2 Sec to 46 Min Delay In Filing ITR : Here's ITAT's Key Observations on Validity of Such ITRs

Case Background

Kumar Builders Project Pune Pvt. Ltd., a real estate development company, filed original ITR on 31st October 2019, claiming a business loss and the return was revised on 6th March 2020, claiming a carry-forward loss.

The Central Processing Centre (CPC) rejected the carry-forward loss claim, citing that the original return was filed belatedly, as the acknowledgement (ITR-V) was generated at 00:00:02 hours on 1st November 2019 two seconds past the midnight deadline of 31st October 2019.

The assessee argued that the return was uploaded before midnight on 31st October 2019, but due to technical glitches and last-hour rush on the e-filing portal, the acknowledgement was delayed by two seconds. The CPC treated the return as filed under Section 139(4) (belated return) and denied the carry-forward loss benefit.

Contentions and Ruling

The Additional/Joint Commissioner of Income Tax (Appeals) [JCIT(A)] ruled in favor of the assessee, holding that the return was filed in time and the assessee was entitled to carry forward the loss.

The Revenue appealed to the ITAT, contending that the CPC correctly treated the return as defective and that the consequences of a non-filer should apply.

The ITAT however ruled in the favour of the assessee and upheld the validity of Income Tax Return (ITR) filed 2 seconds delay of the statutory time. The ITAT also directed to treat the Return filed in time.

Judicial Precedents Cited

The ITAT considered several judicial decisions that supported condoning minor delays in ITR filing due to technical issues:

• Mumbai ITAT in DCIT vs. Palava Dwellers Pvt. Ltd. and Lodha Developers Ltd.

The tribunal condoned a 2-minute delay due to technical glitches and last-hour rush and the return was treated as filed in time, allowing deductions under Section 80IB(10) of the Income Tax Act.

The Tribunal highlighted a justice-oriented approach, citing the Bombay High Court’s ruling in Bombay Mercantile Co-op. Bank Ltd. vs. CBDT which advocated avoiding pedantic approaches in condoning delays.

• Ahmedabad ITAT in The Khedbrahma Taluka Primary Teachers Co-op. Credit Society Ltd. vs. ADIT

The tribunal condoned the delay of 4 minutes and 42 seconds and the CPC’s denial of deduction under Section 80P was overturned by the ITAT, as the delay was due to technical issues.

• Kolkata ITAT in Jeevan Darshi Marketing Pvt. Ltd. vs. ITO

The tribunal condoned a delay of 2-minute and 7-second, which was due to the system malfunctions, stating that taxpayers should not be penalized for portal-related issues.

• Chennai ITAT in Tenovia Solutions Pvt. Ltd.

The tribunal condoned the delay of 12-minute and 31-second delay following the Madras High Court’s ruling in Regen Infrastructure & Services (P.) Ltd. vs. CBDT which emphasized condoning delays caused by technical issues to avoid undue hardship.

• Delhi ITAT in ITO vs. Mantangi Rubber Pvt. Ltd.

The Delhi ITAT condoned 46-minute delay, noting that such technical delays should not lead to denial of deductions, especially when the delay was not mala fide.

Key Observations of ITAT

The ITAT dismissed the Revenue’s appeal, upholding the JCIT(A)’s order with the following observations:

1. Technical Delay of Two Seconds:

• The Tribunal observed that the return was uploaded before midnight on 31st October 2019, but the acknowledgement was generated two seconds past midnight due to technical glitches and portal rush. The tribunal held that such a minor delay, beyond the assessee’s control, should not result in penalization.
• The tribunal citied the Bombay High Court in Bombay Mercantile Co-op. Bank Ltd., and highlighted that a pedantic approach should be avoided in matters of condonation of delay.
• The tribunal emphasized a justice-oriented approach ensures taxpayers are not unfairly penalized for technicalities.
• The Tribunal found the cited judicial decisions directly applicable, where delays ranging from 2 minutes to 46 minutes were condoned. The 2-second delay in this case was deemed negligible and attributable to system issues.
• The ITAT noted that the delay was not deliberate or due to negligence, as the assessee attempted to file the return before the deadline. The tribunal observed that denying the carry-forward loss would cause undue hardship without any fault on the assessee’s part.
• The Tribunal upheld the JCIT(A)’s direction to treat the return as filed under Section 139(1) and allowed the carry-forward of the business loss of Rs. 3,95,51,713.

2. Justice-Oriented Approach:

3. Precedents Support Condonation:

4. No Mala Fide Intent:

5. Return Treated as Filed in Time:

Implications of the Ruling

This decision sets a significant precedent for taxpayers facing minor delays in e-filing due to technical issues. It also important to note that:

• Relief for Technical Glitches: Taxpayers can seek relief for minor delays caused by system malfunctions or portal issues, provided they can demonstrate the attempt to file within time.
• Judicial Support for Fairness: Courts and tribunals continue to adopt a justice-oriented approach, prioritizing taxpayer rights over rigid technicalities.
• Importance of Documentation: Taxpayers should maintain evidence of their filing attempts (e.g., screenshots or logs) to substantiate claims of technical delays.
• Encouragement for Timely Compliance: While the ruling offers relief, taxpayers are encouraged to file well before the deadline to avoid last-minute risks.

Conclusion

The ITAT Pune’s ruling in ITO vs. Kumar Builders Project Pune Pvt. Ltd. is a landmark decision that upholds the validity of an ITR filed with a 2-second delay due to technical glitches. The tribunal highlighted a justice-oriented approach over pedantic technicalities.

The decision draws on a strong framework of judicial precedents, highlighting the judiciary’s role in balancing statutory compliance with fairness.

This decision also calls for systemic improvements in the Income Tax Department’s e-filing infrastructure and clearer guidelines on condoning technical delays. For taxpayers, it emphasizes the importance of proactive filing and documentation to safeguard their rights.

As India advances its digital tax ecosystem, such judgments pave the way for a more equitable and efficient compliance framework.

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