Delayed filing of ITR due to mistake by Accountant: Delhi HC sets aside Income tax order [Read Order]

The petitioner, VRG Electronics Pvt Ltd is challenging the order dated 21.06.2024 passed by the respondent, on an application under Section 119(2)(b) of the Income Tax Act, 1961 (‘the Act’) seeking condonation of delay in filing the Income Tax Return (‘ITR’) and Form 10- IC for the Assessment Year (‘AY’) 2023-24. T

The assessee filed his ITR on 30.12.2023 under Section 115BAA of the Act, declaring taxable income of Rs. 19,76,540/- while claiming a refund of Rs. 4,190/-. The assessee opted Section 115BAA of the Act for taxation for the relevant Assessment Year. Such option can be exercised by filing an Application under Form 10-IC on or before the due date specified under sub-Section (1) of Section 139 of the Act.

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The petitioner/assessee was required to file the ITR and Form 10-IC on or before 31.10.2023. So, in other words, the filing of the ITR was delayed by 60 days as the Form-10 IC was filed on 29.12.2023 and thereafter the return was filed on 30.12.2023.

The assessee/petitioner filed an application dated 14.02.2024 on 16.02.2024, seeking condonation of delay in filing the return of income. The grounds for delay as submitted by the assessee primarily rested on the complete dependence of the assessee on its accountant who inadvertently missed the deadline owing to poor health and work load. The same was rejected by the respondent in terms of the impugned order which we have already reproduced.

Mr. Asheesh Jain, Senior Counsel appearing for the petitioner submitted that the assessee through an E-mail was informed by the Income Tax Department regarding the non-filing of Income Tax for the AY 202324, whereupon the assessee immediately contacted its accountant who informed that there was indeed a delay in filing of the ITR and Form 10-IC. The same was owing to his poor health and heavy workload.

The assessee accordingly requested his accountant to proceed with the filing at the earliest. It is his submission that the assessee was not aware about the compliances to be adhered to under the Act and was completely dependent upon its accountant for the same and this oversight came to their attention only upon receiving the general notification/E-mail from the department which is dispatched to all the non-filing assessees.

Mr. Jain submitted that the parties should not be made to suffer because of the fault or negligence of the professional upon whom they totally depend and rely. This mistake of the Accountant which is an oversight by him should not have been considered to be a fatal circumstance outweighing all the other facts in favour of the assessee. It was a case of a genuine difficulty and the circumstances were beyond the control of the assessee.

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The respondent has failed to appreciate that the limitation would not come as a hindrance to do substantial justice. The delay was not deliberate/wilful. It was on account of genuine hardship, that, ITR could not be filed on time. According to the counsel, the respondent failed to exercise the discretionary power under Section 119 to further the cause of equity. It is his submission that the respondent has also failed to follow the mandate of Section 119(2)(b) whereby the respondent was to focus on evaluating sufficiency of reasons for delay rather that merit.

Further submitted that the delay was not deliberate and corrective actions were taken i.e., ITR was filed, showing bona fide conduct. He also submitted that the impugned order is mechanical in the sense that the assessee, being a private limited company, was presumed to be well-versed with the statutory compliance requirements.

On the other hand, Mr. Puneet Rai, enior Standing Counsel for the respondent would oppose the writ petition by stating that the Circular No. 09/2015 requires the tax payer to prove that the delay was caused by circumstances beyond his control, resulting in genuine hardship.

The impugned order dated 21.06.2023 rejecting the petitioner’s condonation application under Section 119(2)(b) of the Act was passed after due application of mind and in accordance with settled law and CBDT Circular no. 09/2015. The Centralised Processing Center (CPC) processed the ITR filed by the petitioner and raised the demand of Rs. 1,34,050/- while rightly denying the benefits of Section 115BAA.

Careful consideration was given to the submissions and documents on record by the assessee company. The assessee company had failed to satisfy the conditions necessary to avail the concessional taxation scheme as per Section 115BAA read with Rule 21AE of the Income Tax Rules, 1962. The assessee has itself admitted that it has failed to comply with the statutory time for filing the ITR and Form 10IC due to the negligence of its accountant. This was not found to be acceptable and cannot be considered as a case of genuine hardship.

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Section 119(2)(b) of the Act empowers the CBDT, if it considers it desirable or expedient to do so for avoiding genuine hardship in any case or class of cases by general or special order, authorize any income tax authority, not being a Joint Commissioner (Appeals) or a Commissioner (Appeals), to admit an application or claim for any exemption, deduction, refund or any other relief under the Act after the expiry of the period specified by or under the Act for making such application of claim and deal with the same on merits in accordance with law.

The exercise of power by the authority is regulated by empowering the various officers on the basis of monetary effect. The Principal Commissioner of Income Tax (‘PCIT’) had considered the application filed by the assessee seeking condonation of delay in filing form 10-IC and ITR and has stated that mere reason of negligence on the part of the accountant cannot be accepted. Hence, the non-filing of the ITR does not seem to be genuine.

The conclusion of the PCIT is in the light of the provisions of the CBDT Circular No. 09/2015 dated 09.06.2015 to hold that there was no genuine hardship in filing the return of the income. The CBDT Circular No. 09/2015 highlights the fact that while considering the case under Section 119(2)(b), it is to be seen that the case is of genuine hardship on merits.

The PCIT who admittedly exercises powers under Section 119(2)(b) of the Act would amount to a quasi judicial body and is under obligation to pass a reasoned order.

It was found that the respondents have not explained, why the reason given by the petitioner that the accountant had forgot to file the ITR cannot be accepted. In the absence of such a finding, the respondents cannot say that there is no reasonable cause for non-compliance by the assessee. In fact the fault on the part of the accountant surely reflects reasonable cause for noncompliance by the assessee.

It was evident that the return was filed with a delay of sixty days only. A division bench of Justice V. Kameswar Rao and Justice Vinod Kumar held that the impugned order passed by the respondents is without considering the averments made by the petitioner in the application that non-filing of ITA was because of the mistake of the Accountant, and to that extent, it is an unreasoned order.

The court set aside the impugned order dated 21.06.2024 and remanded the matter back to the concerned PCIT for a de novo consideration to decide the application.

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