Income Tax Return Delays: High Court Rules on Tax Authority's Decision-Making Boundaries

Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

Reported as:

2023 (12) TMI 221 - KERALA HIGH COURT

The case in question revolves around the interpretation and application of Section 119(2)(b) of the Income Tax Act, 1961. This provision is central to the dispute, as it concerns the condonation of delay in filing tax returns and the extent of the authority vested in the tax officials regarding such matters. The principal issue is whether the tax authorities, specifically the Principal Commissioner of Income Tax, can consider the merits of the claim (income/loss) while deciding on an application for condonation of delay under Section 119(2)(b).

Factual Background

1. Petitioner's Application for Condonation of Delay: The petitioner had filed a petition to condone a one-day delay in filing the income tax return for the assessment year 2021-22. This was initially rejected by the Principal Commissioner of Income Tax, Kozhikode, on the grounds that the petitioner did not furnish sufficient evidence or details to substantiate their claims.

2. Legal Provision Involved: The rejection was based on the guidelines set out in the Central Board of Direct Taxes (CBDT) Circular No. 9/2015, which empowers tax authorities to admit or reject such applications under Section 119(2)(b).

3. Grounds for Rejection: The Principal Commissioner's rejection focused on the lack of evidence regarding the petitioner's claims, rather than solely on the grounds for the delay in filing the return.

Legal Analysis

1. Scope of Section 119(2)(b): This section empowers the Board to authorize any income-tax authority to admit applications or claims for exemptions, deductions, refunds, or other reliefs after the expiry of the specified period, but does not explicitly grant the power to evaluate the merits of the income/loss claim itself.

2. Judicial Interpretation: The High Court, citing a previous decision in "Daisy v. The Principal Commissioner of Income Tax", held that while the authority may consider the merits of the refund claim, it should not extend to evaluating the merits of the income/loss claim. The focus should be on whether the application for condonation of delay has merit.

3. Impugned Order's Inconsistency: The court observed that the Principal Commissioner's rejection was based on the merits of the income/loss claim, which is beyond the scope of what is permissible under Section 119(2)(b) as interpreted by the courts.

Court's Decision

1. Setting Aside the Impugned Order: The High Court set aside the order of the Principal Commissioner, deeming it unsustainable due to its focus on the merits of the income/loss claim.

2. Remitting the Matter for Fresh Consideration: The case was sent back to the Principal Commissioner of Income Tax for a fresh decision, with instructions to focus only on the merits of the application for condonation of delay, without delving into the merits of the income/loss claim.

Full Text:

2023 (12) TMI 221 - KERALA HIGH COURT