M/S SULLIA TALUK WOMENS MULTI PURPOSE CO OPERATIVE SOCIETY LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX

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WP/19531/2023HC KarnatakaKAHC01045384202321 September 2023Author: B M SHYAM PRASAD12 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the petition, quashing the impugned order dated 23.05.2023 passed by the third respondent (PCIT). The Court condoned the delay of 61 days in the petitioner filing its ITR for AY 2018-19. The Court reasoned that the elaborate electoral processes, including the finalization of the voters' list, contemplated under the Karnataka Co-operative Societies Act/Rules, would have necessarily commenced during the period between the audit in August 2018 and the election on 27.01.2019. The Court referred to CBDT Circular No. 13/2023 dated 26.07.2023, which authorizes Chief Commissioners/Directors General to condone delays in filing ITRs claiming deduction under Section 80P for AY 2018-19 onwards, especially for entities required to get their accounts audited under state laws. The Court opined that the delay was for reasons beyond the petitioner's control and that genuine hardship was established. Consequently, the demand dated 31.05.2019 (Annexure-E) was also quashed. The Court directed that the limitation period for Section 143(2) of the IT Act would commence from 31.12.2023, with the assessment completion timeline reckoned from 31.03.2024.

What were the facts?

The petitioner, M/s Sullia Taluk Womens Multi Purpose Co-operative Society Limited, is challenging an order dated 23.05.2023 by the Principal Commissioner of Income Tax (PCIT) rejecting its application for condonation of delay in filing its Income Tax Return (ITR) for Assessment Year (AY) 2018-19. The society's accounts were audited in August 2018. Under Section 80AC(ii) of the Income Tax Act, 1961, it was required to file its ITR by 31.10.2018 but filed it on 31.12.2018, a delay of 61 days. The society sought condonation citing bona fide reasons. The Assessing Officer's report noted the delay and the society's contention that the CEO was engaged in election-related activities for three months prior to the Board of Directors' election on 27.01.2019. The PCIT rejected the application, stating the default was not due to circumstances beyond the assessee's control and no genuine hardship was proven.

What were the issues?

1. Whether the order dated 23.05.2023 passed by the Principal Commissioner of Income Tax (PCIT) under Section 119(2)(b) of the Income Tax Act, 1961, rejecting the petitioner's application for condonation of delay in filing its Income Tax Return (ITR) for AY 2018-19 is sustainable in law? Assessee's Contention: The petitioner argued that the delay in filing the ITR was due to bona fide reasons, specifically the engagement of the CEO in election-related activities for the Board of Directors' election held on 27.01.2019, which impacted the timely filing. They relied on the fact that they have been tax compliant in previous and subsequent years and that denial of deduction under Section 80P would cause undue hardship. Revenue's Contention: The revenue contended that the delay was not satisfactorily explained. They argued that the audit was completed in August 2018, and elections were held in January 2019, leaving a period for which the delay was not adequately accounted for. Furthermore, they submitted that condonation of delay would allow the petitioner to avail benefits under Section 80P, notwithstanding Section 80AC(ii), which mandates filing the ITR by the due date for such deductions. They also raised concerns about the timeline for assessment under Section 143(2) if the delay were condoned.

Which sections of the Income-tax Act were involved?

Section 119(2)(b),Section 80AC(ii),Section 139(1),Section 80P,Section 143(1),Section 143(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF SEPTEMBER, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO.19531 OF 2023 (T-IT) BETWEEN:

M/S SULLIA TALUK WOMENS MULTI PURPOSE CO-OPERATIVE SOCIETY LIMITED A CO-OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA COOPERATIVE SOCIETY ACT 1959 REGISTERED ADDRESS AT SUBRAHMANYA, SULLIA TALUK DAKSHINA KANNDA DIST - 574238 REP BY ITS CHAIRPERSON SMT VARJIJAKSHI DAUGHER OF SRI SHIVANNA GOWDA AGED ABOUT 53 YEARS …PETITIONER (BY SRI. SHREEHARI KUTSA, ADVOCATE) AND:

1.

DEPUTY COMMISSIONER OF INCOME TAX CENTRAL PROCESSING CENTRE INCOME TAX DEPARTMENT BENGALURU AN AUTHORITY UNDER THE INCOME TAX ACT, 1961, CPC BENGALURU - 560 500

2.

INCOME TAX OFFICER WARD-1, PUTTUR THE ASSESSING OFFICER UNDER THE INCOME TAX ACT 1961 INCOME TAX OFFICE

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

RADHIKA COMPLEX, COURT ROAD PUTTUR - 574 201

3.

PRINCIPAL COMMISSIONER OF INCOME TAX PCIT PANAJI AAYKAR BHAVAN, PLOT NO 05 EDC COMPLEX, PATTO PLAZA PANAJI, GOA 403 001 AN AUTHORITY UNDER THE INCOME TAX ACT, 1961 …RESPONDENTS (BY SRI. K.V.ARAVIND, ADVOCATE ALONG WITH SRI. SUSHAL TIWARI, ADVOCATE )

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO a) ISSUE A WRIT OF CERTIORARI OR DIRECTION IN THE NATURE OF WRIT OF CERTIORARI QUASHING THE INTIMATION UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 DATED 31/05/2019 PASSED BY RESPONDENT NO.1 FOR THE ASSESSMENT YEAR 2018-

CPC 1819/A5/1903031942 ENCLOSED AS ANNEXURE-E; b) ISSUE A WRIT OF CERTIORARI OR DIRECTION IN THE NATURE OF WRIT OF CERTIORARI QUASHING THE LETTER INTIMATING RECOVER OF INCOME TAX ARREARS DATED 23/11/2020 ISSUED BY THE RESPONDENT NO.2 FOR THE ASSESSMENT YEAR 2018-19 ITBA/RCV/F/17/2020-21/1028700543(1) ENCLOSED AS ANNEXURE-F; c) ISSUE A WRIT OF CERTIORARI OR DIRECTION IN THE NATURE OF WRIT OF CERTIORARI QUASHING THE ORDER UNDER SECTION 119(2)(B) OF THE INCOME TAX ACT, 1961 DATED 23/05/2023 ISSUED BY THE RESPONDENT NO.3 FOR THE ASSESSMENT YEAR 2018-19 WHICH ITBA/COM/M/17/2023- 24/1053620312(1) ENCLOSED AS ANNEXURE-G1; d) ISSUE A WRIT OF MANDAMUS OR

DIRECTION IN THE NATURE OF WRIT OF MANDAMUS DIRECTING THE RESPONDENT NO.3 TO CONDONE THE DELAY IN FILING OF THE RETURN OF INCOME AND ETC.,

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

The petitioner, a co-operative society registered under the Karnataka Co-operative Societies Act, 1959 is aggrieved by the third respondent's order dated 23.05.2023 under Section 119(2)(b) of the Income Tax Act, 1961 [for short, 'the IT Act]. The petitioner has also incidentally called in question the intimation dated 31.05.2019 issued under Section 143(1)(a) of the IT Act and the letter for recovery dated 23.11.2020.

2.

The facts necessary for decision in this case would be that the petitioner's accounts are audited in the month of August 2018. The petitioner, given the provisions of Section 80AC(ii) of the IT Act, was required to file Income Tax Returns [ITR] before 31.10.2018, but has filed ITR on 31.12.2018. The

petitioner has filed an application for condonation of the delay under Section 119(2)(b) of the IT Act contending that for bona fide reasons the ITR could not be filed before 31.10.2018, and the third respondent has rejected the application by the impugned order dated 23.05.2023 after calling for report from the concerned Assessing Officer.

3.

The Assessing Officer has filed his report on the question of delay as follows: "The Assessee has furnished certain documents in support of its submission. It is observed that the election of Board of Directors was held on 27.01.2019 & the Assessee has contended that the CEO of the society was engaged in the training, preparation of votes list etc for 3 months prior to election. It is evident that the return of income for the A.Y 2018-19 was filed on 31.12.2018 with a delay of only 61 days. The Assessee has taken a plea that it was prevented by reasonable and sufficient cause as mention in its application. It is also stated that it has been tax complaint with the return filing in all the previous year and subsequent years. The denial of deduction u/s 80P(2)(a)(i) would result in undue

hardship an affect the members of the society who are from rural background."

The third respondent has rejected the petitioner's request for condonation of delay in the light of the Assessing Officer's report as aforesaid by reason, which reads as under:

"The facts of the case & petition of assessee have been examined. Section 119(2)(b) permits admission of a claim "for avoiding genuine hardship". The petition does not show that the default in complying with the requirement of law was due to circumstances beyond the control of the assessee. The assessee has neither proven any hardship caused to him, nor the circumstances which prevented them from filing the return of income within the permissible time limits".

4.

This Court has granted interim order on 07.09.2023. Sri. Shreehari Kutsa, the learned counsel for the petitioner, and Sri. K. V. Aravind, the learned standing counsel contesting respondents, are heard for final disposal of the writ

petition. Sri K.V. Aravind submits that the condonation of delay would enable the petitioner to avail the benefit under Section 80P of the IT Act notwithstanding the provisions of Section 80AC(ii) of the IT Act inasmuch as these provisions stipulate that no deduction admissible under the heading “C – Deductions in respect of certain incomes” unless ITR for the relevant assessment year is filed on or before the due date specified in Section 139(1) of the IT Act. Sri K.V. Aravind also submits that if there is condonation of the delay, the provisions of Section 143(2) of the IT Act would be relied upon to state that there cannot be any assessment beyond three months from the end of the subject financial year.

5.

On the merits of the reasons assigned, Sri K.V. Aravind submits that admittedly audit of the books of accounts, as required under the relevant statute, is contemplated in the month of August 2018 and elections to the Managing Committee is held only on 27.01.2019. The reason for the delay between

27.08.2018 and 27.01.2019 is not explained, and if the delay is not satisfactorily explained, no exception can be taken with the impugned order.

6.

The embargo on the admissibility of deductions under Chapter VIA, in view of the provisions of Section 80AC, is if the ITRs are not filed before the due date specified under sub-section (1) of Section 139 of the IT Act. The provisions of Section 80AC of the IT Act do not stipulate in express terms that the deductions will be inadmissible if the delay in filing the ITR is condoned. This would be crucial because it remains redoubtable that in peculiarities of each case, the concerned, in exercise of powers conferred under Section 119(2)(b) of the IT Act could condone the delay in filing ITR beyond the due date contemplated under Section 139(1).

7.

This Court must also refer to the Circular dated 26.07.2023 in No.13/2023 issued by the Central Board of Direct Taxes on condonation of delay in filing ITR

and allowing deductions under Section 80P of the IT Act for various assessment years starting from 2018-19, and the relevant paragraphs would be: “4. In order to mitigate genuine hardship in cases referred to in para 3, the Board, in exercise of the powers conferred under section 119 of the Act, hereby directs that the Chief Commissioners of Income· tax (CCs/T) / Directors General of lncome·tax (DGsIT) are authorised to deal with such applications of condonation of delay pending before the Board, upon transfer of such applications by the Board, and decide such applications on merits, in accordance with the law.

5.

The Board hereby further directs that the CCsIT/DGsIT, henceforth, shall admit all pending as well as new applications for condonation of delay in furnishing returns of income claiming deduction u/s 80P of the Act, filed either in the Board or in field formation for the assessment years 2018·19 to 2022·23 and decide such applications on merits in accordance with the law where such person is required to get his accounts audited under respective State Laws.”

8.

Sri Shreehari Kutsa, allaying apprehension that the petitioner will contest the assessment on the ground of delay, submits that the timeline must necessarily be computed from the date the delay is condoned or such other reasonable time as may be observed by this Court. This Court must observe that even otherwise, this aspect will be considered by Courts depending on circumstances of each case, when a case for condonation of the delay is established. As such, this Court is not persuaded to opine that the petitioner must be refused indulgence as against the third respondent's impugned order on the grounds urged on behalf of the respondents if this Court is of the opinion that both sufficient reasons and hardship are established for condonation of the delay.

9.

The petitioner had to file ITR on or before 31.10.2018 in terms of Section 139(1) of the IT Act, and because of the provisions of Section 139(1) of the IT Act, the ITR could have been filed until

31.12.2018. The petitioner has filed the ITR on 31.12.2018. There is no dispute that the elections to the Managing Committee is held on 27.01.2019. This Court must observe that elaborate electoral processes such as finalization of voters list are contemplated under the provisions of the Karnataka Co-operative Societies Act/Rules, and these processes which will have to be commenced within certain timeline will have to be completed on or before the calendar of events of elections are announced.

10.

As such, some part of this elaborate exercise will be made during the time between 31.10.2018 and 31.12.2018 to hold elections on 27.01.2019. When an application is filed condonation of delay by a Co-operative Society, as clarified by the above Circular dated 26.07.2023, the concerned will have to examine whether the delay in filing ITR was caused due to circumstances beyond control, and in the circumstances of this case, it

must be opined that the delay is for reasons beyond the petitioner’s control. In the light of the aforesaid, this Court is of the considered view that the impugned order must be quashed and the delay in filing ITR has to be condoned but observing that the time for commencement of limitation for the purposes of Section 143(2) of the IT Act must be reckoned from the end of 31.12.2023. Hence, the following: ORDER [A] The petition is allowed, and the third respondent's impugned order 23.05.2023 is quashed condoning the delay of 61 days in the petitioner filing ITR for the Assessment year 2018-19. Consequentially, demand 31.05.2019 as per Annexure-E is also quashed.

[B] The respondents shall be entitled for limitation for the purposes of Section 143(2) of the IT Act from 31.12.2023. It is clarified

that the timeline for completion of the assessment will have to be necessarily reckoned from the expiry of three months now provided viz., 31.03.2024. Consequentially, demand 31.05.2019 as per Annexure-E is also quashed.

SD/- JUDGE

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