ITR filed rejected in absence of TAR: Delhi HC sets aside Income Tax Order rejecting Condonation Application [Read Order]

The Delhi High Court  has set aside the Income Tax order which rejected the application under section 119(2)(b) of the Income Tax Act, 1961 for condonation of delay in filing the revised the income tax return. The ITR filed was rejected  on the ground that it was not accompanied by the Tax Audit Report [TAR].

Nikon Finlease Pvt. Ltd., the petitioner has filed the present petition, inter alia, impugning an order dated 09.10.2024 [impugned order] passed by the Principal Commissioner of Income Tax, Delhi – 4 [PCIT] whereby the petitioner’s application under Section 119(2)(b) of the Income Tax Act, 1961 [the Act] for condonation of delay in filing the revised income tax return [ITR] in respect of Assessment Year [AY] 2022-23, was rejected.

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The petitioner states that it has been regularly filing its ITR for the past assessment years. It had also filed its ITR for the AY 2022-23 on 03.11.2022. However, the Central Processing Centre [CPC] rejected the ITR filed by the petitioner on the ground that it was not accompanied by the Tax Audit Report [TAR]. According to the petitioner, there is no requirement for furnishing a TAR as its turnover was less than ₹10.00 Crores.

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Accordingly, on 24.12.2022 the petitioner filed the response to the communication dated 14.12.2022 issued by the CPC under Section 139(9) of the Act. The said response was not accepted and the CPC rejected the petitioner’s ITR on 13.12.2023 terming the same as invalid. The petitioner sent a communication dated 29.01.2024 seeking to contest the rejection of its ITR. This was followed up by raising a grievance before the CPC on 08.02.2024. Thereafter, on 04.06.2024, the petitioner also submitted the representation to respondent no.3.

The petitioner filed the application under Section 119(2)(b) of the Act seeking condonation of delay in filing the revised ITR, which in a sense was to seek an opportunity to rectify the defects as pointed out by the CPC. However, the petitioner’s application under Section 119(2)(b) of the Act for condonation of delay in filing the revised ITR was rejected by the impugned order.

The controversy essentially relates to the rejection of the petitioner’s ITR on the ground that it was not accompanied with the TAR under Section 44AB of the Act. As noted above, according to the CPC, the TAR was required to accompany the ITR filed by the petitioner.

It is the petitioner’s case that its turnover was less than ₹10.00 Crores, and therefore, it was not required to file TAR along with the ITR. The petitioner claimed that it satisfied requisite conditions for the availing the benefit of the higher turnover threshold of ₹10.00 Crores (instead of ₹1.00 Crores) as the payments made in it cash did not exceed 5 per cent of the total payments and its cash receipts were NIL.

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Since the petitioner’s case is that its cash payment and receipts did not exceed five percent of the total receipts and payments, the petitioner was required to tick the box with ‘Yes’ instead of box ‘No’. It is the petitioner’s contention that its ITR could not be rejected on this ground. However, there is no appeal provided against the order rejecting the ITR as invalid.

The court observed that the petitioner does not desire to pursue any contentious proceedings and seeks rectification of its return by filing the revised return. The petitioner moved the application under Section 119(2)(b) of the Act.

It is apparent from the above that the entire controversy has arises on account of checking the incorrect box in the return, which has no implication on the assessment of the income of the petitioner.

It is also material to note that the petitioner’s claim that its cash receipts are NIL and its cash payment did not exceed five percent of the total payments is not controverted.

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A division bench of Justice Vibhu Bakhru and Justice Tejas Karla viewed that the petitioner has made out a case of genuine hardship for condonation of delay in filing the revised ITR. Accordingly, the petition is allowed and the impugned order is set aside.

To Read the full text of the Order CLICK HERE

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M/S NIKON FINLEASE PVT. LTD vs PR. COMMISSIONER OF INCOME TAX -04, DELHI , 2025 TAXSCAN (HC) 763 , W.P.(C) 1654/2025 , 08 May 2025 , Mr Amol Sinha , Mr Gaurav Gupta