2018 (1) TMI 1113 - HC - Income Tax

Condonation of delay in filing the income tax return and for making a claim for refund of the tax deducted at source - petitioners were unable to file its return of income within the prescribed time u/s 139(1) - this resulted in the petitioners not being able to claim refund of tax deducted at source on receipt of interest from banks / others - Held that - We find that the impugned order does not deal with the various criteria which the petitioners were asked to satisfy for consideration of its application for condonation of delay as set out by order dated 24th April, 2017 issued by the office of the CIT (Exemption). The impugned order has in fact proceeded to deal with the merits of the petitioners claim for expenses in determining its income and claim for exemption under Section 11 of the Act. In fact, the impugned order inter alia rejects the application for condonation of delay on the ground that there is huge cash expenditure on the part of the petitioners Trust. In fact, at the stage of considering delay condonation application filed by the petitioners, the merits of the claim cannot be a subject matter of examination as held by this Court in the case of Sitaldas K. Motwani (2009 (12) TMI 36 - BOMBAY HIGH COURT ). Kerala High Court in the case of Pala Marketing Cooperative Society Ltd. Vs. Union of India 2007 (11) TMI 294 - KERALA HIGH COURT the Court held that in case where a party is deprived of a refund, then, it would be a case of genuine hardship. This of course has to be considered along with other facts of the application for condonation of delay. Thus we set aside the impugned order dated 26th July, 2017 passed by the Commissioner of Income Tax under Section 119(2)(b) of the Act rejecting the petitioners application for condonation of delay in filing the return of income and delay in claiming refund due to it - matter restored before the CIT.

Summary

Issues:
Challenge to order rejecting condonation of delay in filing income tax return and claiming refund under the Income Tax Act, 1961.

Analysis:
1. The petitioners, a registered Public Trust involved in charitable activities, filed an application for condonation of delay in filing the income tax return for Assessment Year 2014-15 and claiming a refund of tax deducted at source. The delay was due to the late finalization of accounts caused by search and seizure actions leading to key employees leaving the Trust.

2. The respondent, the Commissioner of Income Tax, rejected the application for condonation of delay on the grounds of huge cash expenditure by the Trust. The impugned order failed to address the criteria set out in the notice dated 24th April, 2017, and instead delved into the merits of the Trust's claim for expenses and exemption under Section 11 of the Act.

3. The High Court noted that the respondent's order did not adhere to the guidelines laid down by the CBDT and failed to consider the charitable nature of the Trust's activities. Referring to the decision in Sitaldas K. Motwani case, the Court emphasized that the authority should not prejudge the merits of the claim at the stage of condonation of delay application.

4. The Court highlighted the importance of genuine hardship in cases of delay, citing the Kerala High Court's decision in Pala Marketing Cooperative Society Ltd. case. It emphasized that delay should not defeat a legitimate claim for refund, especially when the refund is crucial for the Trust's charitable activities.

5. Consequently, the High Court set aside the impugned order and directed the Commissioner of Income Tax to reconsider the petitioners' application for condonation of delay, taking into account the parameters specified in the communication dated 24th April, 2017. The Court emphasized the need for a justice-oriented approach to advance the cause of justice and ensure that legitimate refunds are not denied due to procedural delays.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Court's reasoning behind setting aside the order rejecting the condonation of delay in filing the income tax return and claiming the refund.