ITR not filed with Audit Report Timely due to delay in Auditor Appointment: Orissa HC allows Belated Filing with Report [Read Order]

The Orissa High Court has allowed the The Reserve Bank Employees Co-operative Credit Society Limited to file the income tax returns ( ITR ) with an audit report belatedly which was not filed timely due to delay in appointment of the auditor.

The Bench of Justice Chief Justice Harish Tandon and Justice Murahari Sri Raman observed that ‘It is consistent view that the power conferred under Section 119(2)(b) of the IT Act is a benevolent provision intended to mitigate “genuine hardship” of assessee. It should be exercised liberally so as to facilitate the assessee to avail the legitimate benefit as entitled to, but not in a pedantic or hyper-technical manner.”

The petition was filed by The Reserve Bank Employees Co-operative Credit Society Limited challenging challenged order of the Principal Chief Commissioner of Income Tax (PCCIT) rejecting its application for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961 for Assessment Years 2018-19 to 2022-23.

According to the society, under the Odisha Cooperative Societies Act, 1962, its accounts could be audited only by auditors appointed or authorised by the Auditor-General of Cooperative Societies (AGCS).

Due to shortage of departmental auditors, repeated requests made by the society for audit remained unattended for several years, said the society’s counsel, Mr. Rudra Prasad Kar, Senior Advocate.

It was submitted that later the permission was granted to engage empanelled Chartered Accountants. However, the actual appointment and completion of audits were delayed. The audits for the relevant years were completed only on 25 January 2024, beyond the due dates prescribed under Section 139(1) of the Income Tax Act. The same led to the delay in filing of the ITR by the society and also the denial of S. 80P deduction.

The department submitted that the PCCIT rejected the application on the ground that the society was a habitual non-filer and had failed to satisfy the conditions laid down in CBDT Circular No.13 of 2023.

After hearing the submissions, the High Court observed that the authority had focused on past conduct instead of confining its inquiry to the relevant assessment years. The same is unsustainable.

The bench stated that the delay in the ITR filing with the audit report was due to delay in the appointment of the auditor. The same is beyond the hands of the assessee. It found that there is deliberate intention to evade the tax or delay the filing.

According to the bench, the petitioner made out "genuine hardship" as it was not audited timely by the Statutory Auditor due to delay in appointment. The same cannot be treated as default in the hands of the petitioner.

‘The refusal to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated’ noted the bench.

‘this Court finds that though the petitioner is bound to get its accounts audited under Section 62 of the Orissa Cooperative Societies Act, the delay in completion of audit by the auditor appointed under the Act is not attributable to the petitioner’ said the high court.

The Orissa High Court accordingly allowed the petition by setting aside the department’s order rejecting the condonation. It allowed the petitioner to file the returns with the audit report.