The Andhra Pradesh High Court has delivered an important ruling on the scope of Section 119(2)(b) of the Income Tax Act, holding that an application seeking condonation of delay cannot be rejected merely because it was filed beyond a time limit prescribed by a CBDT circular.
The judgment reinforces the principle that tax authorities must consider genuine hardship and the merits of the taxpayer’s explanation, rather than mechanically rejecting a claim on the basis of an administrative deadline.
The Division Bench comprising Justice Ninala Jayasurya and Justice T.C.D. Sekhar dealt with the issue in M/s Sri Vani Educational Society v. The Assistant Commissioner and Others, Writ Petition No. 3499 of 2025.
Background of the Case
The petitioner, Sri Vani Educational Society, a registered educational society, faced substantial tax consequences arising from the delay in filing Form 10B, which is relevant for charitable or educational institutions claiming exemption under the Income Tax Act.
For Assessment Year 2019-20, Form 10B was filed 13 days beyond the prescribed period. The society explained that the delay occurred because its Chartered Accountant, G.R. Sathyanarayana, had suffered a heart ailment and undergone treatment at Care Hospital, Musheerabad, Hyderabad, during October 2019.
For Assessment Years 2020-21 and 2021-22, the society attributed difficulties in timely compliance to circumstances arising from the COVID-19 pandemic. The resulting tax proceedings ultimately led to a substantial demand of approximately ₹4.80 crore.
The society therefore approached the Income Tax authorities under Section 119(2)(b) seeking condonation of the delay.
What Does Section 119(2)(b) Provide?
Section 119(2)(b) gives the competent Income Tax authorities power to admit certain applications or claims after the expiry of the prescribed period where refusing to do so would result in genuine hardship.
The provision can cover claims relating to exemptions, deductions, refunds and other reliefs available under the Income Tax Act.
The underlying objective is to ensure that genuine taxpayers do not lose substantive statutory benefits merely because of a procedural delay, particularly where circumstances beyond their reasonable control caused the delay.
Income Tax Authorities Rejected the Applications
The condonation applications were rejected on January 7, 2025. The authorities primarily relied upon the fact that the applications had not been filed within the period prescribed under the relevant CBDT instructions.
The authorities also took the view that the society had failed to adequately establish what had prevented it from filing Form 10B within time.
The society challenged these orders before the Andhra Pradesh High Court.
High Court Rejects Mechanical Approach
The High Court disagreed with the approach adopted by the Income Tax authorities.
The Bench observed that Section 119(2)(b) itself does not prescribe a specific limitation period for exercising the power of condonation. Consequently, the authorities cannot treat a time limit contained in a CBDT circular as an absolute bar to considering a genuine hardship application.
The Court emphasised that the legislative intention behind Section 119(2)(b) is to adopt a liberal approach when taxpayers approach the authorities with legitimate claims supported by genuine reasons.
Importantly, the Court distinguished between the binding nature of CBDT circulars on departmental authorities and the jurisdiction exercised by constitutional courts.
CBDT Circular Cannot Restrict High Court’s Constitutional Powers
The High Court observed that CBDT circulars are binding upon Income Tax authorities. However, such circulars cannot restrict the jurisdiction of the High Court under Article 226 of the Constitution of India.
The Court held that while departmental authorities are required to follow CBDT instructions, the High Court is not bound by such administrative instructions when examining whether an order is legally sustainable.
This distinction is particularly significant for taxpayers whose legitimate claims may otherwise be defeated solely because of procedural timelines contained in administrative circulars.
Relief Granted to the Educational Society
The Andhra Pradesh High Court ultimately set aside the orders dated January 7, 2025, by which the condonation applications had been rejected.
The Court allowed the applications under Section 119(2)(b) and directed the authorities to permit the society to file Form 10B along with the relevant returns and process the claims in accordance with law.
The consequential demand raised against the society was also set aside.
Key Takeaway for Taxpayers
The ruling provides an important reminder that procedural deadlines should not automatically defeat substantive tax benefits where the Income Tax Act provides a statutory mechanism for condonation based on genuine hardship.
Taxpayers, charitable institutions, educational societies and other eligible entities facing delays should carefully examine whether relief under Section 119(2)(b) is available.
At the same time, the judgment does not mean that every delayed application must automatically be accepted. The taxpayer must still establish genuine hardship and provide a credible explanation for the delay. The important point is that the authority must exercise its statutory discretion judiciously instead of rejecting the application solely because a CBDT circular prescribes a time limit.
The decision therefore strengthens the principle that administrative instructions cannot override the substantive discretion granted by Parliament under the Income Tax Act.
Case: M/s Sri Vani Educational Society v. The Assistant Commissioner and Others
Case No.: W.P. No. 3499 of 2025
Court: Andhra Pradesh High Court
Key Provision: Section 119(2)(b), Income Tax Act
Subject: Condonation of delay in filing Form 10B