Sri K N Subbaraju, President V. The Chief Commissioner of Income Tax, Bangalore-1 and Income Tax Officer, WAR-1, Chickaballapur

WP/22423/2024

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The case involves M/s Sri Kanyakaparamshwari Co-operative Society Ltd, which sought to quash an order under Section 119(2)(b) of the Income Tax Act, 1961, that denied condonation for an 11-day delay in filing income tax returns for the assessment year 2018-19. The petitioner argued that the delay was due to bona fide reasons and cited a similar case where the court had condoned a delay under similar circumstances. The respondents opposed the writ petition, asserting there was no merit in the application. The court, referencing a recent CBDT circular and a similar case, decided in favor of the petitioner, allowing the condonation of delay and quashing the assessment order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 675548 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 21-08-2024
• Assessment Year: misc
• Other Referred Cases: M/s. Sullia Taluk Womens Multi Purpose Co-operative Society Limited Vs. the Deputy Commissioner of Income Tax and others
• Laws Referred To: Income Tax Act, 1960
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILIP
• Assessee Lawyers: R CHANDRASHEKAR; KASHINATH KALMATH
• Keywords: Assessment year 2018-19; Condonation of delay; Income Tax; Section 80P; Writ of Certiorari; Section 119(2)(b)
• Section: 143(3); 143(2); 143(1); 139(1); 80P; 119(2)(b); 80AC(ii); 144(b); 226; 227

Judgement Text

" - 1 - NC: 2024:KHC:33550 WP No. 22423 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF AUGUST, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 22423 OF 2024 (T-IT) BETWEEN: M/S SRI KANYAKAPARAMESHWARI CO-OPERATIVE SOCIETY LTD REPRESENTED BY ITS PRESIDENT, SRI. K N SUBBARAJU, KPSC BUILDING, M G ROAD, CHINTHAMANI 563 125. CHICKABALLAPUR DISTRICT. …PETITIONER (BY SRI. R CHANDRASHEKAR, ADVOCATE AND SRI. KASHINATH KALMATH, ADVOCATE FOR SRI. RAMA MURTHY R., ADVOCATE) AND: 1. THE CHIEF COMMISSIONER OF INCOME TAX, BANGALORE -1, CENTRAL REVENUE BUILDNGS, QUEENS ROAD, BANGALORE - 560 001. 2. INCOME TAX OFFICER, WAR-1, CHICKABALLAPUR. …RESPONDENTS (BY SRI.M. DILIP, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER OF THE RESPONDENT PASSED U/S 119(2)(b) OF THE ACT DATED 28/06/2024 FOR THE ASSESSMENT YEAR 2018-19 VIDE DIN ITBA/COM/F/17/2024-25/1066419834(1) (ANN-G) AND CONDONE THE DELAY OF 11 DAYS IN FILING THE RETURN OF INCOME. THIS WRIT PETITION, COMING ON FOR ORDERS THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR Digitally signed by LEELAVATHI S R Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:33550 WP No. 22423 of 2024 ORAL ORDER In this petition, the petitioner seeks the following reliefs: “a) Issue a Writ of Certiorari or in the nature of Writ of Certiorari quashing the order of the Respondent passed u/s 119(2)(b) of the Act dated 28.06.2024 for the assessment year 2018-19 vide DIN ITBA/COM/F/17/2024- 25/1066419834(1) (Annexure-G) and condone the delay of 11 days in filing the return of income. b. This Hon’ble Court may be pleased to issue such other reliefs or reliefs as this Hon’ble Court deems fit, in the interest of justice and equity.” 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3. The petitioner-Society filed Income Tax returns for the Assessment Year 2018-19 on 10.11.2018, which was followed by an intimation dated 02.07.2019 issued by the respondent under Section 143(1) of the Income Tax Act, 1960 (for short “the I.T. Act”) as well as the order dated 09.09.2021 passed under Section 143(3) r/w. Section 144-B of the I.T. Act. In the said order, the petitioner was denied deduction under Section 80P of the I.T. Act. The petitioner has filed an appeal against the said Assessment Order, which is pending before the appellate Authority. In the meanwhile, - 3 - NC: 2024:KHC:33550 WP No. 22423 of 2024 the Circular No.12/2023 was issued by the CBDT, pursuant to which the petitioner filed an application on 19.10.2023 placing reliance upon the Circular seeking condonation of delay of 18 days in filing the Income Tax Returns. After the correspondences were exchanged between the petitioner and respondents in relation to the application for condonation of delay, the respondent proceeded to pass the impugned order dated 04.07.2023 rejecting the application for condonation of delay of 18 days in filing the IT returns and as such, the petitioner is before this Court by way of the present petition. 4. Learned counsel for the petitioner places reliance upon the judgment of this Court under identical circumstances in the case of M/s. Sullia Taluk Womens Multi Purpose Co-operative Society Limited Vs. the Deputy Commissioner of Income Tax and others – W.P.No.19531/2023 dated 21.09.2023, in which the delay in filing the I.T. returns was condoned by this Court by placing reliance upon the aforesaid circular. It is submitted by the learned counsel for the petitioner on instructions that if this Court were to set aside the Assessment Order condoning the delay in filing returns and remit the matter back, the petitioner would unconditionally withdraw the appeal filed by the petitioner. - 4 - NC: 2024:KHC:33550 WP No. 22423 of 2024 5. Per contra, learned counsel for the respondent submits that there is no merit in the writ petition and that the same is liable to be dismissed. 6. As rightly contended by learned counsel for the petitioner in M/s. Sullia Taluk Womens Multi Purpose Co- operative Society Limited Vs. the Deputy Commissioner of Income Tax and others – W.P.No.19531/2023 dated 21.09.2023, this Court held as under: “The petitioner, a co-operative society registered under the Karnataka Co-operative Societies Act, 1959 is aggrieved by the third respondent's order dated 23.05.2023 under Section 119(2)(b) of the Income Tax Act, 1961 [for short, 'the IT Act]. The petitioner has also incidentally called in question the intimation dated 31.05.2019 issued under Section 143(1)(a) of the IT Act and the letter for recovery dated 23.11.2020. 2. The facts necessary for decision in this case would be that the petitioner's accounts are audited in the month of August 2018. The petitioner, given the provisions of Section 80AC(ii) of the IT Act, was required to file Income Tax Returns [ITR] before 31.10.2018, but has filed ITR on 31.12.2018. The petitioner has filed an application for condonation of the delay under Section 119(2)(b) of the IT Act contending that for bona fide reasons the ITR could not be filed before 31.10.2018, and the third respondent has rejected the application by the impugned order dated - 5 - NC: 2024:KHC:33550 WP No. 22423 of 2024 23.05.2023 after calling for report from the concerned Assessing Officer. 3. The Assessing Officer has filed his report on the question of delay as follows: \"The Assessee has furnished certain documents in support of its submission. It is observed that the election of Board of Directors was held on 27.01.2019 & the Assessee has contended that the CEO of the society was engaged in the training, preparation of votes list etc for 3 months prior to election. It is evident that the return of income for the A.Y 2018-19 was filed on 31.12.2018 with a delay of only 61 days. The Assessee has taken a plea that it was prevented by reasonable and sufficient cause as mention in its application. It is also stated that it has been tax complaint with the return filing in all the previous year and subsequent years. The denial of deduction u/s 80P(2)(a)(i) would result in undue hardship an affect the members of the society who are from rural background.\" The third respondent has rejected the petitioner's request for condonation of delay in the light of the Assessing Officer's report as aforesaid by reason, which reads as under: \"The facts of the case & petition of assessee have been examined. Section 119(2)(b) permits admission of a claim \"for avoiding genuine hardship\". The petition does not show that the default in complying with the requirement of law was due to circumstances beyond the control of the assessee. The assessee has neither proven any hardship caused to him, nor the circumstances which prevented them from filing the return of income within the permissible time limits\". 4. This Court has granted interim order on 07.09.2023. Sri. Shreehari Kutsa, the learned counsel for the petitioner, and Sri. K. V. Aravind, the learned standing - 6 - NC: 2024:KHC:33550 WP No. 22423 of 2024 counsel for the contesting respondents, are heard for final disposal of the writ petition. Sri K.V. Aravind submits that the condonation of delay would enable the petitioner to avail the benefit under Section 80P of the IT Act notwithstanding the provisions of Section 80AC(ii) of the IT Act inasmuch as these provisions stipulate that no deduction admissible under the heading “C –Deductions in respect of certain incomes” unless ITR for the relevant assessment year is filed on or before the due date specified in Section 139(1) of the IT Act. Sri K.V. Aravind also submits that if there is condonation of the delay, the provisions of Section 143(2) of the IT Act would be relied upon to state that there cannot be any assessment beyond three months from the end of the subject financial year. 5. On the merits of the reasons assigned, Sri K.V. Aravind submits that admittedly audit of the books of accounts, as required under the relevant statute, is contemplated in the month of August 2018 and elections to the Managing Committee is held only on 27.01.2019. The reason for the delay between 27.08.2018 and 27.01.2019 is not explained, and if the delay is not satisfactorily explained, no exception can be taken with the impugned order. 6. The embargo on the admissibility of deductions under Chapter VIA, in view of the provisions of Section 80AC, is if the ITRs are not filed before the due date specified under sub-section (1) of Section 139 of the IT Act. The provisions of Section 80AC of the IT Act do not stipulate in express terms that the deductions will be inadmissible if the delay in filing the ITR is condoned. This - 7 - NC: 2024:KHC:33550 WP No. 22423 of 2024 would be crucial because it remains redoubtable that in the peculiarities of each case, the concerned, in exercise of powers conferred under Section 119(2)(b) of the IT Act could condone the delay in filing ITR beyond the due date contemplated under Section 139(1). 7. This Court must also refer to the Circular dated 26.07.2023 in No.13/2023 issued by the Central Board of Direct Taxes on condonation of delay in filing ITR and allowing deductions under Section 80P of the IT Act for various assessment years starting from 2018-19, and the relevant paragraphs would be: “4. In order to mitigate genuine hardship in cases referred to in para 3, the Board, in exercise of the powers conferred under section 119 of the Act, hereby directs that the Chief Commissioners of Income· tax (CCs/T) / Directors General of lncome·tax (DGsIT) are authorised to deal with such applications of condonation of delay pending before the Board, upon transfer of such applications by the Board, and decide such applications on merits, in accordance with the law. 5. The Board hereby further directs that the CCsIT/DGsIT, henceforth, shall admit all pending as well as new applications for condonation of delay in furnishing returns of income claiming deduction u/s 80P of the Act, filed either in the Board or in field formation for the assessment years 2018·19 to 2022·23 and decide such applications on merits in accordance with the law where such person is required to get his accounts audited under respective State Laws.” 8. Sri Shreehari Kutsa, allaying the apprehension that the petitioner will contest the assessment on the ground of delay, submits that the timeline must necessarily be computed from the date the delay is condoned or such other reasonable time as may be observed by this Court. - 8 - NC: 2024:KHC:33550 WP No. 22423 of 2024 This Court must observe that even otherwise, this aspect will be considered by the Courts depending on the circumstances of each case, when a case for condonation of the delay is established. As such, this Court is not persuaded to opine that the petitioner must be refused indulgence as against the third respondent's impugned order on the grounds urged on behalf of the respondents if this Court is of the opinion that both sufficient reasons and hardship are established for condonation of the delay. 9. The petitioner had to file ITR on or before 31.10.2018 in terms of Section 139(1) of the IT Act, and because of the provisions of Section 139(1) of the IT Act, the ITR could have been filed until 31.12.2018. The petitioner has filed the ITR on 31.12.2018. There is no dispute that the elections to the Managing Committee is held on 27.01.2019. This Court must observe that elaborate electoral processes such as finalization of voters list are contemplated under the provisions of the Karnataka Co-operative Societies Act/Rules, and these processes which will have to be commenced within certain timeline will have to be completed on or before the calendar of events of elections are announced. 10. As such, some part of this elaborate exercise will be made during the time between 31.10.2018 and 31.12.2018 to hold elections on 27.01.2019. When an application is filed for condonation of delay by a Co- operative Society, as clarified by the above Circular dated 26.07.2023, the concerned will have to examine whether the delay in filing ITR was caused due to circumstances beyond control, and in the circumstances of this case, it - 9 - NC: 2024:KHC:33550 WP No. 22423 of 2024 must be opined that the delay is for reasons beyond the petitioner’s control. In the light of the aforesaid, this Court is of the considered view that the impugned order must be quashed and the delay in filing ITR has to be condoned but observing that the time for commencement of limitation for the purposes of Section 143(2) of the IT Act must be reckoned from the end of 31.12.2023. Hence, the following: ORDER [A] The petition is allowed, and the third respondent's impugned order dated 23.05.2023 is quashed condoning the delay of 61 days in the petitioner filing ITR for the Assessment year 2018-19. Consequentially, the demand dated 31.05.2019 as per Annexure-E is also quashed. [B] The respondents shall be entitled for limitation for the purposes of Section 143(2) of the IT Act from 31.12.2023. It is clarified that the timeline for completion of the assessment will have to be necessarily reckoned from the expiry of three months now provided for viz., 31.03.2024. Consequentially, the demand dated 31.05.2019 as per Annexure-E is also quashed”. 7. As can be seen from the aforesaid order, by virtue of the Circular dated 26.07.2023, the petitioner would be entitled to the benefit of Section 83 of the I.T. Act. So also, the reasons assigned in the impugned order for the purpose of refusing to condone the delay are clearly illegal and arbitrary, warranting interference of this Court. Under these circumstances, adopting a - 10 - NC: 2024:KHC:33550 WP No. 22423 of 2024 justice oriented approach and by accepting the reasons assigned by the petitioner, which clearly constitute bonafide reasons, unavoidable circumstances and sufficient cause for filing I.T. returns within the prescribed period, I am of the view that the impugned order at Annexure-G dated 04.07.2024 deserves to be quashed and the application for condonation of delay deserves to be allowed. 8. In the result, I pass the following: ORDER i. The Writ Petition is allowed. ii. The impugned order at Annexure-G dated 04.07.2024 passed by respondent No.1 is hereby quashed and delay in filing I.T. returns stands condoned; iii. So also, the impugned assessment order at Annexure-B dated 09.09.2021 is also hereby quashed. iv. The matter is remitted back to the concerned respondents for reconsideration of the claim of the petitioner afresh in accordance with law. Sd/- (S.R.KRISHNA KUMAR) JUDGE BMC: List No.: 1 Sl No.: 24 "