SANDHYA SRIVATSAN vs. THE COMMISSIONER OF INCOME TAX

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WP/6175/2023HC KarnatakaKAHC01014294202330 March 2023Bench: B M SHYAM PRASAD9 pages
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What did the High Court hold?

The High Court allowed the petition and quashed the impugned order dated September 14, 2022. The Court construed the petitioner's application dated April 10, 2022, as an application for condonation of delay in filing a revised ROI under Section 139(5) of the IT Act. The Court held that a bonafide error was established in not claiming the TDS credit in the original ROI for AY 2018-19. The delay was condoned, and the petitioner was permitted to file the revised ROI within three months from the date of receipt of a certified copy of the order. The Court also directed that if the respondents initiate proceedings under Section 143(2) of the IT Act for assessment under Section 143(3), the petitioner shall be precluded from raising the defense of limitation. The ratio decidendi is that a bonafide error in claiming TDS credit, even if it leads to a delayed revised return, can be condoned under Section 119(2)(b) if sufficient cause is shown, and the revenue should not be prejudiced by the delay in assessment proceedings.

What were the facts?

The petitioner, Sandhya Srivatsan, entered into a Joint Development Agreement on February 19, 2018, with M/s. Radiance Realty Developers India Limited. The developer paid advances and deducted Rs. 18,54,000/- as Tax Deducted at Source (TDS) for the financial year 2017-18, which was reflected in Form 26AS for Assessment Year (AY) 2018-19. However, this TDS was not claimed in the original Return of Income (ROI) filed for AY 2018-19. After the project completion and sale of apartments, the petitioner offered capital gains and sought to claim credit for the TDS. The Assessing Officer determined a refund but excluded the Rs. 18,54,000/-. The petitioner's application for rectification was rejected, leading to a subsequent application for condonation of delay in filing a revised ROI, dated April 10, 2022. The Commissioner of Income-Tax (International Taxation), Bengaluru, rejected this application on September 14, 2022.

What were the issues?

1. Whether the order dated 14.09.2022 passed by the Commissioner of Income-Tax (International Taxation), Bengaluru, under Section 119(2)(b) of the Income Tax Act, 1961, rejecting the petitioner's application for condonation of delay in claiming TDS credit for AY 2018-19, is liable to be quashed. Assessee's Contentions: - The petitioner argued that the application was for condonation of delay in filing a revised ROI under Section 139(5) of the IT Act, not for a refund based on an unrevised ROI. - A bonafide error was made in not claiming the TDS credit in the original ROI for AY 2018-19, as the income was realized only upon the sale of apartments in AY 2021-22. - The petitioner relied on the principle that if sufficient cause for condonation of delay is established, the delay can be condoned, permitting the filing of a revised ROI. Revenue's Contentions: - The revenue contended that the rejection was based on the fact that the petitioner was seeking a refund based on an unrevised ROI, and there is no provision for such a request. - The revenue also raised a concern about potential defenses regarding the delay in initiating proceedings under Section 143(2) for assessment under Section 143(3) if the revised ROI were permitted.

Which sections of the Income-tax Act were involved?

Section 119(2)(b),Section 139(5),Section 195A,Section 143(2),Section 143(3)

AI-generated summary — verify with the full judgment below

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WP No. 6175 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30TH DAY OF MARCH, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 6175 OF 2023 (T-IT) BETWEEN:

SANDHYA SRIVATSAN, DAUGHTER OF K.S. AYODHYANATH, AGED ABOUT 55 YEARS, 4331, RADISSON CRESCENT, MISSISSAUGA, ONTARIO, L5M4C2, ONTARIO, CANADA

ALSO AT NO. 10/35, SHAAVAN 16TH CROSS, GAYATHRI DEVI PARK EXTENSION, VYALIKAVAL, BENGALURU - 560003 PAN BADPS4399L REPRESENTED BY HER POWER OF ATTORNEY HOLDER, SRI. KRISHNAMURTHY S., AGED ABOUT 73 YEARS,

…PETITIONER (BY SRI. MADHUSUDHAN U A., ADVOCATE) AND:

1.

THE COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION), BENGALURU, BMTC BUILDING , 80 FEET ROAD,

Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA

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WP No. 6175 of 2023

6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU - 560 095.

2.

CENTRALIZED PROCESSING CENTRE, INCOME TAX DEPARTMENT, BENGALURU - 560 500 REPRESENTED BY ITS INCOME TAX OFFICER

3.

THE INCOME TAX OFFICER, WARD - 5 (3) (5), BENGALURU , BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BANGALORE - 560 095.

…RESPONDENTS (BY SRI. K.V.ARAVIND AND SRI. M. DILIP, ADVOCATES)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 14.09.2022 PASSED UNDER SECTION 119(2)(B) OF THE ACT FOR THE ASSESSMENT YEAR 2018-19 BY THE RESPONDENT NO. 1 BEARING DIN AND ORDER NO.ITBA/COM/F/17/2022-23/1045465835(1) HEREIN MARKED AS ANNXURE-A; TO DIRECT THE RESPONDENT NO. 1 TO CONDONE THE DELAY IN MAKING A CLAIM FOR CARRY FORWARD OF TAX DEDUCTED AT SOURCE OF SUM OF RS.18,54,000/- IN THE RETURN FILED FOR THE A.Y.2018-19; DIRECTING THE RESPONDENT NO. 2 TO GIVE CREDIT OF THE TAXES DEDUCTED AT SOURCE OF A SUM OF RS.18,54,000/- FOR THE A.Y.2021-22.

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WP No. 6175 of 2023

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER

The petitioner has impugned the first respondent's order dated 14.09.2022 [Annexure-A] under Section 119[2][b] of the Income Tax Act, 1961 [for short, 'IT Act']. The first respondent by the impugned order has rejected the petitioner's application dated 10.04.2022 for condonation of delay in claiming refund based on Tax Deducted at Source [TDS] in a sum Rs.18,54,000/- in the financial year 2017-18 and for permission to carry forward the same to the future assessment years.

2.

The first respondent has rejected the petitioner's application observing that the petitioner in seeking condonation of delay is making a request for refund of TDS on the basis of the original Return of Income [ROI] filed on 31.08.2018 for the assessment year 2018-19 which is processed, and

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WP No. 6175 of 2023

such request cannot be accepted based on the ROI which is not revised as there is no provision in the IT Act in that regard. Sri. Madhusudhan U A, the learned counsel for the petitioner, and Sri. K V Aravind, the learned standing counsel for the respondent, are heard for final disposal.

3.

The petitioner has entered into a Joint Development Agreement on 19.02.2018 with M/s. Radiance Realty Developers India Limited [the Developer] for development of residential properties in Chennai. The Developer has paid advances and deducted a sum of Rs.18,54,000/- as TDS. Though this receipt and deduction is reflected in Form 26AS for the assessment year 2018-19, the benefit thereof is not claimed in the ROI for such year. With the completion of the project and sale of the apartments allotted to her share, the petitioner has offered capital gains claiming credit for the TDS reflected in Form 26AS filed for the assessment year 2018-19.

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WP No. 6175 of 2023

4.

The Assessing Officer [the second respondent] has determined the refund permissible to the petitioner but excluding the amount of Rs.18,54,000/- reflected in Form 26AS for the assessment year 2018-19. The petitioner's application for rectification is rejected, and thereafter the present application for condonation of delay is filed on 10.04.2022. It is obvious on reading of the impugned order that the first respondent has rejected the petitioner's application for condonation of delay essentially on the ground that the petitioner has not filed revised ROI for the assessment year 2018-19.

5.

On perusal of the petitioner's application, it cannot be said that the petitioner has asked for condonation of delay in filing the revised ROI which is admittedly permissible under Section 139(5) of the IT Act. It is also not disputed that if the petitioner could establish sufficient cause for condonation of delay in

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WP No. 6175 of 2023

filing application for revised ROI, the delay could be condoned permitting the petitioner to file revised ROI but with liberty to the second respondent to initiate, if necessary, proceedings under Section 143[2] of the IT Act for framing of assessment under Section 143[3] of the IT Act.

6.

At this stage, Sri. K V Aravind submits that if this Court is persuaded to opine that there is sufficient cause for condonation of delay and the delay must be condoned with leave to the petitioner to file revised ROI, the respondents must be protected against a possible defence of delay in initiation of the proceedings for the purposes of Section 143[3] of the IT Act.

7.

As could be seen from the petition averments, the receipt of advances and the deduction of Rs.18,54,000/- under Section 195A of the IT Act is reflected in the corresponding Form 26AS filed but the TDS is not claimed under the impression that it is

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WP No. 6175 of 2023

not required as the deduction is towards advance as against income which is realized only with the sale of the apartments when capital gains are offered during the assessment year 2021-22. The petitioner has declared the transaction, and a strong case of bonafide error in not claiming the benefit of TDS in the assessment year 2018-19 is established.

8.

Though the impugned order cannot be found fault with because of the ambiguous language employed by the petitioner, in the circumstances of the case, the impugned order must be quashed condoning the delay and permitting the petitioner to file revised returns within three months from the date of receipt of certified copy of this order. Further, as the petitioner is being permitted to file revised returns on condonation of delay, if there is any occasion for the respondents to initiate proceedings under Section 143[2] of the IT Act for framing of assessment under Section 143[3] of the IT Act, the

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petitioner must be precluded from raising the defence of limitation. Hence the following: ORDER

[a] The petition is allowed, and the impugned order dated 14.09.2022 [Annexure-A] passed by the first respondent is quashed construing the petitioner's application dated 10.04.2022 as application for condonation of delay in filing the revised ROI under Section 139[5] of the IT Act permitting the petitioner to file such returns within three [3] months from the date of receipt of a certified copy of this order.

[b] The respondents are reserved liberty to initiate action if necessary for proceedings under Section 143[2] of the IT Act and in event the second respondent does not initiate such

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proceedings, the petitioner shall not be entitled to take the defense of limitation.

Sd/- JUDGE

AN/-

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