Income Tax | Assessee Should Not Be Penalised For Delay In Filing Return Caused By CA's Belated Advice: Bombay High Court

The bench noted that the delay is not due to any negligence on the part of the assessee, but to inadequate advice by the Chartered Accountant, a fact admitted by him in his affidavit.

Justices B.P. Colabawalla and Amit S. Jamsandekar opined that the Petitioner ought not to be put to a considerable disadvantage as a result of belated advice given to it by the Chartered Accountant, especially when the issue that was being grappled with is fairly complex and for which there were no well-settled judicial precedents at the relevant time.

In this case, the assessee has filed a petition challenging the order rejecting the assessee's application for condonation of delay in filing its return of income for the Assessment Year 2018-19.

For the Assessment Year 2018-19, the due date for filing a return of income, in which return an Assessee was returning a loss, under Section 139(3) read with Section 139(1) of the Income Tax Act, 1961, was 31st October 2018.

The assessee, however, filed its return belatedly on 30th March 2019 within the time permissible under Section 139(4).

Accordingly, the assessee, on 15th June 2023, filed an application for condonation of the delay of 5 months under Section 119(2)(b) of the Act. This Application was filed by the assessee within the time stipulated in the said Circular, i.e. within a period of 6 years.

The department refused to condone the delay on the ground that the assessee failed to exercise due diligence to ensure the timely filing of its return of income and the delay is caused by the assessee's lack of supervision, and, hence, this does not constitute genuine hardship.

The case of the assessee is that the delay occurred because the assessee's Chartered Accountant was not acquainted with the legal and accounting treatment to be given apropos the compensation received in the form of Transferable Development Rights (TDR) in lieu of compulsory acquisition of certain immovable property, and, accordingly, the assessee sought appropriate legal advice.

The bench opined that grave hardship will be suffered by the assessee if the delay is not condoned, as genuine losses will not be permitted to be carried forward.

The bench asked the assessee as to why the application under Section 119(2)(b) was filed only on June 15, 2023, i.e. more than four years after the return was filed.

The assessee clarified that initially, he was not aware of the procedure of 119(2)(b) and profits of A.Ys.2019-20, 2020-21 and 2021-22 were not enough to adjust the huge losses of A.Y.2018-19 amounting to Rs. 4,47,30,811/-.

The bench satisfied with the explanation given the assessee that it was only in June 2023 when the assessee realised that the business conditions had improved for A.Y. 2022-23, and there were huge profits and there was a possibility of the loss being set off, and the assessee was not able to set off the same against the losses for A.Y. 2018-19, the assessee filed the Application with department.

In view of the above, the bench allowed the petition and condoned the delay in filing the return of income.

Case Title: Balaji Landmarks LLP Eartwhile v. Central Board Of Direct Taxes (CBDT)

Case Number: WRIT PETITION NO. 16638 OF 2024

Counsel for Petitioner/Assessee: Percy Pardiwala, Senior Advocate, a/w Sanket Bora, Archena Shetty, Vidhi Punmiya, Amiya Das

Counsel for Respondent/Department: Vikas Khanchandani

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