2025 (5) TMI 717 - HC - Income Tax

Rejection of application u/s 119 (2) (b) seeking condonation of delay in filing Form 10BB - application for condonation of delay had been filed beyond the period of three years from the end of the assessment year - HELD THAT- The petitioner states that if its earlier application which is for the same relief is considered then the objection that the petitioner had not applied within a period of three years would not hold good. Revenue fairly submits that he would have no objection in regard to the petitioner s prayer for a direction to the concerned authorities to decide the petitioner s application dated 13.03.2024 filed u/s 119 (2) (b) of the Act. He points out that if the petitioner secures a favourable order the other reliefs as sought for in the present petition would not survive. We direct the respondents to decide the petitioner s application for condonation of delay in filing the Form 10BB for the AY 2020-21 that was filed on 13.03.2024 as expeditiously as possible and in any event within a period of eight weeks from date.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the application filed by the petitioner under Section 119(2)(b) of the Income Tax Act, 1961 for condonation of delay in filing Form 10BB for Assessment Year 2020-21, which was rejected on the ground of delay beyond three years, was rightly dismissed;

(b) Whether the petitioner's earlier application dated 13.03.2024 for condonation of delay, filed within the three-year period, requires adjudication;

(c) Whether the respondents are obliged to consider and pass appropriate orders on the petitioner's pending application for condonation of delay;

(d) Whether any proceedings under the Income Tax Act should be stayed or restrained pending adjudication of the condonation application.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity of rejection of the condonation application dated 19.12.2024 on grounds of delay beyond three years

Relevant legal framework and precedents: Section 119(2)(b) of the Income Tax Act empowers the tax authorities to condone delay in compliance with any procedural requirement where sufficient cause is shown. The limitation period for such condonation applications is generally within three years from the end of the relevant assessment year. The Central Board of Direct Taxes (CBDT) Circular dated 18.11.2024 provides procedural guidance on condonation of delay in filing Form 10BB.

Court's interpretation and reasoning: The impugned order dated 29.01.2025 dismissed the petitioner's application dated 19.12.2024 on the ground that it was filed beyond the three-year period from the end of the assessment year 2020-21. The Court noted that the petitioner had filed an earlier application dated 13.03.2024 within the three-year period, which had not been decided by the authorities.

Key evidence and findings: The petitioner's delay in filing Form 10BB was 31 days beyond the prescribed timeline, attributed to mitigating circumstances arising from the Covid-19 pandemic. The petitioner had consistently filed returns and claimed exemption under Section 10(23C) of the Act. The initial application for condonation was timely filed but remained undecided.

Application of law to facts: The Court observed that the rejection of the later application on grounds of limitation was premature and that the earlier application, filed within time, deserved adjudication. The Court emphasized that procedural delays caused by unprecedented circumstances such as the pandemic warranted consideration of sufficient cause under Section 119(2)(b).

Treatment of competing arguments: The Revenue did not dispute the existence of the earlier application or its pendency but relied on the limitation bar for rejecting the later application. The Court balanced the procedural requirements with the equities involved, especially the petitioner's status as a charitable trust and the absence of prejudice to the Revenue.

Conclusions: The Court found that the impugned order dismissing the 19.12.2024 application was not sustainable without deciding the earlier timely application. The limitation objection would not hold if the earlier application was considered on merits.

Issue (b) and (c): Obligation of authorities to decide the pending application dated 13.03.2024

Relevant legal framework: Section 119(2)(b) mandates the authorities to exercise discretion to condone delay if sufficient cause is shown. Judicial precedents require that such applications be decided expeditiously and on merits, especially where delay is due to exceptional circumstances.

Court's interpretation and reasoning: The Court noted that the petitioner's earlier application for condonation remained undecided despite being filed within the prescribed period. The Revenue counsel conceded that there was no objection to the petitioner's prayer for a direction to decide the pending application.

Key evidence and findings: The petitioner's consistent compliance history, the mitigating Covid-19 circumstances, and the lack of prejudice to the Revenue were relevant factors. The Court emphasized the need for timely adjudication to avoid prolonged uncertainty and potential prejudice to the petitioner's rights.

Application of law to facts: The Court directed the respondents to decide the pending application dated 13.03.2024 within eight weeks, underscoring the statutory duty to consider condonation applications fairly and promptly.

Treatment of competing arguments: The Court reserved all rights and contentions of the parties, indicating that the merits of the condonation application would be decided by the authorities in due course.

Conclusions: The Court mandated expeditious disposal of the pending application, thereby ensuring adherence to principles of natural justice and procedural fairness.

Issue (d): Stay of proceedings under the Income Tax Act pending adjudication of condonation application

Relevant legal framework: While the petitioner sought a writ restraining initiation of proceedings under the Income Tax Act pending decision on condonation, such relief is discretionary and depends on the balance of convenience and potential prejudice.

Court's interpretation and reasoning: The Court did not expressly grant any stay but indicated that if the petitioner secures a favourable order on condonation, the other reliefs would not survive. This implies that the petitioner's rights would be protected upon successful condonation.

Key evidence and findings: No specific prejudice to the Revenue was demonstrated by delay in adjudication, and the petitioner's status as a charitable trust was a relevant consideration.

Application of law to facts: The Court's direction to decide the condonation application expeditiously implicitly safeguards the petitioner's interests without the need for an interim stay.

Treatment of competing arguments: The Revenue did not oppose the direction to decide the application but did not concede to stay of proceedings.

Conclusions: No stay was granted; however, the petitioner's rights would be protected upon decision on condonation.

3. SIGNIFICANT HOLDINGS

"The impugned order dated 29.01.2025 dismissing the application dated 19.12.2024 on the ground of delay beyond three years is not sustainable in the absence of adjudication of the earlier application dated 13.03.2024 filed within the period of limitation."

"The respondents are directed to decide the petitioner's application for condonation of delay in filing Form 10BB for Assessment Year 2020-21, filed on 13.03.2024, as expeditiously as possible and in any event within eight weeks from the date of this order."

"All rights and contentions of the parties are reserved."

Core principles established include the obligation of tax authorities to consider condonation applications filed within the prescribed limitation period on merits, especially where delay is caused by exceptional circumstances such as the Covid-19 pandemic, and the necessity of expeditious disposal of such applications to ensure procedural fairness.

The final determination was that the petitioner's later application was rightly rejected for delay beyond limitation only if the earlier application remained undecided; since the earlier application was pending, the authorities must decide it within a stipulated timeframe. No stay of proceedings was granted, but the petitioner's rights were safeguarded pending decision on condonation.