Relief to Balaji Landmark LLP: Bombay HC directs CBDT to Condone Delay, Emphasizing 'Genuine Hardship' Over Technicality [Read Order]

The Bombay High Court in its recent ruling, has allowed a writ petition, setting aside an order of the Central Board of Direct Taxes (CBDT) that had rejected its application for condonation of delay in filing a loss return.

The court held that the delay, caused by the assessee's reliance on professional advice for a complex tax issue, constituted 'genuine hardship' and could not be rejected on technical grounds of negligence.

The petitioner, Balaji Landmarks LLP, had filed its return of income for Assessment Year 2018-19 declaring a loss on 30th March 2019, a delay of five months from the due date of 31st October 2018. The subsequent application for condonation of this delay under Section 119(2)(b) of the Income Tax Act was rejected by the CBDT, which led to the present writ petition.

Master the Latest Amendments in Income Tax Act Click here

The core issue before the court was whether the CBDT was justified in rejecting the condonation application on the grounds of lack of diligence and supervision, and whether the inability to carry forward a substantial loss due to the delay amounted to 'genuine hardship' as contemplated under Section 119(2)(b).

Counsel for the petitioner argued that the delay was not due to negligence but because the Chartered Accountant was unfamiliar with the complex tax treatment of compensation received as Transferable Development Rights (TDR).

The petitioner had sought multiple legal opinions from May 2018 to March 2019, which caused the delay. It was contended that rejecting the condonation would cause genuine hardship, as the petitioner would be unable to carry forward a loss of over Rs. 4.47 crore to subsequent profitable years.

The counsel for the Revenue opposed the petition, contending that the petitioner was negligent and that the delay was not a valid reason for condonation. He argued that allowing the condonation would permit unverified claims and lead to revenue leakage, as the time limit for completing the assessment for the relevant year had expired.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

A division bench comprising Justice B. P. Colabawalla and Justice Amit S. Jamsandekar held that the delay was a result of bona fide reliance on professional advice regarding a complex issue, which constitutes a 'reasonable cause'. The court emphasized that the petitioner would suffer 'genuine hardship' if the loss could not be carried forward.

The bench also noted that the Revenue's apprehension was unfounded, as Section 153(1B) of the Act provides a 12-month window for the Assessing Officer to complete the assessment once the delay is condoned. Accordingly, the court quashed the CBDT's order, condoned the five-month delay, and directed the Revenue to frame the assessment in accordance with law.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates