THE SURENDRANAGAR DISTRICT CO-OPERATIVE BANK LTD. V. THE DEPUTY COMMISSIONER OF INCOME TAX

SCA/13839/2018

AI Insights

The case revolves around The Surendranagar District Co-operative Bank Ltd., which sought to carry forward a loss incurred in the assessment year 2009-10 but failed to claim it in the original return due to a clerical error by its Chartered Accountant. The bank filed a revised return after the due date and applied for condonation of delay under section 119(2)(b) of the Income Tax Act, 1961, which was rejected by the CBDT. The bank challenged this rejection in the Gujarat High Court, arguing that the delay was due to genuine hardship and circumstances beyond its control. The court examined the provisions of the Income Tax Act, relevant circulars, and precedents, ultimately finding in favor of the bank.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 685459 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 22-01-2019
• Assessment Year: misc
• Other Referred Cases: B.M. Malani v. Commissioner of Income Tax, Artist Tree Pvt. Ltd. v. Central Board of Direct Taxes, Sitaldas K. Motwani v. Director General of Income Tax, Deep Narayan Gupta v. Central Board of Direct Taxes, B.U. Bhandari Nandgude Patil Associates v. Central Board of Direct Taxes
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M R BHATT; MAUNA BHATT
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Assessment Year 2009-10; Condonation of delay; Genuine hardship; Income Tax Return
• Section: 143(1); 119(2)(b); 139(9)

Judgement Text

"C/SCA/13839/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 13839 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? Yes 2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ========================================================== THE SURENDRANAGAR DISTRICT CO-OPERATIVE BANK LTD. Versus THE DEPUTY COMMISSIONER OF INCOME TAX ========================================================== Appearance: MR TUSHAR HEMANI for MS VAIBHAVI K PARIKH(3238) for the PETITIONER(s) No. 1 MR MR BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT(174) for the RESPONDENT(s) No. 1 RULE NOT RECD BACK(63) for the RESPONDENT(s) No. 2 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER Date : 22/01/2019 Page 1 of 24 C/SCA/13839/2018 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. This petition under Article 226 of the Constitution of India is directed against the order dated 30.5.2018 passed by the Central Board of Direct Taxes (CBDT) under section 119(2)(b) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), whereby the application moved by the petitioner for condonation of delay in filing return of income for assessment year 2009-10 has been rejected. 2. The facts stated briefly are that the petitioner is a cooperative bank engaged in the business of banking. In financial year 2008-09, relevant to assessment year 2009-10, the petitioner incurred loss of Rs.8,56,52,868/-. The petitioner originally filed return of income for assessment year 2009-10 on 30.9.2009 declaring total income at Rs. NIL. It is the case of the petitioner that its income tax matters were handled by M/s. U.A. Maheshwari & Co., Chartered Accountants. However, the income tax matters for the assessment year 2012-13 were handed over to M/s. R. K. Doshi & Co., Chartered Accountants. During the course of assessment proceedings for assessment year 2012-13, the then Assessing Officer called for the details of brought forward losses. Therefore, M/s. R.K. Doshi & Co., authorised representative of the petitioner, called for old records from the petitioner so as to ascertain and also substantiate the amount of brought forward losses available for set off. While undertaking this exercise, it was realised that though there was a book loss of Rs.8,56,85,868/- for assessment year 2009-10, the return of income for the said assessment year was filed declaring income at Rs. NIL in ITR-7 Page 2 of 24 C/SCA/13839/2018 JUDGMENT without claiming carry forward losses of Rs.7,91,66,338/-. Since the return of income was processed under section 143(1) of the Act, the above error went unnoticed. Upon being properly advised, the petitioner filed correct return of income in ITR-5 for assessment year 2009-10 under section 139(9) of the Act on 24.3.2015 declaring income at Rs.(-)7,91,66,338/- , that is, loss. Since the return of income for assessment year 2009-10 filed on 24.3.2015 was a belated return, the petitioner filed an application dated 9.3.2015 before the CBDT for condonation of delay in filing the return of income for assessment year 2009-10 in exercise of powers under section 119(2)(b) of the Act. By the impugned order dated 30.5.2018, the CBDT has rejected the application made by the petitioner, which has given rise to the present petition. 3. Mr. Tushar Hemani, learned advocate for the petitioner invited the attention of the court to the provisions of section 119(2)(b) of the Act, to submit that there is a distinction between clause (b) and clause (c) of sub-section (2) of section 119 of the Act, inasmuch as, clause (b) contemplates only hardship but does not contemplate circumstances beyond the control of the assessee. Reference was made to Circular No.9/2015 issued by the CBDT, to submit that the same contemplates only one condition that is, genuine hardship and there is no condition of circumstances beyond his control. Referring to the impugned order, it was submitted that the CBDT has rejected the application only on the ground that the petitioner has not been able to make out a case of genuine hardship and has not brought on record the circumstances beyond its control. Insofar as the aspect of genuine hardship is concerned, the learned advocate placed reliance upon the Page 3 of 24 C/SCA/13839/2018 JUDGMENT decision of the Supreme Court in the case of B.M. Malani v. Commissioner of Income Tax, (2008) 306 ITR 196, wherein the court held that the ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. The court held that compulsion to pay any unjust dues per se would cause hardship. 3.1 The decision of the Bombay High Court in the case of Artist Tree Pvt. Ltd. v. Central Board of Direct Taxes, (2014) 369 ITR 691 (Bom), was cited for a similar proposition of law. 3.2 Reliance was also placed upon the decision of the Bombay High Court in the case of Sitaldas K. Motwani v. Director General of Income Tax, (2010) 323 ITR 223, wherein the court has held that the phrase “genuine hardship” used in section 119(2)(b) should have been construed liberally even when the petitioner has complied with all the conditions mentioned in Circular dated October 12, 1993. The legislature has conferred the power to condone delay to enable the authorities to do substantive justice to the parties by disposing of the matters on the merits. 3.3 Mr. Hemani submitted that unless the petitioner is permitted to carry forward the losses incurred by it in the assessment year under consideration, it would lose such amount for all times to come and that such loss cannot be denied on account of technicalities. Therefore, this is a case where the petitioner would suffer from genuine hardship and therefore, the CBDT was not correct in not exercising Page 4 of 24 C/SCA/13839/2018 JUDGMENT discretion under section 119(2)(b) reasonably and judiciously and rejecting the application made by the petitioner. 4. Vehemently opposing the petition, Mr. M. R. Bhatt, Senior Advocate, learned counsel for the respondents submitted that the core ingredient of section 119(2)(b) of the Act is genuine hardship. It was submitted that formation of opinion on stated facts would differ from person to person and that the opinion of the CBDT is not so arbitrary or capricious so as to warrant exercise of extraordinary powers by this court so as to replace the opinion formed by the CBDT. It was submitted that while filing return of income for assessment year 2009-10 a huge loss of more than Rs.10 crore and odd was glossed over. Reference was made to the affidavit-in-reply filed on behalf of the respondents wherein it has inter alia been averred thus: “ “3.2 xxxx The Petitioner's excuse that the Chartered Account (sic. Accountant) was not aware of the applicability of Income Tax Return (hereinafter referred to a ITR) is not believable. It may be possible that the Petitioner has not suffered any loss at that time since the ITR was signed by the authorised signatory and CEO of the Bank Shri H. H. Mori who must be aware of the position of the bank in the fiscal year under consideration. Moreover, if the bank had suffered loss why the authorised signatory did not object to not carrying forward of the loss that occurred to the bank. Further, if the loss was not carried forward in the original ITR filed then the provisions of section 139(5) of the Act provide a significant time to rectify mistake in the ITR filed in time U/s. 139(1) of the Act. It is hard to digest Page 5 of 24 C/SCA/13839/2018 JUDGMENT that such a huge loss has neither come to the notice of the accounting team of the bank nor it was brought to the notice of the higher authorities. The learned counsel, accordingly, submitted that the respondents doubt the very genuineness of the claim. 4.1 Reference was made to the decision of the Patna High Court in the case of Deep Narayan Gupta v. Central Board of Direct Taxes, (2004) 135 Taxmann 499 (Pat.), wherein the court has held the only ground on which the extension can be granted is genuine hardship, which has rightly not been defined under the Act. Whether there is genuine hardship or not, depends upon the facts of each case and no fixed criteria in the strait-jacket formula can be laid down for the said purpose. The court recorded that in the facts of the said case, the returns were filed much beyond time. Nothing had been stated on behalf of the petitioner explaining the delay in filing the returns and on the other hand, the Board had found that this was a very deliberate attempt on the part of the petitioner to escape the liability under the Act. The court held that it does not sit as an appellate forum over the decision of the authority in exercise of the writ jurisdiction. It can interfere only when the authority has acted wrongly in the decision-making process or the order is such which cannot be supported by reasons and similar other grounds. The learned counsel submitted that in the facts of the present case also, there is no infirmity in the decision-making process nor can the order be said to be such which is not supported by reasons and similar other grounds. 4.2 Reliance was also placed upon the decision of the Delhi Page 6 of 24 C/SCA/13839/2018 JUDGMENT High Court in the case of B.U. Bhandari Nandgude Patil Associates v. Central Board of Direct Taxes, (2018) 91 taxmann.com 241 (Delhi), wherein the court found that the findings recorded by the CBDT were primarily factual and also lucid and cogent. The impugned order was not so arbitrary or whimsical, to justify interference in exercise of power of judicial review. The court further held that statutory time limits fixed have to be adhered to as it ensures timely completion of assessments. Discipline on time limits regarding filing of returns have to be complied and respected, unless compelling and good reasons are shown and established for grant of extension of time. Extension of time cannot be claimed as a vested right on mere asking and on the basis of vague assertions without proof. 4.3 The learned counsel for the respondent emphatically argued that there has to be genuine hardship for which there has to be proof. In this case, there is no genuine hardship. It was submitted that there is no provision for the revenue to ascertain genuineness of the loss in respect of the assessment year in question. It was further pointed out that the present application has been made on 24.3.2015, at the fag end, that is, when the period provided under the circular was coming to an end. 4.4 Referring to the decision of the Supreme Court in the case of B.M. Malani v. Commissioner of Income Tax (supra), it was submitted that in the absence of the petitioner having made out a case of genuine hardship, the said decision would have no applicability to the facts of the present case. Page 7 of 24 C/SCA/13839/2018 JUDGMENT 4.5 Insofar as the decision of the Bombay High Court in the case of Sitaldas K. Motwani v. Director General of Income Tax (supra) is concerned, it was submitted that the said case relates to a refund claim which would have no applicability to the facts of the present case. 4.6 As regards the decision of the Bombay High Court in the case of Artist Tree Pvt. Ltd. v. Central Board of Direct Taxes (supra), it was submitted that in the facts of the said case, the court found that the explanation offered was a genuine one. It was submitted that the grounds advanced by the petitioner to plead genuine hardship do not inspire confidence and, therefore, the aspect of genuine hardship has not been met with and that the impugned order passed by the CBDT is just, legal and proper and does not warrant interference by this court. 4.7 Lastly, the learned counsel submitted that the matter has become academic and that if the loss is allowed to be carried forward, there is no revised return for the subsequent assessment year and, therefore, the benefit of carry forward loss would not be available to the petitioner in the subsequent assessment years. 5. In rejoinder, Mr. Tushar Hemani, learned advocate for the petitioner, submitted that it is not the case of the revenue that the loss is not genuine. Referring to the impugned order, it was submitted that there are no allegations regarding the veracity of the loss which has come only in the affidavit. Referring to the documents annexed along with the application, it was pointed out that the audit report under section 44AB of the Act Page 8 of 24 C/SCA/13839/2018 JUDGMENT which was placed during the course of the annual general meeting duly reflects the loss in the year 2009, and, therefore, the genuineness of the claim is beyond doubt. 5.1 Referring to the affidavit-in-rejoinder filed by the petitioner, it was submitted that there was a clerical error on the part of the Chartered Accountant while filing the return of income, and hence, it was beyond the petitioner's control. It was submitted that there is other contemporaneous evidence to show a different picture, namely, that the petitioner had in fact incurred a loss during the assessment year under consideration. Therefore, apparently a clerical error is a mistake of an expert which is beyond the control of the petitioner. It was submitted that the factum of loss not being denied, the conclusion that there is no genuine hardship is not judicious. It was, accordingly, urged that the petition deserves to be allowed by granting the relief as prayed for. 5.2 Dealing with the contention of the learned counsel for the respondent that the matter has become academic, the learned advocate for the petitioner submitted that to claim the benefit of carry forward, it is not necessary to show the same in the return of income for subsequent assessment year and that the argument on the face of it is de hors the scheme of Income Tax Act. It was submitted that moreover, the CBDT has not raised any such ground for rejecting the application. The attention of the court was invited to the assessment order for assessment year 2012-13, which contains a chart showing carry forward losses of each year separately. It was submitted that, therefore, the carry forward losses are quantified in this manner and that the contention that the matter has become Page 9 of 24 C/SCA/13839/2018 JUDGMENT academic, does not merit acceptance. 6. Dealing with the last contention first, it may be noted that the Circular 9/2015 dated 9th June, 2015 places an embargo on entertaining applications for condonation of delay for claim of refund/loss for a period of six years from the end of the assessment year. In other words, condonation applications for such claims can be entertained for a period of six years from the end of the assessment year. If the claim for carry forward loss were to become academic after the returns of the subsequent assessment years are filed, it goes without saying that the CBDT would not have provided for entertaining condonation applications in respect of such claim. The very fact that the CBDT has permitted entertainment of condonation applications for a period of six years from the end of the assessment year is reason to believe that the issue would not become academic. Significantly, the CBDT has not put forth any such reason for rejecting the application. Considering these facts together with submissions advanced by the learned counsel for the petitioner as noted in the preceding paragraph, this court is of the view that the contention that the matter has become academic does not merit acceptance. 7. Before adverting to the merits of the case, reference may be made to the provisions of section 119 of the Act, which provides for instructions to subordinate authorities and reads as under:- “119. Instructions to subordinate authorities.- (1) The Board may, from time to time, issue such orders, instructions and directions to other Income Tax Page 10 of 24 C/SCA/13839/2018 JUDGMENT authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board: Provided that no such orders, instructions or directions shall be issued - (a) so as to require any Income Tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Principal Commissioner or Commissioner (Appeals) in the exercise of his appellate functions. (2) Without prejudice to the generality of the foregoing power,- (a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 115-P, 115-S,, 115-WD, 115-WE, 115-WF, 115-WG, 115- WH, 115WJ, 115-WK, 139, 143, 144, 147, 148, 154, 155, 158-BFA, subsection (1-A) of section 201, sections 210, 211, 234-A, 234-B, 234C, 234-E 270-A, 271, 271-C, 271- CA and 273 or otherwise), general or special orders in respect of any class of incomes or fringe benefits or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other Income Tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information; (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any Income Tax authority, not being a Principal Commissioner or Commissioner] (Appeals) to admit an application or claim for any exemption, deduction, refund or any other Page 11 of 24 C/SCA/13839/2018 JUDGMENT relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; (c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely: (i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and (ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed: Provided that the Central Government shall cause every order Issued under this clause to be laid before each House of Parliament.” 8. It is an admitted position that the present case falls under clause (b) of sub-section (2) of section 119 of the Act, which can be broken up and analysed as under: The Board may - if it considers it desirable or expedient so to do - for avoiding genuine hardship in any case - authorise the Income Tax authority - to admit an application or claim for any exemption, deduction, refund or any other relief under the Act - after the expiry of the period specified by or under the Act for making such application. Page 12 of 24 C/SCA/13839/2018 JUDGMENT Thus, the provision has been made for avoiding hardship occasioned by rigorous application of the rule of limitation in a specified matter. However, for the purpose of admitting any application or claim after the expiry of the period specified, such hardship has to be genuine. 9. This High Court in Jay Vijay Express Carriers v. Commissioner of Income Tax [2013] 34 taxmann.com 61 (Gujarat), on which reliance has been placed on behalf of the petitioner, has held that the paramount consideration in exercise of power under section 119(2)(b) of the Act is the desirability or expedience for avoiding genuine hardship. The twin considerations before the Commissioner, therefore, would be whether to avoid genuine hardship to exercise the power would be necessary, and further even if there was a case of genuine hardship, whether it would be desirable or expedient to do so. In the facts of the said case, the court opined that the petitioner was neither lethargic nor lacking in bona fides in making the claim beyond the period of limitation, which should have a relevance to the desirability and expedience for exercising such power. The court further sounded a note of caution that such powers are not to be exercised in a routine manner to extend limitation provided by the Act for various stages. Such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so for avoiding genuine hardship. 10. In the present case, on 24.3.2015, the petitioner made an Page 13 of 24 C/SCA/13839/2018 JUDGMENT application for condonation of delay in filing the return of income under section 119(2)(b) of the Act. It is the case of the petitioner that the mistake of not showing losses of Rs.7,91,66,38/- in the return of income for assessment year 2009-10 was noticed at the time of calculating the eligible brought forward losses for assessment year 2012-13, and that the mistake is a bona fide one; they are not to gain anything by not filing correct return as per the provisions of the Act; the error will cause genuine hardship as they cannot claim the set off of the loss against the profit of the subsequent year; the original return of income for assessment year 2009-10 was filed on 30.9.2009 within due date showing NlL income, thus, there was no delay in filing the original return of income. The return of income was processed under section 143(1) of the Act. On 24.03.2015 the petitioner filed another return of income under section 139(9) of the Act for assessment year 2009-10 claiming carry forward of losses of Rs.7,91,66,338/- which was beyond the time permitted under that sub-section. After filing the subsequent return of income, the petitioner filed a condonation application under section 119(2)(b) of the Act. It is further the case of the petitioner that though the original return of income was filed in ITR-7 instead of ITR-5, it was not held as an invalid return of income by the department under section 139(9) of the Act. 11. Pursuant to the application made by the petitioner, a report dated 31.8.2017 came to be received from the Principal CClT, Gujarat enclosing reports of the Principal CIT-7 Ahmedabad, Additional CIT, Surendranagar and the Assessing Officer. Page 14 of 24 C/SCA/13839/2018 JUDGMENT 12. The Principal CIT said that the petitioner is continuously earning profits and it cannot be said that payment of taxes will cause any genuine hardship to the bank. The loss sought to be carried forward is not in the spirit of the guidelines of the Circular No.9 of 2015 and it is also not a case of genuine hardship. The Assessing Officer said that the application for condonation of delay may not be accepted as the same had been made by way of an afterthought when the assessee started earning profits during assessment year 2012-13. The petitioner’s case was that denial of carry forward losses would cause genuine hardship to it as it would be burdened by a huge tax liability. 13. By the impugned order, the CBDT has rejected the application made by the petitioner on the following grounds: - The petitioner was not prevented from any circumstances beyond its control from filing the revised return of income within the time prescribed by the Act. There was no factor attributable to the income tax department or other external factor preventing it from filing its revised return of income in time. - There were no external factors preventing the petitioner from filing its revised return of income within the permitted time. - The fact that losses were not carried forward did not come to the notice of the petitioner even while filing returns of income of assessment years 2010-11 and 2011-12, which shows that it has failed to discharge its statutory obligations Page 15 of 24 C/SCA/13839/2018 JUDGMENT diligently. The petitioner has not been able to make out a case of genuine hardship and has not brought on record the circumstances beyond its control which led to delayed filing of revised return of income. 14. In the aforesaid backdrop, the merits of the impugned order may be examined. 15. Vide Circular No.9/2015 instructions have been issued to subordinate authorities under section 119 of the Act, in the context of condonation of delay in filing refund claims and claim of carry forward losses under section 119(1)(b) of the Act. Clause 3 thereof provides that no condonation application for claim of refund/Ioss shall be entertained beyond six years from the end of the assessment year for which such application/claim was made. Thus, the application envisages condonation of delay till a period of six years from the end of the relevant assessment year. In the present case, the assessment year is 2009-10 and the application was made on 24.3.2015 which is within a period of six years from the end of the assessment year. 16. Clause 5 of the circular says that the powers of acceptance/rejection of the application within the monetary limits delegated to the Pr.CCsIT/CCsIT/Pr.CslT/CsIT in case of such claims will be subject to following conditions: i. At the time of considering the case under section 119(2)(b), it shall be ensured that the income/loss declared and/or refund claimed is correct and genuine and also that the case is of genuine hardship on merits. Page 16 of 24 C/SCA/13839/2018 JUDGMENT ii. The Pr.CCIT/CClT/Pr.ClT/CIT dealing with the case shall be empowered to direct the jurisdictional assessing officer to make necessary inquiries or scrutinise the case in accordance with the provisions of the Act to ascertain the correctness of the claim. 17. Thus in terms of the circular, while considering an application under section 119(2)(B) of the Act, the concerned officer is required to ensure two things: (i), that the claim is correct and genuine; and (ii), that the case is of genuine hardship on merits. For the purpose of ensuring the correctness and genuineness, the concerned officer can direct the jurisdictional Assessing Officer to make necessary inquiries or scrutinise the case in accordance with the provisions of the Act to ascertain the correctness of the claim. Therefore, in connection with the application made by the petitioner under section 119(2)(b) of the Act, what the Assessing Officer was required to do was to inquire into the correctness of the claim and submit a report in this regard to the concerned officer and not merely his views on the merits of the application made by the assessee. It is in the backdrop of the above Circular that the report of the Assessing Officer as well as the affidavit-in- reply filed on behalf of the respondents is required to be examined. 18. On reading the report submitted by the Assessing Officer in its entirety, it emerges that the Assessing Officer has only offered his comments on the merits of the application, whereas there is not even a whisper as regards the genuineness of the claim as to whether the loss claimed is genuine or not. As Page 17 of 24 C/SCA/13839/2018 JUDGMENT noticed hereinabove, in terms of the circular, the Assessing Officer is required to make necessary inquiries or scrutinise the case in accordance with the provisions of the Act to ascertain the correctness of the claim. However, no such exercise appears to have been carried out by the Assessing Officer who has only commented on the merits of the application under section 119(2)(b) of the Act. In the opinion of this court, in terms of the above Circular, the Assessing Officer is required to verify the genuineness and correctness of the claim, and if such claim is not genuine and correct, the application must necessarily fail on this ground alone. It is only if the claim is correct that the CBDT would then consider as to whether the case is of genuine hardship on merits. 19. In the affidavit-in-reply filed on behalf of the respondents, it has been averred that it may be possible that the petitioner has not suffered any loss at that time since the lTR was signed by the authorised signatory and CEO of the Bank who must have been aware of the position of the bank in the fiscal year under consideration. Thus, even in the affidavit-in-reply the concerned officer puts forth presumptive arguments, whereas it is the duty of the Assessing Officer to inquire and scrutinise the case to ascertain the correctness of the claim. The record does not indicate any such exercise having been carried out on the part of the Assessing Officer who simply appears to have offered his comments on the merits of the application instead of on the correctness of the claim. 20. Having regard to the conditions laid down in the above Circular, this court is of the view that the contention raised by the learned counsel for the respondent that there is no Page 18 of 24 C/SCA/13839/2018 JUDGMENT provision for revenue to ascertain genuineness of such loss is misconceived and contrary to the circular. 21. Insofar as the question of genuine hardship as contemplated under clause (b) of sub-section (2) of section 119 of the Act is concerned, the Supreme Court in B.M. Malani v. Commissioner of Income Tax (supra) has held that compulsion to pay any unjust dues per se would cause hardship. But a question, however, would further arise as to whether the default in payment of the amount was due to circumstances beyond the control of the assessee. 22. Thus, the contention advanced by the learned counsel for the petitioner that the section does not contemplate circumstances beyond his control, does not merit acceptance. Thus, a case of genuine hardship would apart from the fact that the assessee is likely to suffer hardship if the claim is not admitted beyond the period specified under the Act for making such claim, be a case where the assessee was prevented by circumstances beyond his control from making such claim within the specified period. 23. In the present case, the petitioner has produced contemporaneous evidence on record to show that it had in fact incurred the loss claimed by it in the year under consideration. Not being able to carry forward such loss, therefore, per se would cause hardship to the petitioner. The mere fact that the petitioner is now making a profit and may be in a position to bear the loss does not mean that the petitioner would not suffer hardship. Evidently therefore, if the time limit for filing revised return of income is not extended Page 19 of 24 C/SCA/13839/2018 JUDGMENT the petitioner would have to suffer from hardship as otherwise the entire loss of Rs.7,91,66,338/- would not be permitted to be carried forward for being set off against the profits of the subsequent assessment years. 24. Insofar as the question as to whether the claim could not be made within the specified time for circumstances beyond the control of the petitioner is concerned, the petitioner is a bank which is run by various employees who are engaged in the banking business. The officers of the bank may not have any knowledge about the intricacies of the Income Tax Act or the manner in which a return of income has to be filed. It is for this reason that the petitioner avails of the services of an expert, viz. a Chartered Accountant, for filing its returns of income and handling other matters under the Act. While it is true that the return of income would be based upon the books of account maintained by the petitioner, in this case the concerned Chartered Accountant failed to claim the loss which was duly reflected in the record of the relevant assessment year in the return of income filed for that year. While it is true that the authorised signatory and CEO of the Bank had signed the return of income, it cannot be gainsaid that the concerned officer would have relied upon the Chartered Accountant to have prepared a correct return of income. It is only after the income tax matters were handed over to another firm of Chartered Accountants, and the authorised representative called for the old records so as ascertain and substantiate the amount of brought forward losses available for set-off that it could be detected that though there was a book loss of Rs.8,56,85,868/- for assessment year 2009-10, the return of income was filed declaring income at Nil in ITR-7 without Page 20 of 24 C/SCA/13839/2018 JUDGMENT claiming carry forward loss of Rs.7,91,66,338/-. Besides, though the original return was defective inasmuch as it was filed in ITR-7 instead of ITR-5, the Assessing Officer did not declare such return to be invalid. Moreover, as the return was merely processed under section 143(1) of the Act the error went unnoticed. Hence, upon being properly advised, the petitioner filed the correct return of income in ITR-5 for the assessment year 2009-10 on 24.3.2015 declaring loss of Rs.7,91,66,338/-. 25. Thus, it was because of circumstances beyond its control that the petitioner could not file the return of income under section 139(9) of the Act within the specified time, inasmuch as the error committed while filing of the return of income did not come to its notice till the Chartered Accountants were changed and the authorised representative called for the old records so as ascertain and substantiate the amount of brought forward losses available for set-off. Therefore, the petitioner has made out a case of genuine hardship for admitting the claim after the expiry of the period specified under the Act. 26. In the opinion of this court, if one considers the reasoning adopted by the Board for rejecting the application, in no case would a bank or a company be in a position to avail of the benefit of section 119(2)(b) of the Act as all banks and companies would have employees who maintain the daily accounts and prepare or assist in preparation of Profit and Loss account as well as balance sheet; such books of account are subject to audit by regular auditors as well as tax auditors. It is in cases like the present one, wherein despite the aforesaid Page 21 of 24 C/SCA/13839/2018 JUDGMENT position, in case of genuine hardship, if on account of reasons beyond the control of the assessee, an application or claim is not made by the assessee within the period specified in the Act, that powers under section 119(2)(b) of the Act are required to be exercised. 27. In PDS Logistics International (P.) Ltd. v. Chief Commissioner of Income Tax, [2018] 256 Taxman 167 (Karnataka), the Karnataka High Court has held thus:- “7. It is trite law that rendering substantial justice shall be paramount consideration of the Courts as well as the Authorities rather than deciding on hyper-technicalities. It is obvious that there is some lapse on the part of the petitioner, that itself would not be a factor to turn out the plea for filing of the return, when the explanation offered was acceptable and genuine hardship is established. It was with a fond hope of getting justice at the hands of the Chief Commissioner of Income Tax, petition was filed on 11-06-2010. However, no decision was taken for nearly 6 years. Finally on 11-03-2016, the said petition has been dismissed which has to be viewed seriously while rendering substantial justice to the parties.” 28. Thus, rendering substantial justice is the paramount consideration of the courts as well as the authorities rather than deciding on hyper-technicalities. 29. Insofar as the decisions on which reliance has been placed by the learned counsel for the respondents are concerned, in Deep Narayan Gupta v. Central Board of Direct Taxes (supra), the Patna High Court had noted that the reason for rejecting the application was that though the due dates for filing the returns were before March 31, 1995 and March 31, 1996, they were filed only on October 9, 1998. It Page 22 of 24 C/SCA/13839/2018 JUDGMENT was also noticed that the assessee had deliberately filed his returns much after the due date only to escape scrutiny assessment. For example, for the assessment year 1993-94, the net profit shown by the assessee was very low. No audit report was enclosed with the return. In the balance-sheet, the assessee had shown unsecured loans and other finance as liabilities. It was found that the late filing of return apparently indicated that the assessee had manipulated his accounts and had prevented scrutiny assessment by the Department. It is in such circumstances that the court dismissed the writ applications. In the facts of the present case, the original return on income was filed within time. It is the subsequent return in Form ITR-5 which was beyond the specified period for the reasons discussed hereinabove. The above decision would therefore not be applicable to the facts of the present case. 30. Insofar as the decision of the Delhi High Court in B U Bhandari Nandgude Patil Associates v. CBDT, (supra) is concerned, in that case the assessee had not filed return of income within the prescribed period of limitation on the ground that the audit was not completed by the auditors in time. It was the case of the assessee that the statutory audit could not be completed as the Chartered Accountant who had conducted the audit of the assessee had suffered from some illness. However, no record of such illness was produced. Moreover, the Chartered Accountant had completed audits of other assessees within time limit. There was a delay of five months in filing the return of income and this was the only explanation put forth. The CBDT took note of the fact that the assessee had not been able to show that it had pursued the matter diligently as the responsibility of filing the return in time is of the Page 23 of 24 C/SCA/13839/2018 JUDGMENT assessee and he is expected to be more diligent if a large claim of deduction is involved. It was further found that there was nothing to show that the assessee pursued the matter with the auditor to get audit done. The fact that all other audits were done timely by the auditor except for the said audit also did not help the assessee's case as any medical exigency of the magnitude being claimed would have delayed at least a few more audits. The court found the findings recorded by the CBDT were primarily factual and also lucid and cogent and that the application under section 119(2)(b) was made only at the stage when the assessment order reached the stage of the Tribunal. The above decision would also, therefore, not be applicable to the facts of the present case. 31. In light of the above discussion, this court is of the considered view that the CBDT ought to have exercised such powers under clause (b) of sub-section (1) of section 119 of the Act and condoned the delay in filing the return of income. 32. The petition, therefore, succeeds and is, accordingly, allowed. The impugned order dated 30.5.2018 passed by the CBDT under section 119(2)(b) of the Act is hereby quashed and set aside. It is, accordingly, ordered that the petitioner's return of income shall be taken up for being processed in accordance with law. Rule is made absolute accordingly with no order as to costs. (HARSHA DEVANI, J) (A. P. THAKER, J) Z.G. SHAIKH Page 24 of 24 "