2025 (7) TMI 1242 - HC - Income Tax

Denial of benefit of Section 115BAA - non-filing of Form 10-IC prior to filing of Income Tax Return (ITR) - Scope of genuine hardship - HELD THAT - PCIT Ghaziabad appears to have fallen into error by adopting an excessively precise and stringent approach to the application for condonation of delay u/s 119(2)(b) of the Act. The very essence of this statutory provision is to confer discretionary power upon the tax authorities to mitigate genuine hardship faced by assessee s. The undeniable and tragic circumstances of successive family deaths of the person handling petitioner company s tax matters as submitted by the petitioner through a detailed affidavit of Anupam Sharma unequivocally establish a case of profound personal hardship that directly impaired the petitioner s ability to ensure timely compliance. To dismiss such a well-substantiated cause as insufficient for condonation not only negates the remedial intent of Section 119(2)(b) but also constitutes an arbitrary exercise of discretion particularly when the petitioner s intent to avail the beneficial provisions of Section 115BAA was evident from its original return and audit report. The arbitrary rejection of the condonation of delay in filing Form 10- IC are strongly supported by various judgments that widely interpret genuine hardship under Section 119(2)(b) of the Act. The Hon ble Supreme Court in B.M. Malani 2008 (10) TMI 2 - SUPREME COURT emphasized that genuine hardship signifies genuine difficulty and requires a purposeful interpretation of the provision mandating a judicious exercise of discretion by statutory authorities. The Hon ble Gujarat High Court in Gujarat Electric Co. Ltd. 2001 (1) TMI 10 - GUJARAT HIGH COURT held that genuine hardship must be construed liberally. The Hon ble Bombay High Court in K.S. Bilawala Ors. 2024 (1) TMI 950 - BOMBAY HIGH COURT and Sitaldas K Motwani 2009 (12) TMI 36 - BOMBAY HIGH COURT further consolidated this liberal interpretation asserting that the power to condone delay is for substantial justice and refusing it can defeat the interest of justice. The Hon ble Gujarat High Court in Deepak Pragjibhai Gondaliya 2025 (6) TMI 1644 - GUJARAT HIGH COURT held that the filing of forms for claiming benefits is procedural and no assessee benefits from late filing. The Hon ble Bombay High Court in Pankaj Kailash Agarwal 2024 (4) TMI 549 - BOMBAY HIGH COURT recited by the Madras High Court in MRF Ltd. 2025 (3) TMI 305 - MADRAS HIGH COURT firmly stated that the an assessee feels that he would be paying more tax if he does not get the advantage of deduction will certainly constitute genuine hardship. The judgments discussed hereinabove collectively stress that when substantial justice and technical considerations are aligned against each other the preference should be given to the cause of substantial justice and the authorities approach should be justice-oriented on merits. The clear and repeated position of law is that even if a procedural delay occurs due to genuine hardship it should not prevent an assessee from receiving a rightful tax benefit. Therefore we are of the view that filing of Form 10-IC prior to filing of return is not mandatory and if genuine hardship is shown then delay may be condoned and in this respect the provision of law shall be taken as a beneficial piece of legislation. The genuine hardship shall be seen by the concerned respondent authority as the petitioner is not getting benefit of concessional rate of tax under the Act in respect of delay therefore the impugned order dated 30.01.2024 passed by the Principal Commissioner of Income Tax Ghaziabad is quashed and the respondent authority is directed to condone the delay in filing Form 10-IC and accept the said Form 10-IC. Assessee Appeal allowed.

Summary

ISSUES:

Whether delay in filing Form 10-IC for exercising option under Section 115BAA of the Income Tax Act, 1961 can be condoned under Section 119(2)(b) of the Act on grounds of "genuine hardship".Whether the non-filing of Form 10-IC prior to filing of Income Tax Return (ITR) as required under Section 115BAA is mandatory and precludes acceptance of the option for concessional tax rate.Whether the rejection of condonation application without providing opportunity of personal hearing and without disclosing adverse reports violates principles of natural justice.Whether the discretion under Section 119(2)(b) of the Act was exercised arbitrarily by rejecting the application despite documentary evidence supporting the claim of hardship.Whether the authorities are bound to consider the Assessing Officer's report favoring the genuineness of the hardship claim.Whether the failure to file Form 10-IC timely results in denial of benefit under Section 115BAA and application of Minimum Alternate Tax (MAT) regime.Whether the statutory provisions and relevant Circulars and Notifications permit condonation of delay in filing Form 10-IC beyond prescribed deadlines.

RULINGS / HOLDINGS:

Delay in filing Form 10-IC can be condoned under Section 119(2)(b) of the Act if "genuine hardship" is demonstrated; the phrase "genuine hardship" must be construed liberally to advance substantial justice rather than technical considerations.The filing of Form 10-IC prior to filing ITR is not an absolute mandatory condition; if delay is due to genuine hardship, condonation may be granted and the form accepted subsequently.Rejection of condonation application without affording opportunity of personal hearing and without disclosing adverse reports constitutes violation of principles of natural justice and renders the order arbitrary.The discretion under Section 119(2)(b) must be exercised judiciously and not arbitrarily; failure to consider well-substantiated personal hardships, such as deaths in the family of the person responsible for tax compliance, amounts to an unjust exercise of discretion.The authorities are required to consider the Assessing Officer's report and documentary evidence supporting the genuineness of the hardship claim and cannot ignore such findings without cogent reasons.Non-filing of Form 10-IC within the prescribed time results in denial of benefit under Section 115BAA and application of MAT regime; however, such denial is subject to the condonation of delay under Section 119(2)(b) if genuine hardship exists.Relevant Circulars and Notifications, including Circular No. 9/2015 and Notification No. 6/2022, provide procedural guidelines but do not preclude condonation of delay where genuine hardship is shown.

RATIONALE:

Section 119(2)(b) of the Income Tax Act, 1961 confers discretionary power on the tax authorities to admit applications or claims after expiry of prescribed periods for avoiding "genuine hardship". This power is intended to enable substantial justice and should be exercised liberally.Judicial precedents, including the Supreme Court's interpretation in B.M. Malani and various High Court decisions, have consistently held that "genuine hardship" means "genuine difficulty" and requires a purposive and liberal construction to avoid defeating justice on technical grounds.Principles of natural justice require that an assessee be given an opportunity to be heard and to review adverse reports before an order rejecting condonation is passed; failure to do so vitiates the order.The doctrine of substantial compliance applies where procedural lapses occur without deliberate or mala fide intention; substantial compliance with conditions of Section 115BAA through declaration in return and audit report supports condonation of delay in filing Form 10-IC.Circular No. 9/2015 and Notification No. 6/2022 set out procedural requirements and conditions for condonation but do not oust the discretionary power under Section 119(2)(b) to condone delay in appropriate cases.The tax authorities must balance technical requirements against the cause of substantial justice; when these conflict, the cause of substantial justice prevails as no assessee gains advantage by delayed filing and may suffer hardship if delay is not condoned.In the instant case, the petitioner's delay was caused by severe personal hardships (deaths in family of the responsible officer), supported by affidavit and documentary evidence, which the Assessing Officer found "correct and genuine"; ignoring this amounts to arbitrary exercise of discretion.The Court's intervention is warranted to ensure that the discretionary power under Section 119(2)(b) is exercised in a manner consistent with justice and fairness, allowing the petitioner to file Form 10-IC and claim the benefit under Section 115BAA on merits.