Failure to file Income Tax Return by State Taxes Employees Co-op Society: Kerala HC Directs ITO to Consider Rectification Application Within 3 Months, Condones Delay [Read Order]

The KeralaHigh Court has allowed a writ suit filed by Kerala State Taxes Employees Co-op Society Limited challenging the Income Tax Department's inactivity on its plea for rectification by condoning the delay in filing Income Tax Return and directed to consider the rectification application within 3 months.

The petitioner, a co-operative society registered under the Kerala Co-operative Societies Act, 1969 was aggrieved by an assessment order imposed for the assessment year 2018-19.

The dispute arose when the petitioner could not file its income tax return within the prescribed statutory time because of a delay in completion of the obligatory statutory audit under the Co-operative Societies Act. As a result, the assessment was done ex-parte. Notably, the assessment ruling declined the petitioner deduction under Section 80P of the Income Tax Act, 1961, mainly on the reason that the return was not filed in time.

The petitioner thereafter filed an application before the Commissioner of Income Tax (Respondent 2) for condonation of delay in filing of return under Section 119(2)(b) of the Income Tax Act on the basis of Circular No.13/2023 issued by the Central Board of Direct Taxes (CBDT). This request was granted and the delay condoned by order (Ext.P3). Thereafter, the Petitioner approached the Assessing Officer (Respondent 3) with this order in view for giving effect to the permitted delay and thereafter filed a correction application (Ext.P4).

But the Assessing Officer rejected the application on the ground that it could not be heard in the absence of any express directive from an Appellate or Revisional Authority. Feeling aggrieved by the denial of the ruling approving the delay, the petitioner approached the High Court.

The precise ground on which the benefit under Section 80P was disallowed in the assessment ruling (Ext.P1) was non submission of the return, observed Justice Ziyad Rahman A.A. The precise basis for denial of the deduction was no longer there as the competent authorities later condoned that delay by Ext.P3. The Court stated that the Assessing Officer could not have ignored the ruling allowing the delay and the assessment had to be reopened and evaluated in the light of this development.

The Court stressed that the petitioner’s plea for rectification was an inevitable consequence of the judgement of condonation. The Assessing Officer was under a statutory duty to evaluate the application and to make necessary orders.

Accordingly, the Court approved the writ petition instructing the Assessing Officer to take up the rectification application (Ext.P4) and give suitable order as per law. The authorities were directed to record that the return was accepted after condoning the delay and the petitioner was heard. The Court directed that this process shall be completed within a period of three months from the date of receipt of copy of the judgement.