Gujarat High Court allows condonation of delay in filing an income tax return under Section 119(2)(b), despite a pending CIT(A) appeal, providing relief to taxpayers with genuine hardship.
The Gujarat High Court has delivered an important ruling on the condonation of delay in filing an income tax return, holding that a taxpayer’s request under Section 119(2)(b) of the Income Tax Act, 1961 can be considered even when an assessment order has already been passed and an appeal against that assessment is pending before the Commissioner of Income Tax (Appeals).
The decision provides significant relief to taxpayers who may otherwise lose legitimate deductions or claims merely because their income tax return was filed beyond the prescribed statutory deadline.
Background of the Case
The matter arose in the case of Rajgrin Infralink LLP v. Principal Commissioner of Income Tax-1, Surat, concerning Assessment Year 2020-21.
The taxpayer was required to file its income tax return by 31 October 2020 under Section 139(1) of the Income Tax Act. However, the return was ultimately filed on 25 March 2021, resulting in a delay of approximately 25 days beyond the relevant period considered by the petitioner.
The taxpayer attributed the delay to circumstances arising during the COVID-19 pandemic and subsequently sought condonation of the delay.
The significance of the matter arose because the taxpayer had claimed a substantial deduction of approximately ₹19.30 crore under Section 80-IBA, relating to an eligible housing project.
Assessment Proceedings and Disallowance
The return was subsequently selected for scrutiny. The Assessing Officer passed an assessment order on 29 September 2022 under Section 143(3), read with Section 144B.
The Assessing Officer disallowed the taxpayer’s deduction claimed under Section 80-IBA primarily because the return had not been filed within the prescribed time.
Apart from this issue, another substantial addition of approximately ₹19.19 crore was made in relation to alleged under-recognition of revenue.
The taxpayer challenged the assessment order before the Commissioner of Income Tax (Appeals).
While the appeal was pending, Rajgrin Infralink LLP filed an application dated 17 August 2023 under Section 119(2)(b) seeking condonation of the delay in filing its return. The application, however, was rejected by the authorities on 27 October 2023.
Revenue’s Objection Before the High Court
The Revenue opposed the taxpayer’s writ petition on the ground that the assessment had already been completed and that an appeal against the assessment order was pending before the CIT(A).
The Revenue essentially contended that the taxpayer should pursue its remedy in the pending appellate proceedings rather than separately challenge the rejection of the condonation application.
The Gujarat High Court examined whether the pendency of the appeal prevented the taxpayer from seeking judicial review of the rejection of its Section 119(2)(b) application.
Gujarat High Court’s Decision
A Division Bench comprising Justice A.S. Supehia and Justice Vaibhavi D. Nanavati rejected the Revenue’s objection.
The Court noted that the CIT(A) does not possess the statutory power to condone the delay in filing the income tax return under the relevant provision. Therefore, approaching the competent authority under Section 119(2)(b) was consistent with the statutory framework.
The Court held that merely because an assessment order had already been passed, the taxpayer’s application for condonation could not become incapable of consideration.
Similarly, the pendency of an appeal before the CIT(A) did not prevent the High Court from examining the legality of the rejection of the taxpayer’s condonation application.
The Court also relied upon its earlier decision concerning the same taxpayer for AY 2021-22, where a similar delay had occurred during the COVID-19 period.
Consequently, the Gujarat High Court quashed the order dated 27 October 2023 rejecting the condonation application.
The Court directed the CIT(A) to examine the disallowance relating to the ₹19.30 crore Section 80-IBA deduction on its merits and pass an appropriate order in accordance with law.
Key Takeaway for Taxpayers
The ruling highlights an important procedural principle: a taxpayer’s genuine request for condonation of delay should not automatically become infructuous merely because an assessment has subsequently been completed or an appeal is pending.
Section 119(2)(b) provides a statutory mechanism for seeking relief in appropriate cases involving genuine hardship. Where the appellate authority does not possess the power to condone the delay, the taxpayer can approach the authority competent under the statutory framework.
The decision therefore reinforces the importance of considering substantive tax claims on their merits, particularly where the taxpayer can demonstrate genuine circumstances explaining the delay.
For taxpayers who have missed statutory filing deadlines but have legitimate deductions, refunds or other claims, the judgment serves as a useful reminder to examine the possibility of seeking condonation of delay under Section 119(2)(b) rather than assuming that the claim has permanently been lost.