2025 (3) TMI 874 - HC - Income Tax

Denial of exemption u/s 11 - delay in filing Form No.10B - HELD THAT - The reason assigned by the petitioner citing Covid-19 Pandemic would come under genuine hardship. However the 1st respondent had failed to consider the same and passed order rejecting the application of the petitioner for condonation of delay in filing the audit report. As far as the Assessment Year 2022-2023 is concerned the audit report in Form No.10B is filed within the time on 30.09.2022 and the same was e-verified on 19.11.2022 and since there was an inadvertent error in the audit report the revised audit report was filed on 19.11.2022 which shows that the delay is not intentional and the same would be the case under genuine hardship. It is obligatory to permit the assessee s to avail the benefits of exemption prescribed under the provision of law. Refusing to condone the delay could result into a meritorious matter being thrown out at the very threshold defeating the cause of justice. Therefore this Court is of the view that it would be appropriate to condone the delay in filing the audit report for the Assessment Years 2020-2021 and 2022-2023.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the delay in filing Form No.10B for the Assessment Years 2020-2021 and 2022-2023 can be condoned under Section 119(2) of the Income Tax Act, 1961.
Whether the reasons provided by the petitioner for the delay constitute "genuine hardship" as per the legal standards.
Whether the rejection of the condonation application by the 1st respondent was justified.

ISSUE-WISE DETAILED ANALYSIS

1. Condonation of Delay in Filing Form No.10B

Relevant legal framework and precedents: Section 119(2) of the Income Tax Act, 1961, allows the Central Board of Direct Taxes (CBDT) to condone delays in certain circumstances. The CBDT had issued Circular No.2 of 2022, authorizing condonation of delays up to 365 days in filing Form No.10B.
Court's interpretation and reasoning: The Court noted that the reasons for the delay in filing Form No.10B for the Assessment Year 2020-2021 were attributed to the Covid-19 pandemic. The Supreme Court had previously granted an extension for limitation periods during the pandemic, which the Court found applicable to this case.
Key evidence and findings: For the Assessment Year 2020-2021, the audit report was filed 34 days late due to pandemic-related disruptions. For the Assessment Year 2022-2023, the initial filing was timely, but a revised report was filed 43 days late due to inadvertent errors.
Application of law to facts: The Court applied the precedent set by the Supreme Court regarding extensions during the pandemic to determine that the delay for the Assessment Year 2020-2021 constituted genuine hardship. For the Assessment Year 2022-2023, the Court found that the delay in filing a revised report was not intentional and also constituted genuine hardship.
Treatment of competing arguments: The respondents argued that the reasons for delay were generic and did not constitute genuine hardship. However, the Court found the pandemic-related disruptions and inadvertent errors to be sufficient justification for condonation.
Conclusions: The Court concluded that the delay in filing Form No.10B for both assessment years should be condoned, as refusing to do so would result in denying the petitioner the benefits of exemption under Section 11 of the IT Act, leading to irreparable loss.

SIGNIFICANT HOLDINGS

Verbatim quotes of crucial legal reasoning: "Refusing to condone the delay could result into a meritorious matter being thrown out at the very threshold defeating the cause of justice."
Core principles established: The Court emphasized the importance of considering genuine hardship and the broader context, such as the Covid-19 pandemic, when deciding on condonation of delays. The principle that justice should not be denied due to procedural delays was reinforced.
Final determinations on each issue: The Court set aside the impugned orders rejecting the condonation applications and condoned the delay in filing Form No.10B for the Assessment Years 2020-2021 and 2022-2023. The Court also directed the petitioner to make a representation regarding the bank attachment and other reliefs to the Assessing Officer, who must consider and decide in accordance with the law.