TMI Blog2019 (4) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... ses available for set-off that it could be detected that though there was a book loss Thus, it was because of circumstances beyond its control that the petitioner could not file the return of income u/s 139(9) within the specified time, inasmuch as the error committed while filing of the return of income did not come to its notice till the Chartered Accountants were changed and the authorised representative called for the old records so as ascertain and substantiate the amount of brought forward losses available for set-off. Therefore, the petitioner has made out a case of genuine hardship for admitting the claim after the expiry of the period specified under the Act. In the opinion of this court, if one considers the reasoning adopted by the Board for rejecting the application, in no case would a bank or a company be in a position to avail of the benefit of section 119(2)(b) as all banks and companies would have employees who maintain the daily accounts and prepare or assist in preparation of Profit and Loss account as well as balance sheet; such books of account are subject to audit by regular auditors as well as tax auditors. It is in cases like the present one, wherein de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of ₹ 8,56,85,868/- for assessment year 2009-10, the return of income for the said assessment year was filed declaring income at Rs. NIL in ITR-7 without claiming carry forward losses of ₹ 7,91,66,338/-. Since the return of income was processed under section 143(1) of the Act, the above error went unnoticed. Upon being properly advised, the petitioner filed correct return of income in ITR-5 for assessment year 2009-10 under section 139(9) of the Act on 24.3.2015 declaring income at Rs.(-)7,91,66,338/- , that is, loss. Since the return of income for assessment year 2009-10 filed on 24.3.2015 was a belated return, the petitioner filed an application dated 9.3.2015 before the CBDT for condonation of delay in filing the return of income for assessment year 2009-10 in exercise of powers under section 119(2)(b) of the Act. By the impugned order dated 30.5.2018, the CBDT has rejected the application made by the petitioner, which has given rise to the present petition. 3. Mr. Tushar Hemani, learned advocate for the petitioner invited the attention of the court to the provisions of section 119(2)(b) of the Act, to submit that there is a distinction between clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly and rejecting the application made by the petitioner. 4. Vehemently opposing the petition, Mr. M. R. Bhatt, Senior Advocate, learned counsel for the respondents submitted that the core ingredient of section 119(2)(b) of the Act is genuine hardship. It was submitted that formation of opinion on stated facts would differ from person to person and that the opinion of the CBDT is not so arbitrary or capricious so as to warrant exercise of extraordinary powers by this court so as to replace the opinion formed by the CBDT. It was submitted that while filing return of income for assessment year 2009-10 a huge loss of more than ₹ 10 crore and odd was glossed over. Reference was made to the affidavit-in-reply filed on behalf of the respondents wherein it has inter alia been averred thus: 3.2 xxxx The Petitioner's excuse that the Chartered Account (sic. Accountant) was not aware of the applicability of Income Tax Return (hereinafter referred to a ITR) is not believable. It may be possible that the Petitioner has not suffered any loss at that time since the ITR was signed by the authorised signatory and CEO of the Bank Shri H. H. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were primarily factual and also lucid and cogent. The impugned order was not so arbitrary or whimsical, to justify interference in exercise of power of judicial review. The court further held that statutory time limits fixed have to be adhered to as it ensures timely completion of assessments. Discipline on time limits regarding filing of returns have to be complied and respected, unless compelling and good reasons are shown and established for grant of extension of time. Extension of time cannot be claimed as a vested right on mere asking and on the basis of vague assertions without proof. 4.3 The learned counsel for the respondent emphatically argued that there has to be genuine hardship for which there has to be proof. In this case, there is no genuine hardship. It was submitted that there is no provision for the revenue to ascertain genuineness of the loss in respect of the assessment year in question. It was further pointed out that the present application has been made on 24.3.2015, at the fag end, that is, when the period provided under the circular was coming to an end. 4.4 Referring to the decision of the Supreme Court in the case of B.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t picture, namely, that the petitioner had in fact incurred a loss during the assessment year under consideration. Therefore, apparently a clerical error is a mistake of an expert which is beyond the control of the petitioner. It was submitted that the factum of loss not being denied, the conclusion that there is no genuine hardship is not judicious. It was, accordingly, urged that the petition deserves to be allowed by granting the relief as prayed for. 5.2 Dealing with the contention of the learned counsel for the respondent that the matter has become academic, the learned advocate for the petitioner submitted that to claim the benefit of carry forward, it is not necessary to show the same in the return of income for subsequent assessment year and that the argument on the face of it is de hors the scheme of Income Tax Act. It was submitted that moreover, the CBDT has not raised any such ground for rejecting the application. The attention of the court was invited to the assessment order for assessment year 2012-13, which contains a chart showing carry forward losses of each year separately. It was submitted that, therefore, the carry forward losses are quantified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( 2) Without prejudice to the generality of the foregoing power,- ( a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 115-P, 115-S,, 115-WD, 115-WE, 115-WF, 115-WG, 115- WH, 115WJ, 115-WK, 139, 143, 144, 147, 148, 154, 155, 158-BFA, subsection (1-A) of section 201, sections 210, 211, 234-A, 234-B, 234C, 234-E 270-A, 271, 271-C, 271- CA and 273 or otherwise), general or special orders in respect of any class of incomes or fringe benefits or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other Income Tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hardship has to be genuine. 9. This High Court in Jay Vijay Express Carriers v. Commissioner of Income Tax [2013] 34 taxmann.com 61 (Gujarat), on which reliance has been placed on behalf of the petitioner, has held that the paramount consideration in exercise of power under section 119(2)(b) of the Act is the desirability or expedience for avoiding genuine hardship. The twin considerations before the Commissioner, therefore, would be whether to avoid genuine hardship to exercise the power would be necessary, and further even if there was a case of genuine hardship, whether it would be desirable or expedient to do so. In the facts of the said case, the court opined that the petitioner was neither lethargic nor lacking in bona fides in making the claim beyond the period of limitation, which should have a relevance to the desirability and expedience for exercising such power. The court further sounded a note of caution that such powers are not to be exercised in a routine manner to extend limitation provided by the Act for various stages. Such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of delay may not be accepted as the same had been made by way of an afterthought when the assessee started earning profits during assessment year 2012-13. The petitioner s case was that denial of carry forward losses would cause genuine hardship to it as it would be burdened by a huge tax liability. 13. By the impugned order, the CBDT has rejected the application made by the petitioner on the following grounds: - The petitioner was not prevented from any circumstances beyond its control from filing the revised return of income within the time prescribed by the Act. There was no factor attributable to the income tax department or other external factor preventing it from filing its revised return of income in time. - There were no external factors preventing the petitioner from filing its revised return of income within the permitted time. - The fact that losses were not carried forward did not come to the notice of the petitioner even while filing returns of income of assessment years 2010-11 and 2011-12, which shows that it has failed to discharge its statutory obligations diligently. The petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner under section 119(2)(b) of the Act, what the Assessing Officer was required to do was to inquire into the correctness of the claim and submit a report in this regard to the concerned officer and not merely his views on the merits of the application made by the assessee. It is in the backdrop of the above Circular that the report of the Assessing Officer as well as the affidavit-inreply filed on behalf of the respondents is required to be examined. 18. On reading the report submitted by the Assessing Officer in its entirety, it emerges that the Assessing Officer has only offered his comments on the merits of the application, whereas there is not even a whisper as regards the genuineness of the claim as to whether the loss claimed is genuine or not. As noticed hereinabove, in terms of the circular, the Assessing Officer is required to make necessary inquiries or scrutinise the case in accordance with the provisions of the Act to ascertain the correctness of the claim. However, no such exercise appears to have been carried out by the Assessing Officer who has only commented on the merits of the application under section 119(2)(b) of the Act. In the opinion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is control from making such claim within the specified period. 23. In the present case, the petitioner has produced contemporaneous evidence on record to show that it had in fact incurred the loss claimed by it in the year under consideration. Not being able to carry forward such loss, therefore, per se would cause hardship to the petitioner. The mere fact that the petitioner is now making a profit and may be in a position to bear the loss does not mean that the petitioner would not suffer hardship. Evidently therefore, if the time limit for filing revised return of income is not extended the petitioner would have to suffer from hardship as otherwise the entire loss of ₹ 7,91,66,338/- would not be permitted to be carried forward for being set off against the profits of the subsequent assessment years. 24. Insofar as the question as to whether the claim could not be made within the specified time for circumstances beyond the control of the petitioner is concerned, the petitioner is a bank which is run by various employees who are engaged in the banking business. The officers of the bank may not have any knowledge about the intricacies of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion of this court, if one considers the reasoning adopted by the Board for rejecting the application, in no case would a bank or a company be in a position to avail of the benefit of section 119(2)(b) of the Act as all banks and companies would have employees who maintain the daily accounts and prepare or assist in preparation of Profit and Loss account as well as balance sheet; such books of account are subject to audit by regular auditors as well as tax auditors. It is in cases like the present one, wherein despite the aforesaid position, in case of genuine hardship, if on account of reasons beyond the control of the assessee, an application or claim is not made by the assessee within the period specified in the Act, that powers under section 119(2)(b) of the Act are required to be exercised. 27. In PDS Logistics International (P.) Ltd. v. Chief Commissioner of Income Tax , [2018] 256 Taxman 167 (Karnataka), the Karnataka High Court has held thus:- 7. It is trite law that rendering substantial justice shall be paramount consideration of the Courts as well as the Authorities rather than deciding on hyper-technicalities. It is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the statutory audit could not be completed as the Chartered Accountant who had conducted the audit of the assessee had suffered from some illness. However, no record of such illness was produced. Moreover, the Chartered Accountant had completed audits of other assessees within time limit. There was a delay of five months in filing the return of income and this was the only explanation put forth. The CBDT took note of the fact that the assessee had not been able to show that it had pursued the matter diligently as the responsibility of filing the return in time is of the assessee and he is expected to be more diligent if a large claim of deduction is involved. It was further found that there was nothing to show that the assessee pursued the matter with the auditor to get audit done. The fact that all other audits were done timely by the auditor except for the said audit also did not help the assessee's case as any medical exigency of the magnitude being claimed would have delayed at least a few more audits. The court found the findings recorded by the CBDT were primarily factual and also lucid and cogent and that the application under section 119(2)(b) was made ..... 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