Gujarat HC Allows Plea To Condone Delay In Filing Income Tax Return Despite Pending Appeal Against Assesment

The Gujarat High Court has ruled that the rejection of a taxpayer's application seeking condonation of delay in filing an income tax return can be examined even after an assessment order has been passed and an appeal against it is pending before the Commissioner of Income Tax (Appeals).

“We do not subscribe to the objection raised by the Revenue since it is an admitted position that the Commissioner of Income-tax (Appeals) does not have the power in condoning the delay and the remedy invoked by the petitioner by filing an application under Section 119(2)(b) of the Act reconciles with the statutory scheme of the Act,” a Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati observed.

The case concerned Rajgrin Infralink LLP, which sought condonation of a 25-day delay in filing its return for Assessment Year 2020-21. The return was filed on March 25, 2021, after the October 31, 2020 deadline, with the petitioner attributing the delay to the COVID outbreak.

Section 139(1) of the Income Tax Act prescribes the time for filing a return. Section 119(2)(b) provides a mechanism under which certain delayed applications or claims can be considered where doing so is necessary to avoid genuine hardship.

The petitioner's return was later selected for scrutiny. The Assessing Officer passed an assessment order on September 29, 2022 under Section 143(3), read with Section 144B, and rejected its claim for a deduction of ₹19,30,28,003 under Section 80-IBA because the return had been filed late.

Section 143(3) deals with scrutiny assessments, while Section 144B sets out the procedure for faceless assessments. Section 80-IBA provides for a deduction for eligible housing projects subject to the conditions prescribed under the law.

Rajgrin Infralink challenged the assessment before the Commissioner (Appeals). The appeal covered the Section 80-IBA disallowance as well as a separate disallowance of ₹19,19,37,063 relating to under-recognition of revenue.

While that appeal was pending, the petitioner filed an application on August 17, 2023 seeking condonation of the delay in filing the return. The application was rejected on October 27, 2023.

The Revenue opposed the writ petition, pointing out that the assessment order had already been passed and that the petitioner had challenged it before the Commissioner (Appeals).

The bench specifically asked whether the Commissioner (Appeals) had the power to condone the delay in filing the return. The Revenue fairly acknowledged that it did not. The court recorded that the power rested with the Central Board of Direct Taxes.

The court therefore held that the assessment order did not prevent it from examining the rejection of the petitioner's condonation application. The pending appeal before the Commissioner (Appeals) also did not restrict the High Court from examining the validity of that rejection.

The bench also considered its earlier judgment involving the same petitioner for Assessment Year 2021-22. In that case, the court had set aside a similar rejection after considering the COVID-19 circumstances and directed the authorities to reconsider the application. The earlier case involved a 13-day delay.

The Revenue did not dispute that earlier judgment but argued that it could not assist the petitioner in the present case because an assessment order had already been passed and an appeal was pending before the Commissioner (Appeals).

The bench rejected that distinction. It noted that the Commissioner (Appeals) had no power to condone the delay and that the petitioner had therefore approached the authority empowered to consider such a request.

The High Court accordingly quashed the October 27, 2023, order rejecting the petitioner's application and set it aside in terms of its earlier judgment.

The court directed the Commissioner (Appeals) to examine the disallowance of the ₹19,30,28,003 deduction claimed under Section 80-IBA on merits and pass an appropriate order in accordance with law.

For Petitioner: S.N. Soparkar, Senior Advocate with B.S. Soparkar

For Respondent: Karan G. Sanghani