Bombay High Court: Mere Delay in Filing Return Should Not Defeat Refund Claim of Taxpayer if Legitimately Due to Him

Bombay High Court: Mere Delay in Filing Return Should Not Defeat Refund Claim of Taxpayer if Legitimately Due to Him

The Bombay High Court has avowed that a mere delay in filing a tax return should not result in the denial of a refund claim if it is legitimately due to the taxpayer.

The division judge’s bench comprising of Justices K.R. Shriram and Firdosh P. Pooniwalla quashed an order rejecting the Assessee’s application for condonation of delay of 43 days in filing the return of income and remits the matter back to Central Board of Direct Taxation (CBDT) for de-novo consideration.

The factual matrix of the case was that for the AY 2016-17, the Assessee filed ITR with delay and sought a refund of Rs. 82.13 lakhs along with a request for condonation of delay in filing ITR which was rejected.

After considering the submission, the bench observed that CBDT had not considered Assessee’s prayer for condonation in its proper perspective and in accordance with CBDT Circular dated 9 June, 2015, and thus it needed to be considered afresh.

In this context the Court observed, “Refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. The authorities fail to understand that when the delay is condoned, the highest that can happen is that the cause would be decided on merits after hearing the parties.”

The Court was not inclined to accept the Revenue’s argument that the Assessee had failed to prove the genuine hardship by relying on a co-ordinate bench ruling in Sitaldas K. Motwani vs. Director General of Income Tax (International Taxation) and Ors (2009) wherein it was held that the term ‘genuine hardship’ as envisaged under Section 119(2)(b) should be construed liberally, particularly when the legislature had conferred the power to condone the delay to enable the authorities to do substantive justice to the parties by disposing the matter on merits.

The Court noted that as per the order rejecting condonation of delay, the partner of the Asesssee-Firm was held up abroad whereas the Assessee in its letter submitted that partners were in India but the person entrusted to advise on ITR filing was out of the country.

Thus, the Court remarked that such issues could have been addressed by calling upon the Assessee to explain which was not done; observing that the order mentions the remark of the field authorities stating that one of the partners was abroad was not supported by any evidence.

However, the Court in accordance with the principles of natural justice was of the view that the said statement should have been provided to the Assessee for a response to be submitted.

While referring to the CBDT Circular dated 9 June, 2015, the bench observed that the refund claims exceeding Rs. 50 lakhs shall be considered by the CBDT.

The Court found that the order was passed by a Director of Income-tax and was not sent to the Member, CBDT on whose approval it was supposed to have been passed.

Accordingly, the High Court directed the CBDT to decide the question of hardship as well as that of correctness and genuineness of Assessee’s refund claim of Rs. 82.13 lakhs, and at the same time, clarified that the order cannot be passed by anyone else even with the approval of the CBDT.

Advocate Bharat Raichandani appeared for the Assessee while Revenue was represented by Advocate Akhileshwar Sharma.