Prolonged Trustee Suspension, Sealed Records Left Trust Unable to File Returns: Bombay HC Condones Delay for Six Assessment Years [Read Order]
The Court held that years of administrative takeover entitles the Trust to full condonation of filing delays.
The Bombay High Court held that prolonged trustee suspension, sealed records, and administrative takeover of a charitable trust constituted genuine hardship warranting condonation of delay in filing Income Tax Returns and statutory forms for six assessment years.
The Bombay Diocesan Trust Association Private Limited filed the Writ Petition challenging the order issued by the Commissioner of Income Tax (Exemptions) [CIT(E)], which refused to condone the delay under Section 119(2)(b) of the Income Tax Act, 1961.
The case arose from internal disputes among the Trustees regarding an alleged illegal sale of Trust property. This led to proceedings before the Joint Charity Commissioner under Section 41D of the Maharashtra Public Trust Act, 1950. In December 2012, the Joint Charity Commissioner removed the Trustees, sealed trust records, and appointed an Administrator to take over the management.
Due to the sealing of records and suspension of the Board, the Trust was unable to file Income Tax Returns or required forms, including Form No. 9A and Form No. 10B, for Assessment Years (A.Y.) 2012-13 to 2017-18. Fresh elections for Trustees were conducted only in mid-2017 pursuant to a High Court order, and the newly elected Trustees received charge in October 2017.
Bank accounts could be operated only after March 2018, and the accounts for the period 2009–2018 were completed and ratified by December 2018. Despite these facts, the authority rejected condonation solely for Assessment Year 2016-17, even though the application covered six assessment years.
Represented by Dharan V. Gandhi and Aanchal Vyas, the Appellant contended that the delay was caused entirely by circumstances beyond its control. They argued that Section 119(2)(b) of the Income Tax Act, 1961 empowers the authority to condone delay where genuine hardship exists, and the Trust’s inability to function for several years clearly satisfied this condition.
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The Bench of Justice B. P. Colabawalla and Justice Amit S. Jamsandekar held that the rejection order was unsustainable as the CIT(E) had failed to consider crucial, undisputed facts demonstrating genuine hardship. The Court noted that from December 2012 to October 2017, the Trust was under the control of an Administrator, its records were sealed, and the Trustees were legally barred from functioning.
Access to bank accounts was restored only in March 2018, and financial accounts could be finalized only by the end of 2018. Moreover, observed that the application covered A.Y. 2012-13 to 2017-18, yet the authority dealt with only one year, rendering the decision flawed. The Bench reasoned that refusal to condone the delay would cause substantial hardship to a charitable institution deprived of control for several years due to statutory action under the Maharashtra Public Trust Act, 1950.
Accordingly, the Court quashed the order of CIT(E), condoned the delay for all six assessment years, and directed that the Returns be processed as if filed within time.
