Facts of the Case

The petitioner, VRG Electronics Pvt. Ltd., filed its Income Tax Return for Assessment Year 2023–24 on 30.12.2023, declaring taxable income of ₹19,76,540 and claiming a refund of ₹4,190 while opting for the concessional tax regime under Section 115BAA of the Income-tax Act, 1961. For exercising the option under Section 115BAA, filing of Form 10-IC on or before the due date under Section 139(1), i.e., 31.10.2023, was mandatory. The Form 10-IC was filed belatedly on 29.12.2023, resulting in a delay of 60 days. The petitioner filed an application under Section 119(2)(b) seeking condonation of delay, explaining that it was completely dependent on its accountant, who due to ill health and workload inadvertently missed the statutory deadline. The Principal Commissioner of Income Tax rejected the application by order dated 21.06.2024, holding that there was no reasonable cause for delay.

Issues Involved

Whether delay of 60 days in filing ITR and Form 10-IC caused due to inadvertence of the accountant constitutes “genuine hardship” under Section 119(2)(b) of the Income-tax Act, whether rejection of condonation without dealing with the explanation amounts to non-application of mind, and whether the PCIT is required to pass a reasoned quasi-judicial order while exercising powers under Section 119(2)(b).

Petitioner’s Arguments

The petitioner contended that it was a regular tax filer and had promptly filed the ITR and Form 10-IC immediately upon receiving an automated email from the Department regarding non-filing. It was argued that the delay was neither deliberate nor wilful and occurred solely due to lapse on the part of the accountant, on whom the petitioner entirely relied for statutory compliances. The petitioner submitted that denial of condonation on technical grounds defeated the object of Section 119(2)(b), which is intended to mitigate genuine hardship. Reliance was placed on judgments holding that parties should not suffer for mistakes of professionals and that substantial justice should prevail over technicalities.

Respondent’s Arguments

The Revenue contended that negligence of the accountant does not constitute genuine hardship and that the petitioner, being a private limited company, was aware of statutory compliances. It was argued that the petitioner had a history of delayed filings and had failed to satisfy the conditions laid down in CBDT Circular No. 09/2015. The Revenue submitted that the impugned order was passed after due consideration and in accordance with law.

Court Order / Findings

The Delhi High Court held that the power exercised under Section 119(2)(b) is quasi-judicial in nature and requires passing of a reasoned order. The Court observed that the impugned order merely concluded that there was no reasonable cause without explaining why the explanation regarding accountant’s lapse was unacceptable. The Court held that fault of the accountant constitutes a reasonable cause and genuine hardship, particularly when the delay was only of 60 days and corrective action was taken promptly. Relying on decisions of the Supreme Court and various High Courts, the Court reiterated that substantial justice must prevail and parties should not be penalised for inadvertent lapses of professionals.

Important Clarification

The Court clarified that while considering applications under Section 119(2)(b), authorities must adopt a liberal approach and focus on existence of genuine hardship rather than applying technical standards. It was further clarified that such authorities must pass reasoned orders demonstrating application of mind to the explanation offered by the assessee.

Final Outcome

The writ petition was allowed. The impugned order dated 21.06.2024 rejecting the application for condonation of delay was set aside. The matter was remanded to the concerned Principal Commissioner of Income Tax 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/1769680856_VRGELECTRONICSPVTLTDVsPRINCIPALCOMMISSIONEROFINCOMETAXDELHI7.pdf

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