2015 (10) TMI 1088 - HC - Income Tax

Refund application after the expiry of the period - condonation of delay - Held that - When Exts.P14 and P15 applications were filed by the assessee, what was required to be examined was whether, to avoid genuine hardship to the assessee, it was necessary to condone the delay in making the application for refund. Ext.P16 order does not show that the Commissioner has examined Exts.P14 and P15 applications in the manner as required under Section 119(2)(b). On the other hand, Commissioner has discussed on the merits of the application and held that the delay has not been properly explained and that when returns are filed in response to notices issued under Section 148, assessee will not be entitled to claim refund of advance tax paid. In our view, such an order does not reflect a proper exercise of power under Section 119(2)(b) and for that reason, Ext.P16 is unsustainable. In this case, according to us, when Ext.P16 order was passed in an improper manner, the learned Single Judge ought to have directed reconsideration of Exts.P14 and P15 instead of condoning the delay by himself. Therefore, while we are inclined to agree with the learned Single Judge on the unsustainability of Exts.P13 and P16 orders, according to us, the proper consequential order to be passed is to direct reconsideration of Exts.P14 and P15 with a direction to pass fresh orders in the matter.

Summary

Issues:
1. Delay in filing returns for assessment years 1996-97 and 1997-98 leading to rejection of refund claim.
2. Application for condonation of delay under Section 119(2)(b) of the Income Tax Act.
3. Proper exercise of power under Section 119(2)(b) by the Commissioner.
4. Consideration of genuine hardship in condoning delay for refund claims.
5. Applicability of Bombay High Court judgment on claiming refund when returns are filed in response to Section 148 notices.
6. Judicial review of orders passed on refund claims.

Analysis:
The writ appeal in this case was filed challenging the rejection of a refund claim due to the belated filing of returns for assessment years 1996-97 and 1997-98. The judgment under appeal condoned the delay in applying for a refund based on the authority granted under Section 119(2)(b) of the Income Tax Act, emphasizing the need to avoid genuine hardship to the assessee. The Commissioner's order rejecting the delay condonation did not properly assess the genuine hardship aspect as required by the law, leading to the unsustainability of the order.

The Bombay High Court's judgment stating that an assessee cannot claim a refund when returns are filed in response to Section 148 notices was considered. However, it was highlighted that if the delay in filing is condoned under Section 119(2)(b), the reason for filing the return becomes less significant. The Court found the Commissioner's order to be improper and unsustainable, emphasizing the need for a proper exercise of power under Section 119(2)(b) to consider genuine hardship.

While agreeing with the Single Judge's decision on the unsustainability of the previous orders, the Court directed a reconsideration of the applications for delay condonation (Exts.P14 and P15) instead of directly condoning the delay. The judgment quashed the previous orders and instructed the competent authority to reevaluate the applications and pass fresh orders within two months, ensuring compliance with Section 119(2)(b) of the Income Tax Act. The writ appeal was disposed of accordingly, focusing on the proper application of the law in refund claim cases.