Shakthi Infra Developers V. Director General of Income Tax (Investigation), Karnataka and Goa Region and Assistant Commissioner of Income Tax, Circle 1, Shivamogga

WP/22576/2021

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The case involves M/s. Shakthi Infra Developers, a partnership firm, which sought to quash an order by the Director General of Income Tax (Investigation), Karnataka and Goa Region, rejecting their application for condonation of delay in filing a revised return for the assessment year 2019-20. The petitioner argued that the delay was due to their involvement in Covid-19 relief activities, which prevented them from filing the revised return within the stipulated time. The court found that the authority did not adequately consider the impact of the Covid-19 pandemic on the petitioner's ability to meet the deadline and directed a reconsideration of the application.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 797428 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 27-05-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAVI RAJ; DILIP M
• Assessee Lawyers: BALARAM RAO
• Keywords: Assessment Year 2019-20; Condonation of delay; Covid-19 pandemic; Revised return; Writ of Certiorari
• Section: 40(a)(ia); 119(2)(b); 40(a)(i a)

Judgement Text

" - 1 - NC: 2024:KHC:17666 WP No. 22576 of 2021 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF MAY, 2024 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 22576 OF 2021 (T-IT) BETWEEN: M/S. SHAKTHI INFRA DEVELOPERS, A PARTNERSHIP FIRM REPRESENTED BY ITS PARTNER, NO.100, EKADANTHA NILAYA, BEHIND WATER TANK, 100 FT. ROAD, VINOBHANAGAR, SHIVAMOGGA - 577 204. …PETITIONER (BY SRI. BALARAM R. RAO, ADVOCATE) AND: 1. THE DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION), KARNATAKA AND GOA REGION, 3RD FLOOR, C R BUILDING, QUEEN'S ROAD, BENGALURU - 560 001. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, SHIVAMOGGA - 577 204. …RESPONDENTS (BY SRI. RAVI RAJ Y.V., ADVOCATE AND SRI. DILIP M., ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER Digitally signed by V KRISHNA Location: High Court of Karnataka - 2 - NC: 2024:KHC:17666 WP No. 22576 of 2021 DATED 15.4.2021 IN F.NO.01/119(2)(b)/DGIT(Inv.)/BLR/2021 -22 PASSED BY THE R1 A COPY OF WHICH IS PRODUCED AT ANNEXURE-E AND CONSEQUENTLY ALLOW THE PETITION FILED BY THE PETITIONER A COPY OF WHICH IS PRODUCED AT ANNEXURE-D AND ETC., THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The present petition has been filed seeking for issuance of writ of certiorari to quash the order at Annexure-'E', whereby the Director General of Income Tax (Investigation), Karnataka and Goa Region has rejected the application filed seeking condonation of delay for filing revised return for the assessment year 2019-20 as there was no justifiable reason and accordingly, declined to exercise power under Section 119(2)(b) of the Income Tax Act, 1961 (for short 'the Act'). 2. The brief facts that are made out is that the petitioner had filed the original return for the assessment year 2019-20 on 07.12.2019, it is stated that an assessment order came to be passed and a notice of demand came to be issued by respondent No.2 to the - 3 - NC: 2024:KHC:17666 WP No. 22576 of 2021 petitioner and in such proceedings certain expenses were disallowed in respect of the assessment year 2017-18. 3. The petitioner filed an appeal and sought to file revised return for the assessment year 2019-20 which however was not possible as the petitioner asserted system did not allow filing of revised return at that point of time. The petitioner then sought for condonation of delay to enable him to file the revised return for the assessment year 2019-20 by filing an application under Section 119(2)(b) of the Act. The said application is produced at Annexure-'D' and the reasons made out are as follows: \"1. M/s Shakthi Infra Developers is a partnership firm having its registered office at Shimoga. During the course of scrutiny assessment for AY 17-18, the assessing office ACIT C-1, Shimoga has concluded the assessment by disallowing certain expenses as per the provisions of section 40(a)(i)(a) of the Income-tax on the ground that TDS has not been made on these expenses. The assessment order was passed on 07/12/2019 and the same was served on the firm on 09/12/2019. (copy of the order is enclosed for reference) - 4 - NC: 2024:KHC:17666 WP No. 22576 of 2021 2. The firm had objected for the said disallowance at the time of scrutiny itself. After the scrutiny order the firm filed an appeal before the Hon'ble CIT(A) Davanagere against the said order. The appeal is filed on 03.01.2020 (copy enclosed for reference). 3. After the introduction of Vivad se vishwas scheme (VSVS), Hon'ble CIT(A) suggested us to opt for the scheme and explained the benefits of the scheme. Further the CIT(A) has also suggested that as per law the firm can claim the expenditure in the AY 2019-20 during which TDS been made. After discussion with CIT(A) the firm agreed to withdraw the appeal and opt for VSVS. Accordingly appeal was withdrawn and taxes were paid on. 4. After filing of TDS Statements an effort was made to file the revised return for AY 19-20 claiming the expenditure as per the provisions of section 40(a)(ia) of the IT Act. The system did not allow us to file the return. 5. Further efforts to file could not be made by the firm due to onset of Covid- 19 pandemic. 6. The partners of the firm are running an ayurvedic hospital by name Tapovana at Davanagere. Our hospital was declared as Covid-19 treatment hospital by the District Administration. (copy of the order is enclosed). - 5 - NC: 2024:KHC:17666 WP No. 22576 of 2021 7. During the whole period of pandemic all the partners were very busy in looking after the administration of the hospital and treating the patients. 8. We were facilitated by the District Administration in recognition of our contribution to the society during pandemic. (copy of the photo and recognition letter are enclosed). 9. Immediately after the settling down of pandemic firm did try to file the return again. However, the system did not allow the same. After contacting the Department we were told that since the time to file the return has elapsed a necessary order condoning the delay in filing the return needs to be taken from the competent authority. 10. We were under the bona-fide belief that the jurisdictional CIT is the competent authority to condone the delay in filing the return. Accordingly, we filed an application for condonation of delay as per section 119(2)(b) of the before the CIT-2 Bangalore. Copy of the letter is enclosed. 11.Subsequently come to the understanding that Hon'ble DGIT is the competent authority as our files are centralized to DCIT(Central) Hassan. Accordingly, an application seeking condonation has been filed before the Hon'ble DGIT.\" - 6 - NC: 2024:KHC:17666 WP No. 22576 of 2021 4. In essence, the case made out for condonation of delay was that the partners of the firm were running an ayurvedic hospital by name of Tapovana at Davangere and the hospital was declared as center for Covid-19 treatment hospital by the District Administration and in light of such activity there was a delay. It is submitted that such delay was genuine in light of the Covid-19 pandemic at the relevant point of time. 5. However, in terms of the order at Annexure-'E', the application seeking condonation of delay has been rejected and the authority concerned has observed that the time for filing revised return for the year 2018-19 had been extended on several occasions till 30.11.2020 and the only reason assigned by the assessee that the partners were busy in the Covid-19 related relief activities, is not sufficient. 6. It is further observed at paragraph No.4.3.4, that the business activities had resumed and the condition - 7 - NC: 2024:KHC:17666 WP No. 22576 of 2021 of the pandemic was returning to normalcy after July- 2020. Taking note of such observation, the application has been rejected. 7. Learned counsel for the petitioner would submit that the application seeking for condonation of delay is self explanatory and in light of the partners of the firm running an ayurvedic hospital which was declared as Covid-19 treatment hospital by the District Administration, authority ought to have exercised power conferred under Section 119(2)(b) of the Act not hyper technically and ought to have also taken note of the pandemic condition. It is further submitted that the findings made at paragraph No.4.3.4 requires re-consideration as by no stretch of imagination could it be stated that normalcy was returning after July-2020 and in fact Covid-19 condition continued till August-2021. 8. It is accordingly submitted that the application ought to have been allowed and the premise that matters - 8 - NC: 2024:KHC:17666 WP No. 22576 of 2021 were returning to normalcy by July-2020 is an erroneous observation. It is further submitted that the question of condonation is again after 30.11.2020 till the date the petitioner sought to file revised return which aspect has not been adverted to. 9. After hearing learned counsel for the revenue as well as learned counsel for the petitioner, it appears that it is a fit case to remit the matter back for re-consideration for respondent No.1. The observation made at paragraph No.4.3.4 reads as follows: \"4.3.4. The only reason that the assessee states is that the partners were busy in covid related activities. It is pertinent to note that business activities resumed and there was increase in day to day activities as the days passed and returning to normalcy after July, 2020. In this scenario, the assessee's Chartered Accountants and concerned people could have revised the return on behalf of the assessee in the stipulated time limit. On the basis of the facts of the case mentioned supra, it is held that the assessee had not given any cogent reason and circumstances for explaining the delay for filing the revised return of income for - 9 - NC: 2024:KHC:17666 WP No. 22576 of 2021 the AY 2019-20. Hence, the assessee's claim that there were genuine reasons for not filing revised return, in time, is not convincing and accordingly, cannot be considered.\" 10. It is clear that such observation appears prima- facie to be not in consonance with the pandemic situation which returned to normalcy in second half of 2021. It must be noticed that taking note of point No.6 of the application at Annexure-'D', the authority ought to have resorted to liberal interpretation of reasons sufficient for condonation of delay in terms of the power under Section 119(2)(b) of the Act. 11. Taking judicial notice of the Covid-19 pandemic, it appears to be a fit case to direct the authority for reconsideration of the application with an observation that the authority ought to take a liberal view in light of the Covid-19 pandemic. Accordingly, the order at Annexure-'E' is set aside and the matter is remitted for reconsideration in light of the observations made. - 10 - NC: 2024:KHC:17666 WP No. 22576 of 2021 12. Petitioner is at liberty to file additional pleadings in support of his application at Annexure-'D' without raising any fresh reason. Other material that may enable the authority to take a considered decision available in the public domain is permitted to be made. Accordingly, petition is disposed off. Sd/- JUDGE MCR "