Facts of the Case

The petitioner, Udit Goyal, filed his Income Tax Return for Assessment Year 2021–22 on 12.01.2022 under Section 139(4) of the Income-tax Act, 1961, declaring total income of ₹11,40,040 and claiming carry forward of Long-Term Capital Loss of ₹41,85,770 arising from sale of securities. The due date for filing the return under Section 139(1), after multiple extensions, was 31.12.2021. As the return was filed with a delay of 12 days, the Centralised Processing Centre disallowed the carry forward of loss. The petitioner filed an application under Section 119(2)(b) seeking condonation of delay citing disruption caused by the COVID-19 pandemic, particularly the second and impending third wave. The Principal Commissioner of Income Tax rejected the application by order dated 30.05.2023 holding that no genuine hardship was made out.

Issues Involved

Whether a marginal delay of 12 days in filing the ITR during the COVID-19 pandemic constituted genuine hardship under Section 119(2)(b), whether the PCIT was required to pass a reasoned and speaking order while exercising quasi-judicial powers under Section 119(2)(b), and whether rejection of condonation in a mechanical manner was sustainable in law.

Petitioner’s Arguments

The petitioner contended that the delay was inadvertent and occurred due to restricted functioning of offices, staff shortages, work-from-home limitations, and COVID infections during December 2021 and January 2022. It was argued that the petitioner was a regular taxpayer, that taxes paid far exceeded tax liability, and that denial of carry forward of loss for a mere 12-day delay defeated substantive justice. Reliance was placed on the Supreme Court’s suo motu orders extending limitation during the pandemic, CBDT Circular No. 01/2022 extending timelines for certain compliances, and judicial precedents holding that Section 119(2)(b) must be interpreted liberally to mitigate genuine hardship.

Respondent’s Arguments

The Revenue argued that mere reference to the pandemic was insufficient to justify the delay and that the petitioner had ample time between July 2021 and December 2021 to file the return. It was contended that CBDT Circular No. 09/2015 mandates strict scrutiny of genuine hardship and that loss of carry forward benefit is a statutory consequence of belated filing. Reliance was placed on the Supreme Court judgment in B.M. Malani to submit that hardship must be real and beyond the assessee’s control.

Court Order / Findings

The Delhi High Court held that the PCIT, while exercising powers under Section 119(2)(b), acts as a quasi-judicial authority and is under a mandatory obligation to pass a reasoned order. The Court observed that the impugned order merely concluded that there was no genuine hardship without dealing with the detailed explanation furnished by the petitioner. The Court noted that the delay was only of 12 days, occurred during the COVID-19 pandemic, and that the petitioner had demonstrated bona fide conduct by promptly filing the return. Relying on judgments including Ramesh Kumar Shokeen, Sitaldas K. Motwani, and Gujarat Electric Co. Ltd., the Court held that the expression “genuine hardship” must be construed liberally and that technical considerations cannot override substantial justice. The Court found the impugned order to be mechanical, unreasoned, and unsustainable in law.

Important Clarification

The Court clarified that while deciding applications under Section 119(2)(b), the authority must focus on sufficiency of reasons for delay and not prejudge the merits of the claim. It was further clarified that pandemic-related disruption is a relevant factor and that marginal delays, if bona fide, deserve liberal consideration to advance the cause of justice.

Final Outcome

The writ petition was allowed. The impugned order dated 30.05.2023 passed by the Principal Commissioner of Income Tax rejecting the application for condonation of delay was set aside. The matter was remanded to the concerned PCIT for de novo consideration of the petitioner’s application under Section 119(2)(b) in accordance with law and in light of the Court’s observations. The petition was disposed of and the pending application was dismissed as infructuous.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769681004_UDITGOYALVsPRINCIPALCOMMISSIONEROFINCOMETAXDELHI12.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.