2024 (4) TMI 939 - HC - Income Tax

Rejection of application u/s 119(2)(b) for condoning the delay in filing the Form 10B - delay was about 1257 days - assessment of trust - Petitioner/trust explained the cause for delay on the Chartered Accountant/Auditor - According to Petitioner when it sent Form No. 10B to the Department for submission after filing the return the Departmental staff refused to acknowledge the manual submission and Petitioner was told to file the same online - HELD THAT - Admittedly Petitioner is a charitable trust. Admittedly Petitioner has been filing its returns and Form 10B for AY 2015-16 for AY 2017-18 to AY 2021-22 within the due dates. On this ground alone in our view delay condonation application should have been allowed because the failure to file returns for AY 2016-17 could be only due to human error. Even in the impugned order there is no allegation of mala fide. As held in Sarvodaya Charitable Trust 2021 (1) TMI 214 - GUJARAT HIGH COURT the approach in the cases of the present type should be equitious balancing and judicious. Technically strictly and liberally speaking Respondent No. 1 might be justified in denying the exemption by rejecting such condonation application but an assessee a public charitable trust with almost over thirty years which otherwise satisfies the condition for availing such exemption should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned. Moreover in our opinion Petitioner does not appear to have been lethargic or lacking in bona fides in making the claim beyond the period of limitation which should have a relevance to the desirability and expedience for exercising such power. We are conscious that such routine exercise of powers would neither be expedient nor desirable since the entire machinery of tax calculation processing of assessment and further recoveries or refunds would get thrown out of gear if such powers are routinely exercised without considering its desirability and expedience to do so to avoid genuine hardship. Thus delay was not intentional or deliberate. Petitioner cannot be prejudiced on account of an ignorance or error committed by professional engaged by Petitioner. In our view Respondent No. 1 ought to have exercised the powers conferred. Thus we quash and set aside the impugned order passed under Section 119(2)(b) of the Act dated 25/10/2023 and condone the delay in filing form 10B.

Summary

Issues involved:
The issues involved in this case are the delay in filing Form 10B by a charitable trust for Assessment Year 2016-17, the rejection of the application for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961, and the subsequent legal challenge against the impugned order.

Delay in Filing Form 10B:
The petitioner, a charitable trust registered under the Bombay Public Trusts Act, 1950, filed its return of income for AY 2016-17 declaring income at 'Nil' and claiming a refund. However, the petitioner failed to file Form 10B along with the return, which was eventually filed after a delay of about 1257 days. The application for condonation of delay under Section 119(2)(b) of the Income Tax Act was rejected by an order dated 25th October 2023, leading to the current legal challenge.

Reasons for Delay and Rejection:
The petitioner attributed the delay in filing Form 10B to the refusal of the Departmental staff to acknowledge manual submission and the subsequent requirement to file online. However, the explanation was not accepted as sufficient cause for condoning the delay. The respondent rejected claims of 'Oversight' and 'Inadvertent error' as reasons for the delay, stating that the petitioner should have been aware of the rules and regulations, given its history of filing returns and Form 10B in previous years.

Legal Precedents and Equitable Considerations:
In citing the case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption), the court emphasized the need for an equitable, balancing, and judicious approach in such matters. The court highlighted the absence of mala fide intentions on the part of the petitioner and stressed that denial of exemption solely based on a procedural lapse could be unjust, especially when discretionary powers exist to condone such delays. The court also referred to a similar case where an auditor's oversight was accepted as a reasonable cause, underscoring the importance of considering genuine hardships in tax matters.

Court's Decision and Rationale:
The court, after considering the circumstances, concluded that the delay was not intentional or deliberate. It noted that the petitioner should not be penalized for errors committed by professionals engaged on its behalf. Consequently, the court allowed the Writ Petition, quashed the impugned order, and directed the condonation of the delay in filing Form 10B. The respondent was instructed to process the petitioner's returns based on the timely filing of Form 10B as per the court's order.

Significant Legal Reference:
The court's decision was influenced by the principles outlined in previous judgments, emphasizing the need for a reasonable and equitable interpretation of tax laws, especially in cases involving genuine errors or oversights. The court's ruling underscores the importance of considering individual circumstances and avoiding undue hardship on taxpayers due to procedural lapses.