2022 (11) TMI 1556 - AT - Income Tax

Carry forward of business loss - Disallowance on the ground that the return was filed on 01/11/2019 whereas the due date of filing was on 31/10/2019 - delay of mere two minutes in filling return - A/R submitted that the delay in filing of the return by 2 minutes 7 seconds is purely due to malfunctioning of the system and therefore cannot be attributed to the assessee. HELD THAT - As relying on M/s. Palava Dwellers Pvt. Ltd. 2020 (4) TMI 842 - ITAT MUMBAI set aside the order of the ld. CIT(A) and direct the Assessing Officer to allow the carry forward of loss as claimed by the assessee by holding that the delay of 2 minutes 7 seconds in filing of the return of income by the assessee was purely on the ground of technical glitch/malfunctioning in the system/portal of the Income Tax Department for which the assessee cannot be penalized. Appeal of the assessee is allowed.

Summary

The primary legal issue considered by the Tribunal was whether a delay of two minutes and seven seconds in filing the income tax return beyond the due date precluded the assessee from claiming the benefit of carry forward of business loss under the Income Tax Act, 1961. The Tribunal examined whether such a marginal delay caused by technical glitches in the Income Tax Department's e-filing portal could be condoned, thereby allowing the assessee to carry forward losses despite the apparent delay.

In addressing this issue, the Tribunal referred extensively to the relevant statutory provisions, judicial precedents, and the facts of the case. Section 139(1) of the Income Tax Act prescribes the due date for filing returns, and Section 80AC mandates that certain deductions or benefits, including carry forward of losses, are available only if the return is filed within the prescribed time. However, Section 139(4) provides an exception allowing returns to be filed beyond the due date under certain conditions, and Section 119(2)(b) empowers the Central Board of Direct Taxes (CBDT) to condone delays and admit claims or applications beyond the prescribed time limits to avoid undue hardship.

The Tribunal's interpretation emphasized a justice-oriented and pragmatic approach rather than a pedantic or hyper-technical application of the time limits. It recognized that the delay of two minutes and seven seconds was caused by a technical malfunction in the Department's portal during the last hour rush on the due date. The assessee had diligently attempted to file the return on time, and the delay was beyond its control. The Tribunal held that such a minor delay should not result in the denial of substantive rights, such as the carry forward of business losses.

To support this reasoning, the Tribunal relied on several authoritative judicial pronouncements. It cited a co-ordinate Bench decision where a similar delay of two minutes due to technical glitches was condoned, and the return was treated as filed in time. The Tribunal also referred to High Court rulings that advocated for a justice-oriented approach in condoning delays, including the observations that a highly pedantic approach should be eschewed and that parties should not suffer due to technicalities. The Tribunal highlighted decisions where delays caused by technical issues, last-minute rush, or unavoidable circumstances like floods were condoned to prevent hardship.

Further, the Tribunal noted that the CBDT's power under Section 119(2)(b) to condone delays is discretionary and must be exercised on sound lines, taking into account whether the interests of justice and avoidance of hardship are better served by condonation. The Tribunal also discussed precedents where returns filed shortly after midnight were accepted as timely, and benefits under the Act were granted accordingly.

The Tribunal examined the competing arguments, including the Assessing Officer's and CIT(A)'s strict interpretation that the return filed even a minute late is to be treated as belated, thereby disallowing carry forward of losses. However, the Tribunal found this approach unduly rigid and inconsistent with the principles of equity and fairness. The assessee's argument that the delay was due to system malfunction and that penalizing such a delay would cause undue hardship was accepted as valid. The Tribunal rejected the mechanical application of the statutory deadline in light of the facts and judicial guidance.

Applying the law to the facts, the Tribunal held that the two minutes and seven seconds delay caused by technical glitches should be condoned. The Tribunal directed the Assessing Officer to treat the return as filed within the due date and consequently allow the carry forward of business loss claimed by the assessee. This decision aligns with the principle that procedural delays caused by technical or systemic failures, especially minimal ones, should not deprive taxpayers of substantive rights and benefits under the Income Tax Act.

The significant holdings of the Tribunal include the following:

"The delay of 2 minutes 7 seconds in filing of the return of income by the assessee was purely on the ground of technical glitch/malfunctioning in the system/portal of the Income Tax Department for which the assessee cannot be penalized."

"It is well settled that in matters of condonation of delay a highly pedantic approach should be eschewed and a justice oriented approach should be adopted and a party should not be made to suffer on account of technicalities."

"The provisions of section 80AC are directory and even the Board may, under the provision of section 119, condone the delay in order to avoid undue hardship."

These principles establish that minor delays caused by technical issues do not necessarily render a return invalid or deprive the assessee of statutory benefits, provided the delay is not mala fide. The Tribunal's final determination was to set aside the order of the CIT(A) and direct the Assessing Officer to allow the carry forward of loss as claimed, treating the return as timely filed despite the brief delay.