Embracing Equity in Tax Laws: Recognizing Genuine Difficulties in Condonation of Delays in filing of ITR 2024 (9) TMI 585 - BOMBAY HIGH COURT - HC

Deciphering Legal Judgments: A Comprehensive Analysis of High Court's Judgment on Balancing Technicalities and Fairness: The Evolving Doctrine of Condonation u/s 119(2)(b) Reported as: 2024 (9) TMI 585 - BOMBAY HIGH COURT INTRODUCTION This case deals with the scope and application of Section 119(2)(b) of the Income-tax Act, 1961 , which empowers the income tax authorities to condone delays in filing income tax returns. The core legal question presented is whether the delay caused due to the ill health of the petitioners' chartered accountant's spouse constitutes a genuine and acceptable reason for condonation of delay in filing returns. ARGUMENTS PRESENTED The petitioners, who are members of the same family, argued that their chartered accountant could not file their income tax returns within the stipulated time due to the ill health of his spouse. They contended that they were fully dependent on the chartered accountant for finalizing accounts and filing returns, and the delay was caused due to circumstances beyond their control. The petitioners submitted medical documents to support their claim and filed an application u/s 119(2)(b) seeking condonation of the delay. The respondent income tax authorities rejected the application, observing that the reasons provided by the petitioners were not genuine and prevented them from filing their returns. COURT DISCUSSIONS AND FINDINGS The High Court observed that the approach of the Principal Commissioner of Income Tax (PCIT) was mechanical and lacked sensitivity towards genuine human problems that may prevent timely compliance. The Court emphasized that assessees heavily rely on chartered accountants for maintaining accounts and filing returns, and personal difficulties faced by the professional should be duly considered. The Court noted that the PCIT did not provide any reasons for disbelieving the petitioners' case or the medical documents submitted. There was no contrary material on record to reject the petitioners' claim as false or unacceptable. The Court drew an analogy with legal proceedings, where courts adopt an empathetic and humane view in condoning delays when the law confers such powers. It stated that similar principles should apply when an assessee seeks condonation of delay in filing income tax returns, as not permitting the filing of returns would be counterproductive to the objectives of tax laws. ANALYSIS AND DECISION The High Court concluded that the delay in filing returns was sufficiently explained in the present case and should be condoned. It quashed the impugned order of the PCIT and directed the respondents to permit the petitioners to file their returns without penalty, fees, or interest within two weeks. The Court established the legal principle that genuine personal difficulties faced by professionals engaged by assessees, such as illness of family members, should be duly considered as acceptable reasons for condoning delays in filing income tax returns u/s 119(2)(b) of the Income-tax Act, 1961 . DOCTRINAL ANALYSIS The Court's decision upholds the doctrine of substantial justice and equity in the application of tax laws. It recognizes that strict adherence to technicalities and rigid rules may sometimes lead to unjust outcomes and should be tempered by considering genuine human factors and circumstances beyond the assessee's control. The Court's reasoning aligns with the principles of natural justice and fairness, which require authorities to adopt a reasonable and humane approach when exercising discretionary powers. The decision emphasizes the need for empathy and understanding towards assessees who face genuine difficulties in complying with statutory deadlines due to circumstances beyond their control. The Court's analogy with legal proceedings and the principles applied by courts in condoning delays reinforces the doctrine of harmonious construction, which seeks to interpret tax laws in a manner consistent with established legal principles and jurisprudence. By recognizing the assessee's reliance on professionals and the potential impact of personal difficulties faced by such professionals, the Court has expanded the scope of acceptable reasons for condonation of delay u/s 119(2)(b) of the Income-tax Act, 1961. This interpretation aligns with the principles of equity and fairness, ensuring that assessees are not unduly prejudiced due to circumstances beyond their control. Full Text : 2024 (9) TMI 585 - BOMBAY HIGH COURT