CREDENCE PROPERTY DEVELOPERS PRIVATE LIMITED ,MUMBAI vs. DCIT -CC-2(4), MUMBAI , MUMBAI

The assessee in appeal has assailed disallowance of carry forward of loss Rs.1,85,40,668/- on account of delay in filing return of income by 35 minutes.

Shri Naresh Kumar appearing on behalf of the assessee narrating facts of the case submitted that the assessee had filed its return of income for the impugned assessment year on 01/10/2011 declaring current year losses at Rs.1,85,40,668/-. The assessee was mandatorily required to file return of income through electronic mode on the official website of Income Tax Department. The Chartered Accountant of the assessee tried to upload the return of income on 30/09/2011 late evening. However, the official website of the Income Tax Department was not accessible for uploading of the income tax return on 30/09/2011 between 11.05 pm to 12.05 am of 01/10/2011. The website of the Department started working on 01/10/2011 at 12.05 am and immediately thereafter, the income tax return of the assessee was uploaded at 12.35a.m.on 01/10/2011. On account of technical reasons beyond the control of assessee, there was delay of 35 minutes in filing of the income tax return. After uploading of return of income, the assessee vide letter dated 10/10/2011 informed the Assessing Officer about the delay and reasons for delay of 35 minutes in uploading the return of income. A copy of the said letter is at page-1 of the Paper Book. The ld. Authorized Representative for the assessee pointed that stamp acknowledging receipt of said letter in the office of Assessing Officer is evident from the copy of letter placed in the Paper Book. The return of the assessee was selected for scrutiny and assessment order dated 07/03/2014 u/s. 143(3) of the Income Tax Act, 1961 [in short ‘the Act’] was passed accepting assessee’s claim of carry forward of current year’s business losses to subsequent Assessment Years. After more than three years, from the date of assessment, the assessee received notice dated 07/07/2017 u/s. 154 of the Act from the Assessing Officer to disallow carry forward of current year’s losses to subsequent Assessment Years. The assessee vide letter dated 21/07/2017 furnished detailed reply explaining the reason for delay of 35 minutes in uploading income tax return for Assessment Year 2011-12. The assessee again on 23/03/2018 furnished reply to the notice u/s. 154 of the Act reiterating reasons for delay in uploading e-return. The Assessing Officer brushing aside the bonafide reasons causing delay in uploading return of income, vide order dated 31/03/2018 u/s. 154 of the Act denied the benefits of carry forward of current losses for set off in subsequent Assessment Years. Aggrieved by the order passed u/s. 154 of the Act, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order dismissed the appeal of assessee. In the meantime, on 16/06/2021 the assessee had also filed petition u/s. 119 of the Act for condonation of delay in filing income tax return before the CBDT. The petition u/s. 119 of the Act was rejected by CBDT vide order dated 11/11/2021on the ground of delay in filing of the said petition.

The ld. Authorized Representative of the assessee submits that filing of return of income on ‘e-portal’ of the Department is a time consuming process. The Chartered Accountant who was assigned the task of filing income tax return of the assessee had started preparing return of income on 30/09/2011. However, by the time the return was fully prepared and uploaded on the portal of Income Tax Department, there was delay of 35 minutes. The delay in filing of the return occurred because of technical glitch. The official website of the Department was not functional between 11.05 pm on 30/09/2011 to 12.05 am on 01/10/2011. Thus, the delay of 35 minutes in uploading return was on account of bonafide reasons beyond the control of assessee and not intentional. The ld. Authorized Representative for the assessee further submitted that the Assessing Officer in scrutiny assessment proceedings accepted the return of income. He had accepted the asessee’s claim of carry forward of losses of current year, therefore, the assessee had no reason to believe that the assessee is required to file petition u/s. 119 of the Act for condonation of delay in filing of return of income. It was only when the assessee received notice u/s. 154 of the Act in the year 2017 that the assessee came to know that the assessee’s claim for carry forward of losses is being questioned for delay in filing of return of income. The assessee had bonafide belief for not filing condonation petition u/s119 of the Act. If the Assessing Officer would have denied carry forward of losses for delay in filing return of income in assessment proceedings, the assessee would have filed petition u/s. 119 of the Act in time. The ld. Authorized Representative for the assessee prayed for setting aside the impugned order u/s.154 of the Act and allowing the benefit of carry forward of current losses for set off in subsequent Assessment Years.

Per contra, Shri Prasoon Kabra representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submits that the benefit of carry forward of losses for set off in subsequent years is allowed only if the return of income is filed within the time prescribed u/s. 139(1) of the Act. The Assessing Officer while passing assessment order initially allowed assessee to carry forward current year’s losses to be set off in the subsequent Assessment Years, the said finding of the Assessing Officer was a mistake apparent on record which was rectified by the Assessing Officer in the proceedings u/s. 154 of the Act. Hence, there is no infirmity in the action of Assessing Officer in withdrawing the benefit of carry forward of losses in the facts of the case.

We have heard the submissions made by rival sides and have examined the orders of authorities below. In so far as the facts and the time line of the events necessary for adjudication of the issue is concerned, there is no dispute.

The income tax return of the assessee was delayed by 35 minutes on account of alleged glitch in the official website of the Income Tax Department on 30/09/2011 from 11.05 pm to 12.05 am of 01/10/2011. Therefore, the income tax return of the assessee could be uploaded on the portal of the Department at 12.35am on 01/10/2011. The assessee thereafter promptly informed the Assessing Officer vide letter dated 10/10/2011about hardship in uploading the return which ultimately resulted in delay of 35 minutes. This shows that there was no intention on the part of assessee to file the return of income beyond time. The Assessing Officer while framing the assessment took note of the fact of delay in filing return of income and accepted the claim of assessee.

The delay occurred due to bonafide reasons beyond control of the assessee. No useful purpose or benefit could have been drawn by the assessee by delaying the return of income. In fact delay in filing return of income was detrimental to the interest of assessee, as the assessee had suffered business losses during the relevant financial year, and current year losses could only be allowed to be carry forward for set off in subsequent years if, the assessee files return within the time specified. It is a trite law that rules or procedures are made to facilitate and streamline compliances with an intent that no one takes undue advantage under the Acts. Procedural rules deserves to be read down where sufficient cause exists or events are beyond the control of a party to the lis. It is an accepted fact that filing of income tax return is an intense process which takes time, requires full attention and care lest any column in the return which is required to be filled is left or wrong amount is punched in the income tax return form. Purportedly, the assessee started preparing income tax return on 30/09/2011, however, by the time the assessee completed income tax return and digitally signed it, the time crossed11.59 pm on 30/9/2011.The assessee was well aware that the benefit of carry forward of current year loss for set off in subsequent assessment years would be available only if the return is filed within the time specified u/s. 139(1) of the Act, therefore, the assessee intended to file return on 30/09/2011. For the reasons beyond the control of assessee the return could only be uploaded after 11.59 pm on 30/9/2011 with a delay of 35 minutes on 01/10/2011. We are satisfied that delay in filing return of income was not intentional but was for the reasons beyond the control of assessee. Hence, the assessee cannot be penalized for the circumstances over which the assessee has no control. In any case, the fact of delay in uploading of the return was brought to the notice of Assessing Officer by the assessee immediately after filing of return of income. Thus, at the time of passing the assessment order the Assessing Officer was well aware of the fact that return of income was filed with 35 minutes delay. This is evident from the facts recorded by the Assessing Officer in assessment order. The Assessing Officer while framing assessment u/s. 143(3) of the Act took cognisance of the explanation of the assessee and thereafter, allowed the assessee to carry forward loss of the current year to be set off against the profit in the subsequent assessment years. The subsequent order passed by the Assessing Officer u/s. 154 of the Act disallowing assessee’s claim is unwarranted. We find merit in the submissions of the assessee, hence, impugned order is set aside and the appeal of the assessee is allowed.

Before we part, we wish to record that this decision is rendered purely on peculiar facts of the case and hence, does not lay down any precedent.