illness as reasons for the delay.
5. The respondents contended that the delay was deliberate and questioned the hacking claim without substantial proof.
6. The assessing officer highlighted the failure to pay taxes on book profits as a reason for delayed filing.
7. The court emphasized the importance of timely filing for claiming deductions under Section 10B and the authority of the 2nd respondent to grant relaxation.
8. The judgment stressed the need for a liberal interpretation to allow legitimate benefits to eligible entities like Export Oriented Units.
9. The court directed the 5th respondent to reassess the petitioner's returns for the relevant years, allowing the benefit of deduction under Section 10B if otherwise entitled.
10. The 5th respondent was instructed to finalize the assessments within three months from the date of the order, ensuring due notice and hearing for the petitioner.

This comprehensive analysis of the judgment highlights the key arguments, legal provisions, and the court's decision regarding the delay in filing income tax returns and the subsequent denial of deduction under Section 10B of the Income Tax Act, 1961.