Delay in Filing Revised Income Tax Return Condoned by Bombay High Court Due to Audit Error and COVID-19 Pandemic

Income tax compliance in India mandates strict adherence to timelines prescribed under law. However, genuine hardships beyond a taxpayer’s control sometimes lead to unintended delays — especially in complex scenarios involving audit reports and revised returns. In a recent decision, the Bombay High Court took a progressive, justice-oriented approach by condoning the delay in filing a revised income tax return where the delay was mainly caused by an audit error compounded by COVID-19 disruptions. This article breaks down the facts of the case, issues raised, the court’s observations, relevant law, and overall conclusion, in simple and reader-friendly language.

Facts and Issues in the Case

In the case titled Perks Links And Services Private Limited vs. PCIT (Bombay High Court), the petitioner company filed its original tax audit report and income tax return for Assessment Year (AY) 2018-19 on time in October 2018. The audit report prepared under Section 44AB of the Income-tax Act contained an error — the auditor mistakenly included both employee and employer contributions to certain funds under clause 20(b), when only the employee portion was reportable. This resulted in a higher figure reported in the audit report than the correct amount.

The Income Tax Department processed the original return under Section 143(1) of the Income-tax Act and issued an intimation on 17 November 2019, which resulted in a reduction of the refund due to the petitioner by ₹25,52,814. The petitioner later realized that the audit report was erroneous only after reviewing the processed intimation. However, the email containing this intimation had not been seen earlier because it remained “lost” in the petitioner’s email system. The reason, the company said, was that its offices were shut during the first wave of the COVID-19 pandemic — a disruption beyond its control. Consequently, the petitioner obtained a revised audit report on 27 May 2021 and filed a revised/rectified return on the same day.

Unfortunately, this return was filed well after the statutory deadline for filing revised returns under Section 139(5) of the Income-tax Act, which had expired on 31 March 2019. The petitioner then applied under Section 119(2)(b) — a discretionary power of the Central Board of Direct Taxes (CBDT) — seeking condonation of the delay. The Principal Commissioner of Income Tax rejected this application on 29 January 2025, triggering the writ petition before the Bombay High Court.

Observations by the Court

In its analysis, the Bombay High Court did not simply focus on rigid timelines; it examined the context, circumstances, and whether the taxpayer had exercised sufficient diligence once the issue was noticed. The court made several important observations:

a. Timing of Intimation

Although the intimation where the error first became evident was issued on 17 November 2019 (which was before the pandemic), the court observed that the petitioner genuinely could have missed the email due to offices being closed during pandemic lockdowns and disruptions. The pandemic’s impact on business operations was held to be a factor beyond the taxpayer’s control, particularly when normal work resumed only gradually.

b. Bona Fide Explanation and Conduct of Taxpayer

The court took note of the petitioner’s past compliance history — it had always filed returns within limits, including for AY 2020-21 during the pandemic. Officers of the Income Tax Department also indicated that this was a fit case for condonation. These factors suggested honest conduct rather than deliberate delay.

c. Discretionary Nature of Section 119(2)(b)

Most significantly, the court reflected on the purpose of Section 119(2)(b) powers — which allow condonation of delay for genuine hardship or reasons beyond control. The court emphasized that authorities should adopt a justice-oriented approach rather than a narrow, technical view in exceptional situations such as this. This reasoning followed other judicial pronouncements where pandemic-related hardships were considered valid grounds for delay.

The court also notably cited the principle that taxpayers should not be permanently deprived of statutory rights (like correcting errors in returns) when legitimate obstacles prevent timely filing.

Law Applicable

Understanding this case requires familiarity with three key legal provisions:

a. Section 139(5) — Time Limit for Filing Revised Returns

Under Section 139(5), a taxpayer can file a revised return of income to correct errors in the original return before the end of the relevant assessment year or before completion of assessment — whichever is earlier. Once this deadline expires, no revised return can be filed as of right. This timeline had lapsed before the petitioner became aware of the audit error.

b. Section 119(2)(b) — Condonation of Delay

Section 119(2)(b) empowers the CBDT to condone delay in filing returns or documents beyond the statutory time — where the delay is due to reasons beyond the taxpayer’s control and where it is expedient in the interests of justice to do so. This section is discretionary; authorities may grant relief in deserving cases.

c. Principles for Granting Condonation

Courts and tribunals have consistently held that condonation powers should be exercised liberally where:

• The delay was caused by circumstances beyond control (e.g., pandemic lockdowns)
• The taxpayer acted in good faith with no mala fide intent
• The taxpayer has a strong compliance history and quick action once aware of the delay
• No prejudice would be caused to revenue by granting relief

These principles were reflected in the High Court’s reasoning in this case, aligning with broader jurisprudence (including cases where pandemic disruption justified condonation of delay).

Conclusion by the Tribunal or Court

After evaluating all circumstances, the Bombay High Court allowed the writ petition, set aside the order of the Principal Commissioner of Income Tax, and condoned the delay in filing the revised return. The court directed the tax authorities to consider the revised return filed on 27 May 2021 and issue a fresh intimation under Section 143(1). It also directed that no recovery or adjustment arising from the earlier intimation shall proceed in the meantime.

The court’s conclusion was anchored in the view that the explanation — a combination of missed intimation and COVID-19 related disruption — was bona fide and the petition was a deserving case for condonation. Importantly, the judgement reiterated that justice-oriented interpretation of tax law must prevail over strict procedural technicalities, particularly when taxpayers face genuine difficulties beyond their control.