2023 (9) TMI 1226 - HC - Income Tax

Condonation of delay in filing the return of income - carry forward the capital loss denied - HELD THAT - The words in the section if it considers it desirable or expedient to do so for avoiding genuine hardship given wide powers on the Board and obligates the authority concerned dealing with the request for acceptance of the application, to consider the relevant facts and reasons which may have been advanced for condoning the delay. The object is to help the assessee, who for good and valid reasons is prevented from making an application. As it is not in dispute that the observations made in the impugned order regarding that the petitioner was a habitual defaulter is misconceived, as in three out of five years, there was no delay since the due dates were extended by the authorities. Moreover, in order to do substantial justice, the period of limitation would not come as hindrance as the loss suffered by the petitioner is genuine and not set off the same would result into denial of substantial justice. The three reasons given by the assessee for delay, namely, health problems of Senior Accountant Pragna Patel, computer system having got corrupted and heads of accounts being on the verge of retirement and heavy rainfall in the month of July disrupting routine were genuine and cannot be termed as an excuse for filing delayed returns. The petitioner has explained in detail all the above reasons for delay in filing the return. The delay is also of not more than 152 days. It is a settled position of law that the respondent Board has wide powers to condone the delay and in the facts of the case, such powers ought to have been exercised judiciously so as to render substantial justice. We, therefore, find that the rejecting the application of the petitioner by the impugned order dated 16.05.2008, the respondent-Board ignored the facts and the settled legal position of law while considering the genuine claim of the petitioner to condone the delay in filing the return of the income. We find that in rejecting the application of the petitioner vide impugned order dated 16.05.2018, the Board, the respondent, ignored the above position of law and failed to consider the petitioner s genuine claim for condoning the delay. Therefore, the order of the respondent is quashed and set aside. The application filed by the petitioner u/s 119(2)(b) for condonation of delay in filing the return of income for the Assessment Year 2014-15 seeking to carry forward the capital loss is allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the return of income.
2. Genuine hardship as a ground for delay.
3. Powers of the Board under Section 119(2)(b) of the Income Tax Act, 1961.

Summary:

Issue 1: Condonation of Delay in Filing the Return of Income
The petitioner, a Hindu Undivided Family, filed a return of income for AY 2014-15 on 31.12.2014, declaring a total income of 'NIL' and a claim of Long Term Capital Loss of Rs. 1,39,41,852/-. The due date for filing was 30.07.2014. Due to genuine hardship, the petitioner could not file the return within the stipulated time, resulting in the loss not being allowed to be carried forward under Section 139(3) of the Income Tax Act, 1961. An application under Section 119(2) of the Act to condone the delay was rejected by the authorities on 16.05.2018.

Issue 2: Genuine Hardship as a Ground for Delay
The petitioner cited several reasons for the delay, including health problems of a Senior Accountant, corruption of computer data, the retirement of key personnel, and heavy rainfall disrupting routine work. The petitioner argued that these reasons constituted genuine hardship, and the delay should have been condoned. The petitioner also relied on Circular No. 9/2015 and several judicial decisions supporting the condonation of delay in similar circumstances.

Issue 3: Powers of the Board under Section 119(2)(b) of the Income Tax Act
The court examined Section 119(2)(b) of the Income Tax Act, which allows the Board to condone delays to avoid genuine hardship. The court noted that the Board has wide discretionary powers to condone delays, especially in cases where the delay is not deliberate or due to culpable negligence. The court referred to various judgments, including those of the Supreme Court and High Courts, which emphasized a liberal and justice-oriented approach in condoning delays to avoid genuine hardship.

Judgment:
The court found that the reasons for the delay provided by the petitioner were genuine and beyond the control of the petitioner. The court held that the authorities had not taken a judicious and holistic view of the facts and had adopted an unduly restrictive approach. The court quashed the impugned order dated 16.05.2018 and allowed the application filed by the petitioner under Section 119(2)(b) of the Income Tax Act for condonation of delay in filing the return of income for AY 2014-15, thereby allowing the petitioner to carry forward the capital loss of Rs. 1,39,41,842/-. The petition was allowed, and the rule was made absolute to the aforesaid extent.