2024 (1) TMI 69 - HC - Income Tax

Condonation of delay u/s 119(2)(b) - delay in filing the income tax return was 26 days - permission to file income tax return for the A.Y. 2020-21, the due date for which had expired on 31.05.2021 - genuineness and genuine hardship claimed by the petitioner in submitting return with the delay of 26 days - HELD THAT - In the instant case, the petitioner had claimed for refund of TDS and submitted a draft profit and loss statement for A.Y. 2020-21 along with the application seeking condonation of delay of 26 days in filing the return. While refusing to condone the delay on the ground that no genuine hardship could be said to have been caused to the petitioner, the respondent No. 2 had also held that the claim for refund was not correct and the statement made in the table extracted in the order shows very strange circumstances as the claim of the petitioner that due to decrease in the number of patients in Cathlab Department, its revenue had negatively impacted and correspondingly in gross profit for A.Y. 2020-21 was unbelievable as also the applicant had not submitted any documents such as IPD register etc. to substantiate the same. Having noted the ratio of the decisions relied uponm by the petitioner as also the statutory scheme and the guidelines prescribed by CBDT, we are of the considered view that the first ground for rejection of the application seeking condonation of delay in submitting the return that no genuine hardship can be said to have been caused to the petitioner is a result of is an arbitrary approach of respondent No. 2. Delay was merely 26 days and judicial notice can be taken to the fact that the country was facing overwhelming situation of second wave of Covid-19, which turned out to be fatal between the last week of March, 2021 till June, 2021, the entire set up of the whole country was paralyzed. Hospitals were flooded with patients and lot of death had occurred during the said period. The petitioner being a hospital establishment, having been declared a dedicated Covid facility by the District Administration, demonstrably was dealing with unprecedented adverse circumstances. The claim of the applicant that the delay of 26 days had occurred because of the absence of account staff or the staff being pre-occupied with other Covid duties and also dealing with the hospital administration due to flooding of patients, the claim of the petitioner that it was a genuine hardship, is found to be correct. Claim of the petitioner is for refund of the TDS deducted by calculation of the advance tax paid, without going into the merit of the profit and loss account of the petitioner in detail, it was not permitted for respondent No. 2 to hold that applicant has failed to establish the correctness of the claim in a cursory manner at the stage of admission of the application. As observed by the Division Bench of this Court in Shailesh Vitthalbhai Patel 2022 (8) TMI 1031 - GUJARAT HIGH COURT the dominant purpose of Section 119(2)(b) of the Income-Tax Act, 1961 is to condone the delay and the power conferred on the statutory authorities is to be exercised with caution and proper application of mind, we are of the considered opinion that even the second ground for rejection of the application seeking condonation of delay for filing of return and claim for refund for A.Y. 2020-21, cannot be sustained. The order dated 04.10.2023 passed by the respondent No. 2 namely Additional / Joint Commissioner of Income Tax (HQ) (ADMN) CCIT, Aayakar Bhawan, Near Majura Gate, Opposite New Civil Hospital, Surat-395001, is hereby set aside. We further provide that the application seeking condonation of delay u/s 119(2)(b) for filing income tax return for A.Y. 2020-21 is liable to be admitted by condonation of delay of 26 days in submitting the return for A.Y. 2020-21. With the admission of the application, the petitioner is permitted to file the return by waiving the time limit and the same shall have to be scrutinized in accordance with the provisions of the Income Tax Act, 1961.

Summary

Issues Involved:
1. Rejection of application for condonation of delay in filing income tax return.
2. Examination of the correctness and genuineness of the refund claim.

Summary:

Issue 1: Rejection of Application for Condonation of Delay in Filing Income Tax Return

The petition challenges the order dated 04.10.2023 by the respondent rejecting the application for condonation of delay and permission to file the income tax return for A.Y. 2020-21. The delay was 26 days, attributed to Covid-19 related issues, including the inaccessibility of the hospital's directors and the unavailability of accounting staff. The respondent found the claim factually incorrect, stating that the hospital managed operations throughout the year, and the gradual easing of travel restrictions provided ample time to finalize accounts and file the return. The respondent concluded that the reasons provided were of a general nature and did not constitute genuine hardship as per the guidelines in paragraph 5(I) of the circular dated 09.06.2015.

Issue 2: Examination of the Correctness and Genuineness of the Refund Claim

The respondent also examined the correctness of the refund claim, concluding that the petitioner failed to establish the genuineness of the income and refund claim for A.Y. 2020-21. The claim that the hospital's revenue was negatively impacted due to a decrease in patients was found unsubstantiated as no supporting documents were provided.

Judgment:

The court noted the overwhelming situation due to the second wave of Covid-19, which paralyzed the country, and acknowledged the genuine hardship faced by the petitioner, a hospital establishment declared a dedicated Covid facility. The court found the rejection of the application for condonation of delay arbitrary, considering the circumstances. It was also noted that the respondent's examination of the refund claim's correctness was premature at the admission stage of the application.

Based on precedents and the statutory scheme, the court set aside the order dated 04.10.2023, directed the admission of the application for condonation of delay, and permitted the petitioner to file the return for A.Y. 2020-21. The return is to be scrutinized in accordance with the provisions of the Income Tax Act, 1961. The writ petition was disposed of with these observations and directions.