Nearly 5-Year Delay in Filing Defective ITRs Due to Financial Hardship: Bombay HC Allows Condonation on Condition [Read Order]

In a recent ruling, the Bombay High Court condoned a delay of nearly five years in filing defective Income Tax Returns (ITRs) for two assessment years, on the condition that the petitioner would not claim interest on any resulting refund. The Court found that the delay was due to financial hardship and internal miscommunication, rather than any deliberate intent to evade the law.

Skystar Clearing & Forwarding Pvt. Ltd., a private limited company, filed a writ petition challenging an order dated 28 February 2023 passed by the Principal Commissioner of Income Tax under Section 119(2)(b) of the Income Tax Act, 1961. The petitioner sought condonation of delay in curing defects in ITRs originally filed on time for Assessment Years 2017–18 and 2018–19, but subsequently declared defective by the Centralized Processing Centre (CPC).

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The petitioner’s counsel argued that the delay arose because a part-time accountant had failed to notify the directors about the notices issued, and by the time the issue came to their attention, the accountant had already left the company. Believing that the refund delay was due to systemic delays, the petitioner did not pursue the matter actively, especially during a period of financial strain exacerbated by the COVID-19 pandemic.

The Income Tax Department refused to condone the delay, arguing that the reasons were unverifiable and lacked diligence. The petitioner countered by stating that the returns were filed within time and that they were willing to forgo any claim to interest on the refund, should one become due.

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The assessee also claimed that the supply of goods used in maintaining gardens was wrong

A division bench comprising Justices M.S. Sonak and Jitendra Jain observed that the reasons provided by the petitioner were credible and did not reflect any bad faith. The court observed that since the petitioner had agreed not to claim interest on any potential refund, no prejudice would be caused to the department by allowing the condonation.

The court further held that the petitioner’s offer showed good faith and a genuine effort to rectify past omissions. The court set aside the impugned order and directed the Income Tax Department to reissue the notices of defects within two weeks. The petitioner was directed to respond and cure the defects within four weeks of receiving the notices.

The Assessing Officer was instructed to complete the assessment under Section 143(2) within one year from the date of defect-free filing. The court also clarified that if any refund is due, it shall be granted without interest. If any tax demands are arising from the assessment, the petitioner would retain the right to challenge them through appellate mechanisms. The writ petition was allowed.

To Read the full text of the Order CLICK HERE

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