Punjab & Haryana High Court directs income tax authorities to adopt a liberal approach while considering genuine hardship in condoning delay in filing returns, particularly where CBDT circulars apply.
Introduction
The Punjab and Haryana High Court has reiterated that income tax authorities should adopt a liberal and pragmatic approach while considering applications for condonation of delay, particularly where the assessee demonstrates genuine hardship and the delay was caused by circumstances beyond its control.
The observation came in a case involving a cooperative society that had filed its income tax return with a delay of 34 days and was consequently denied a deduction under Section 80P of the Income Tax Act, 1961.
The Court found that the authority concerned had relied upon an inappropriate CBDT circular and had failed to consider the specific circular applicable to cooperative societies claiming deduction under Section 80P. The High Court ultimately condoned the delay and directed the tax authorities to consider the society’s claim in accordance with law.
Background of the Case
The case concerned Alaknanda Coop. Group Housing Society Ltd. v. Chief Commissioner of Income Tax & Ors., decided by a Division Bench comprising Justice Deepak Sibal and Justice Sunish Bindlish.
The matter arose from the society’s income tax return for Assessment Year 2020-21.
The statutory due date for filing the return had originally been July 31, 2020. In view of the COVID-19 pandemic, the deadline was subsequently extended to February 15, 2021.
The cooperative society could not file its return by the extended deadline. One of the important reasons was the delayed receipt of its statutory audit report. The audit report was received on February 22, 2021, and the report was required to accompany the return. The society also pointed out that the audit report had to be routed through the concerned State department.
The society subsequently approached the income tax authorities seeking condonation of the delay. After receiving communication from the authorities, it eventually filed its return on March 20, 2021.
The return claimed deduction under Section 80P, which provides specified deductions to eligible cooperative societies.
Why the Deduction Under Section 80P Was Disallowed
The dispute arose because of Section 80AC(ii) of the Income Tax Act.
The provision stipulates that certain deductions under Chapter VI-A, including deductions falling within the relevant category, cannot be allowed unless the income tax return is furnished within the prescribed due date under Section 139(1).
Since the society’s return was filed after the prescribed deadline, its claim for deduction under Section 80P was denied.
The society challenged the disallowance through the appellate mechanism. After the matter travelled through the appellate process, the society pursued its separate application for condonation of the filing delay under the relevant CBDT framework.
CBDT Circular No. 13/2023 Was Central to the Dispute
A significant aspect of the case was the applicability of CBDT Circular No. 13/2023 dated July 26, 2023.
The circular specifically addresses applications for condonation of delay in filing income tax returns by cooperative societies seeking deductions under Section 80P.
The society relied upon this circular and contended that its circumstances fell within the situations contemplated by the CBDT.
However, the Chief Commissioner of Income Tax, Panchkula, rejected the application while relying, among other things, upon CBDT Circular No. 09/2015, rather than considering the specific provisions of Circular No. 13/2023.
The High Court found this approach legally unsustainable because Circular No. 13/2023 specifically dealt with cooperative societies seeking condonation of delay for claiming Section 80P deductions.
High Court Finds Non-Application of Mind
The High Court noted that the society had specifically relied upon Circular No. 13/2023, yet the Chief Commissioner had not properly considered the circular while deciding the application.
The Court regarded this as a failure to apply the relevant legal framework to the facts of the case.
The Court also considered the circumstances surrounding the delayed filing. The relevant period fell during the COVID-19 pandemic, and the society had received its audit report only after the extended return-filing deadline.
According to the Court, these circumstances were relevant to determining whether the delay was attributable to circumstances beyond the assessee’s control.
Court Emphasises Liberal Approach to Genuine Hardship
The High Court emphasised that while exercising powers under the CBDT’s condonation framework, income tax authorities should adopt a liberal approach where genuine hardship is demonstrated.
The Court observed that the purpose of the relevant CBDT circulars is to provide relief in appropriate cases where taxpayers face circumstances that prevent them from complying with the prescribed filing timeline.
This does not mean that every delay must automatically be condoned. Rather, the authority is expected to examine the facts objectively, identify the applicable CBDT circular or instruction and determine whether the assessee has established sufficient grounds for the delay.
The Court’s approach therefore highlights the importance of considering the substance and circumstances of the delay, instead of mechanically rejecting an application based on a technical reading of an inapplicable circular.
34-Day Delay Ultimately Condoned
After examining the facts, the Punjab and Haryana High Court set aside the order passed by the Chief Commissioner of Income Tax.
The Court itself condoned the 34-day delay in filing the income tax return for AY 2020-21.
It consequently directed the income tax authorities to consider the cooperative society’s claim for deduction under Section 80P in accordance with law.
Key Takeaways for Taxpayers
The decision carries practical significance for taxpayers dealing with delayed return filing and applications for condonation.
First, an assessee seeking condonation should clearly document the circumstances responsible for the delay.
Second, taxpayers should identify and rely upon the specific CBDT circular or instruction applicable to their category and circumstances.
Third, supporting documents such as audit reports, correspondence with authorities and evidence explaining the delay can be important in establishing genuine hardship.
Finally, the decision demonstrates that condonation proceedings should not be approached as a purely mechanical exercise. Authorities are required to examine the facts and apply the appropriate legal framework.
Conclusion
The Punjab and Haryana High Court’s decision in Alaknanda Coop. Group Housing Society Ltd. v. Chief Commissioner of Income Tax & Ors. reinforces the principle that genuine cases of hardship deserve a fair and reasoned consideration.
For cooperative societies claiming Section 80P deductions, the judgment is particularly relevant because it highlights the importance of CBDT Circular No. 13/2023 and the requirement for tax authorities to apply the correct circular while considering condonation applications.
The ruling also serves as a reminder that procedural compliance remains important, but where a taxpayer demonstrates circumstances beyond its control, the condonation mechanism should be exercised in a manner consistent with its intended purpose.
Case: Alaknanda Coop. Group Housing Society Ltd. v. Chief Commissioner of Income Tax & Ors.
Case No.: CWP No. 24673 of 2026 (O&M)
Assessment Year: 2020-21
Court: Punjab and Haryana High Court
Decision: 16 September 2026
Citation: 2026 LLBiz HC(PNH) 53