Wp(C)/14424/2016 Of M.rajan v. Principal Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE TUESDAY, THE 4TH DAY OF OCTOBER 2016/12TH ASWINA, 1938 WP(C).No. 14424 of 2016 (C) ---------------------------- PETITIONER:----------- M.RAJAN, ALANKAR TEXTILES, CHALAD, KANNUR-670 014. BY ADVS.SRI.S.ARUN RAJ SMT.C.T.SUJA RESPONDENT(S): -------------- 1. PRINCIPAL COMMISSIONER OF INCOME TAX, MANACHIRA, CALICUT-673 001. MANACHIRA, CALICUT-673 001. 2. INCOME TAX OFFICER WARD-1, KANNUR-670 006. WARD-1, KANNUR-670 006. 3. CENTRAL BOARD OF DIRECT TAXES, NORTH BLOCK, DEPARTMENT OF REVENUE, NEW DELHI-110 001. NORTH BLOCK, DEPARTMENT OF REVENUE, NEW DELHI-110 001. K.V. BY ADV. SRI.CHRISTOPHER ABRAHAM,CG BY ADV. SRI.K.M.V.PANDALAI, THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04-10-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ON 04-10-2016, THE COURT ON THE SAME DAY DELIVERED THE APPENDIXPETITIONER(S)' EXHIBITS-----------------------P1 COPY OF THE ACKNOWLEDGMENT OF THE RETURN FILED FOR THE AY 2007-08 AND 2008-09.P2 COPY OF THE PETITION DATED.26.9.2014 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT SEEKING TO GET CONDONATION FROM THE COMMISSIONER OF INCOME TAX, OF THE DELAY IN FILING THE RETURN AND REFUND CLAIM.P3 COPY OF THE PETITION DATED.5.11.2014 SUBMITTED BY THE PETITIONER TO THE COMMISSIONER OF INCOME TAX, KOZHIKODE UNDER SECTION 119(2)(B) OF THE ACT SEEKING TO CONDONE THE DELAY IN FILING THE RETURN AND REFUND CLAIM.P4 COPY OF THE LETTER DATED.20.10.2015 SUBMITTED TO THE COMMISSIONER OF INCOME TAX, KOZHIKODE BY THE PETITIONER.P5 COPY OF THE PROCEEDINGS INITIATED BY THE FEDERAL BANK AGAINST THE PETITIONER UNDER THE SARFAESI ACT IN THE YEAR 2008.P6 COPY OF THE ORDER DATED.5.2.2009 ISSUED BY THE COMMERCIAL TAX OFFICER, FIRST CIRCLE, KANNUR CANCELLING THE SALES TAX REGISTRATION.P7 COPY OF THE ORDER DATED.29.7.2011 PASSED BY THE MAGISTRATE COURT IN STC 108/2010 AGAINST THE PETITIONER.P7(A) COPY OF THE ORDER DATED.22.9.2011 PASSED BY THE MAGISTRATE COURT IN STC 108/2010 AGAINST THE PETITIONER.P8 COPY OF THE TREATMENT RECORDS OF THE PETITIONER ISSUED BY THE HOSPITAL.P9 COPY OF THE CIRCULAR NO.670 DATED.26.10.1993 AND CIRCULAR NO.8/2001 DATED.16.5.2001, CIRCULAR 12 OF 2003 DTD.30.10.2003 AND INSTRUCTION NO.13/2006 DATED.22.12.2006, ISSUED BY THE CBDT IN EXERCISE OF THE POWERS UNDER SECTION 119(2) OF THE ACT ON THE ISSUE OF CONDONATION OF DELAY IN BELATED RETURNS AND CLAIMS OF REFUNDS.P10 COPY OF THE ORDER DATED.30.11.2015 PASSED BY THE 1ST RESPONDENT UNDER SECTION 119(2)(B) OF THE ACT REJECTING THE APPLICATION FOR CONDONATION OF DELAY IN FILING RETURN AND REFUND CLAIM FOR AY'S 2007-08 AND 2008-09.RESPONDENT(S)' EXHIBITS NIL----------------------- /TRUE COPY/ K.V. P.A.TO JUDGE A.M. SHAFFIQUE, J. ------------------------------------- W.P.(C) No. 14424 of 2016 -------------------------------------- Dated this the 4[th] day of October, 2016 JUDGMENT Petitioner challenges Ext.P10 order, by which theCommissioner of Income had rejected an application filedunder Section 119 (2) (b) of the Income Tax Act, 1961, interalia observing that the assessee does not have any genuinefinancial hardship and he could justify or produce any evidencefor the delay in filing the return of income. 2.The main contention urged by the petitioner is thatthe delay in filing return for the assessment year 2007-08 and2008-09 was due to the fact that the petitioner had to closedown his business. Thereafter, he was faced with severallitigations and proceedings initiated by the financial institutionand other creditors. As a result of which, the petitioner was notin a position to file the return and seek refund of the TDS. It isalso contended that his health condition was so poor that he WP(C).No. 14424 of 2016 (C) -2- 2.The main contention urged by the petitioner is thatthe delay in filing return for the assessment year 2007-08 and2008-09 was due to the fact that the petitioner had to closedown his business. Thereafter, he was faced with severallitigations and proceedings initiated by the financial institutionand other creditors. As a result of which, the petitioner was notin a position to file the return and seek refund of the TDS. It isalso contended that his health condition was so poor that he WP(C).No. 14424 of 2016 (C) -2- was unable to make necessary arrangements for initiating theprocess of filing the return. 3.Perusal of Ext.P10 order would show that theCommissioner having taking note of the factual circumstances,observed that no satisfactory evidence or explanation wasoffered to substantiate the claim. 4.Ext. P5 is a notice issued by the Federal Bank on16.2.2008 calling upon the petitioner to pay an amount ofRs.6,48,704/- being the amount due to the Bank, failing whichhe was threatened with SARFAESI proceedings. By Ext.P6, theCommercial Tax Officer had cancelled the registration of thepetitioner as per order dated 5.2.2009 under the Kerala ValueAdded Tax Act. Exts. P7 and P7 (a) are the judgments issuedby the Judicial First Class Magistrate-I, Kannur, convicting thepetitioner for the offence punishable under Section 138 of theNegotiable Instruments Act. The common judgment was dated24.3.2011. Petitioner had also produced some medical recordsto indicate that he was suffering from certain illness. -3- 5.On the basis of the aforesaid factual circumstances, the learned counsel for the petitioner submits that if thereturns are not accepted, the petitioner will be at a great lossas he is entitled to get refund of tax and on account of which,genuine hardship will be caused to him. 6. On the other hand, the learned counsel appearing for the Department supports the stand taken by theCommissioner. It is stated that though several documentshave been produced, there is no material to justify the grossdelay in filing the return. 7.The issue that arises for consideration is whetherthe Commissioner was justified in denying an application tocondone the delay in accepting the returns. Section 119 (2) (b)reads as under:- “119.(2): Without prejudice to the generality ofthe foregoing power: - (b)the Board may, if it considers it desirableor expedient so to do for avoiding genuine hardship inany case or class of cases, by general or special order, -4- authorize [any income-tax authority, not being aCommissioner (Appeals) to admit an application orclaim for any exemption, deduction, refund or anyother relief under this act after the expiry of the periodspecified by or under this Act for making suchapplication or claim and deal with the same on meritsin accordance with law.” 8.I had the occasion to consider almost a similar issue in M/s.Beta Cashews and Allied Products Pvt. Ltd v. TheCommissioner of Income Tax. After referring to thejudgments in Sitaldas K. Motwani v. Director General ofIncome Tax (International Taxation) & Ors. [2010 (323)ITR 223] and Pala Marketing Co-operative Society Ltd v.Union of India [2009 (311) ITR 177], it was held thatwhen an assessee is suffering huge losses for over a period oftime, it has to be assumed that they have genuine hardshipand the genuine hardship can be redressed or avoided only onpayment of the amount which is legally due to them. 9.In the case on hand as well, there are some WP(C).No. 14424 of 2016 (C) -5- materials to indicate that the assessee was under severefinancial crises. He had to close down his business, hisregistration under the Kerala Value Added Tax Act has beencancelled, he was involved in cases for dishonour of cheques.These are all materials which ought to have been consideredfor the purpose of arriving at a conclusion as to whether thedelay is condonable or not. 9.In the case on hand as well, there are some WP(C).No. 14424 of 2016 (C) -5- materials to indicate that the assessee was under severefinancial crises. He had to close down his business, hisregistration under the Kerala Value Added Tax Act has beencancelled, he was involved in cases for dishonour of cheques.These are all materials which ought to have been consideredfor the purpose of arriving at a conclusion as to whether thedelay is condonable or not. 10.It is fairly submitted by the learned counsel for thepetitioner that as per the circulars issued by the Board, theCommissioner gets jurisdiction to condone delay, only if theapplication for condonation of delay is filed within the six yearsfrom the last date of the end of the assessment year. 11.Having regard to the aforesaid factual situation, it isapparent that the application for condoning the delay inrespect of assessment year 2008-09, is alone within the sixyears period. Under such circumstances, it will only beappropriate to condone delay for filing return as far as theassessment year 2008-09 are concerned. Therefore, taking WP(C).No. 14424 of 2016 (C) -6- into account the over all factual circumstances involved in thematter, this writ petition is disposed of as under. (i)Ext.P10 order to the extent that the delay is notcondoned for the assessment year 2008-09 is set aside. (ii)The delay in filing the return for the year 2008-09 iscondoned. (iii)The assessing officer shall consider the return filedby the petitioner for the assessment year 2008-09 and finalisethe assessment, as expeditiously as possible and not later thanthree months from the date of receipt of a copy of thisjudgment. A.M. SHAFFIQUE JUDGE