Substantial Justice: Addressing Minor Delays in Tax Filing

Condonation of delay under Section 119(2)(b) of the Income Tax Act

-By Atul Singh, Advocate

In a recent judgment, the Division bench of the Hon’ble Delhi High Court disposed off a petition filed by a corporate entity challenging the dismissal of its application for the condonation of delay in submitting Form 10-IC under Section 119(2)(b) of the Income Tax Act. The Petitioner contended that a technical glitch had hindered the timely submission of the requisite Form 10-IC, resulting in a delay of merely nine minutes past the deadline. This delay resulted in a tax liability of around 1.97 Crore on the Petitioner.

The Income Tax Department however, rejected the application, asserting that there was insufficient evidence to substantiate the claim of a technical glitch and characterizing the delay as not constituting a genuine hardship. Consequently, the Petitioner approached the High Court by way of an Writ Petition.

Upon examination of the record, the Hon’ble Division Bench acknowledged the circumstances surrounding the delay; perused the screenshots demonstrating a failed upload attempt at 11:59 PM on the due date and observed:

"It does prima facie appear that the petitioner’s failure to file Form 10-IC within the due date was not on account of its failure to attempt to do so."

During the proceedings, the counsel for the Respondent, representing the Income Tax Department, conceded that the impugned order was liable to be set aside. At his request with the consent of the Petitioner, the Bench remand back the matter to the Principal Commissioner of Income Tax (PCIT) so that the application for condonation of the delay, could be decided afresh.

In light of this ruling, the Delhi High Court has clearly articulated that minor technical delays, such as the nine-minute setback experienced by the petitioner, should not undermine a taxpayer’s genuine intent to comply with regulatory obligations.

The call for a more liberal interpretation of procedural rules is echoed across numerous judicial decisions, urging the Income Tax Department to approach delay applications with a focus on equity. This emphasis on substantial justice over strict adherence to timelines has been affirmed in various past judgments.

That in an earlier judgment the Division Bench of the Delhi High Court in G.V.Infosutions Pvt. Ltd. vs Deputy Commissioner Of Income Tax (Manu/DE/0328/2019), while considering the the issue of limitation and relying upon its earlier judgment  titiled  'Indglonal Investment & Finance Ltd. vs. Income Tax Officer, [2012 343 ITR 44(Delhi)]', had held:

“9. The statute or period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities - including Revenue Authorities have to construe them in a reasonable manner. That was the effect and purport of this court's decision in Indglonal Investment & Finance Ltd. (supra). This court is of the opinion that a similar approach is to be adopted in the circumstances of the case.”

The Bombay High Court in Sitaldas K. Motwani v. Director General of Income Tax (International Taxation), New Delhi, had observed that the phrase "genuine hardship" in Section 119 (2) (b) of the Act ought to be construed liberally.

The Hon’ble Bombay High Court held:

"When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay."

Given the precedent of various judgments favoring a liberal interpretation, it is imperative for the Income Tax Department to approach genuine hardship cases with greater leniency and compassion.

Case Details:

W.P.(C) 8893/2024 titled as ‘Ms Shikshantrix Srijan Pvt. Ltd Versus Principal Commissioner, Income Tax Delhi’

Coram: Hon'ble Mr. Justice Vibhu Bakhru and Hon'ble Ms. Justice Swarana Kanta Sharma

Date Of Order: 30.09.2024

Counsel For Petitioner: Mr Swastik Singh And Mr Atul Singh, Advocates.

Counsel For Respondent: Mr Sunil Kumar Agarwal, Senior Standing Counsel With Mr Shivansh B. Pandya, Mr Viplav Acharya And Mr Utkarsh Tiwari, Advocates