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December 24, 2022

Genuine hardship faced by the tax consultant that caused the delay in filing a return is allowed

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Genuine hardship faced by the tax consultant that caused the delay in filing a return is allowed

Facts and issue of the case

The petitioner, being a firm engaged in the business of real estate, builders and developers since 3rd March, 2007, had entered into a joint venture agreement dated 12th May, 2008 with M/s Sanghvi Premise Pvt. Ltd. to jointly develop a housing project named “Sanghvi Nakshatra” situated at Nasik and the project having met the conditions under Section 80 IB (10) of the Act was entitled to a deduction under that Section for the AYs 2010-11 to 2013-14 However, in case of petitioner for A.Y. 2011-2012 the return of income remained to be filed in time by the Chartered Accountant.

The joint venture partner, Sanghvi Premise Pvt. Ltd., has already successfully claimed the aforementioned deduction for the AYs 2010-11 to 2013-14, according to learned counsel for the petitioner. He would submit that even the petitioner has been granted the deductions under Section 80 IB(10) for the AYs 2010-11, 2012-13 and 2013-14. He would submit that, however, with respect to the AY 2011-12 the return of income remained to be filed in time by the Chartered Accountant entrusted with the filing of returns. Learned counsel would submit that the petitioner had engaged M/s B.S. Mart and Associates as the chartered accountant firm who had recommended one Mr. Damodar Narayan Panchal as tax consultant for the task of looking after petitioner’s filing of returns. However, in view of the said tax consultant’s son’s handicap coupled with innumerable medical emergencies in the year 2011, the said tax consultant overlooked the filing of ITR not only in petitioner’s case but also of many other clients of the said chartered accountant’s firm. Mr. Bora would submit that the said tax consultant’s affidavit clearly setting out the circumstances which led to the omission to file the petitioner’s as well as the returns of around 28 other assessees for AY 2011-12 to the petition.

Mr. Bora submits that the present petition only pertains to the AY 2011-12, wherein the tax consultant was supposed to file the return on or before 30th September, 2011. However, due to the inadvertent delay on his account, the ITR was filed on 30th September, 2012 after making a delay of 365 days. Learned counsel submits that the books of accounts of the petitioner were audited on 21st September, 2011 i.e., well within the due date. Learned counsel submits that therefore the petitioner firm filed an application dated 11th October, 2019 under Section 119 (2) (b) of the Act seeking condonation of delay in filing of the ITR for AY 2011-12 caused due to the said tax consultant, depriving the petitioner of a deduction of Rs. 2,42,88,917/- causing grave hardship to the said firm.

Aggrieved by the rejection of its application under Section 119(2)(b), by the CBDT, the petitioner has filed petition to HC

Observation of court

Mr. N. N. Singh, learned Senior Standing Counsel for the respondents refers to the affidavit in reply dated 8 th November, 2021 filed on behalf of the respondents. He would submit that the return of income was due to be filed on 30th September, 2011 but was filed only on 30th September, 2012 i.e., after a delay of 365 days, although, the books of accounts of the petitioner were admittedly audited on 21st September, 2011 and the assessment was completed on 14th March, 2014 disallowing the deduction claimed by the petitioner under Section 80 IB (10) of the Act. It is submitted that after due consideration of all the facts, circumstances and material on record, the application dated 11th October, 2019 of the petitioner has been rejected by the impugned order dated 7th May, 2021.

The application was correctly rejected because the income tax consultant had attended several limitation matters before March 30, 2012, which made the filing of the petitioner’s return for the (AY) 2011–12 an act of negligence. As a result, the learned standing counsel would argue that the filing of the return of income late cannot be justified. He would argue that the application under Section 119(2)(b) of the Act was only submitted on October 11, 2019, more than 5 years late, in order to claim the deduction under Section 80 IB (10) and that the said is inane and bad in law .

Learned counsel would submit that no man can take advantage of his own wrong and the ground of income tax consultant’s omission due to his son’s physical and mental condition and ill health cannot be used by petitioner to claim hardship. Learned counsel also submits that the petitioner has already availed of the benefits under the DTVSV Act as the petitioner has already been issued Form 3 whereby petitioner is liable to pay 100% of the tax liability without any interest and penalty, the petition deserves to be dismissed.

It is undeniable that the petitioner participated in the Sanghvi Nakshatra housing project in Nasik as a joint venture partner of Sanghvi Premise Pvt. Ltd. Sanghvi Premises Pvt. Ltd. was granted deductions under Section 80 IB (10) of the Act for the AYs 2010-11 to 2013-14, and this is also not disputed by the respondents. Admittedly, the petitioner has also been allowed deduction under Section 80 IB (10) for the said project for the AYs 2010-11, 2012-13 and 2013-14.

Only for the AY 2011–12 was the return of income finally submitted on September 30, 2012, following a 365-day delay. For the said assessment year, the petitioner has claimed deduction of Rs.31,06,990/- under Section 80 IB (10) of the Act which was  disallowed by the Assessing Officer under intimation issued under Section 143 (1) of the Act by application of Section 80 AC of the Act for the reason that the return of income had been filed  beyond the time permitted under Section 139 (1) of the Act. The petitioner had filed rectification application before the Assessing Officer against the said disallowance which came to be rejected by order under Section 154 of the Act. The said order was confirmed by the CIT(A). Before the ITAT the claim for deduction under Section 80 IB (10) was allowed on the ground that this being a debatable issue, cannot be rejected under Section 143 (1) of the Act.

Court view ,the affidavit of the income tax consultant which has neither been disputed nor controverted by the respondents is sufficient cause for condonation of delay in filing the application under Section 119 (2)(b) of the Act. Besides it is not in dispute that the return for AY 2011-12 was in fact filed by the petitioner albeit 365 days later on 30th September, 2012. That in respect of the other years from 2010-11 to 2013-14 except 2011-12, the income tax authorities have allowed the deduction under Section 80 IB (10) through the petitioner. In our view, substantial injustice would be caused to the petitioner if the order dated 7th May, 2021 is not set aside. This is clearly a case falling within the phrase “genuine hardship”. As mentioned above. Technical consideration above cannot come in the way of substantial justice. It is neither an allegation of malafide nor an allegation that the delay has been deliberate. We do not find that the omission to file petitioner’s return by the income tax consultant to be an act of negligence. Any person in his situation would have been mentally disturbed. The very fact that not only the petitioner’s ITR was not filed in time, there were also 28 others whose return filing was delayed beyond the due date. The authorities should refrain from over analysis which leads to paralysis of justice

Conclusion

After hearing to the both parties the petition allowed by petitioner. The affidavit of the income tax consultant which has neither been disputed nor controverted by the respondents is sufficient cause for condonation of delay in filing the application under Section 119 (2)(b) of the Act. Court does not find that the  omission to file petitioner’s return by the income tax consultant to be an act of negligence. Any person in his situation would have been mentally disturbed. The very fact that not only the petitioner’s ITR was not filed in time, there were also 28 others whose return filing was delayed beyond the due date.

Read full case law given below

Bhatewara-Associates-Manik-Vs-Union-of-India-Bombay-High-Court-1

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