Karnataka High Court condones delay in filing Income Tax Return caused due to ‘Genuine Hardship’ [Read Order]

The Karnataka High Court held that the Central Board of Direct Taxes (CBDT) empowered to issue orders to other Income Tax Authorities to Condone Delay in cases of genuine hardship.

The respondent assessee, Vasudev Adigas Fast Food is a Company incorporated under the Companies Act, 1956 and engaged in the business of provision of hotel, restaurant and catering services. During the financial year 2012 -13, there was a change in the majority shareholding of the respondent/company and disputes arose between the erstwhile management of the respondent/Company i.e., promoter directors and the new management i.e., investor directors of the respondent/company. In 2014, a petition came to be filed before the Company Law Board (CLB) in Chennai by the Promoters of the respondent/company alleging oppression and mismanagement by the Investors in the respondent/company under Sections 397 and 398 of the Companies Act, 1956. During the pendency of the said petition, CLB appointed an Administrator vide an order dated 22.05.2014 to supervise the affairs of the company, heading a Committee of Management, which would replace the Board of Directors of the respondent.

The Single Judge has allowed the writ petition and has quashed the order passed by the CBDT and has also allowed the application for condonation of delay in filing the return of income for the assessment year 2014-15.

Mr. Sanmathi, counsel appearing for the Income Tax department has argued that the learned Single Judge has erred in law and in facts in allowing the writ petition especially in view of the fact that the order passed under Section 119(a)(b) of the Income Tax Act of 1961 was passed in view of the parameters laid down in the statute. He has further argued that the learned Single Judge has erred in law in allowing the writ petition of the respondent/assessee in spite of the fact that the respondent/assessee has not fulfilled the conditions set out under Section 119(2)(b) of the Income Tax Act of 1961 for condonation of delay in filing the return of income. His further contention is that the reason cited by the respondent/assessee could not have been accepted and it was not a fit case for condoning the delay.

The division bench of Justice Satish Kumar Sharma and Justice Natarajan Rangaswamy held that the CBDT has ignored the recommendations of the jurisdictional authorities to condone the delay in filing the return of income, at the time of considering the application of the respondent/assessee seeking condonation of delay in filing the return of income. The CBDT had sought for a report from the Principal Commissioner of Income Tax-II, as well as the jurisdictional Additional Commissioner of Income Tax. It is pertinent to note that both the Principal Commissioner of Income Tax-II as well as the jurisdictional Additional Commissioner of Income Tax have given a report that the delay in filing the return of income may be condoned. Though the CBDT has referred to the said opinions, but has not taken the same into consideration while deciding the application of the respondent/assessee.

The court opined that the order passed by the learned Single Judge does not warrant interference.

To Read the full text of the Order CLICK HERE

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