Karnataka H.C : benefit of condoning delay extends to original return but would also extend to filing of revised return

High Court Of Karnataka

Mahalakshmi Co-Operative Bank Ltd. VS. Central Board Of Direct Taxes

Assessment Year : 2005-06

Section : 139, 119

Ram Mohan Reddy, J.

Writ Petition No. 48004 Of 2012 (T-It)

April 19, 2013

ORDER

1. Petitioner, a co-operative society registered under the Karnataka Co-operative Societies Act, 1959, for short ‘KCS Act’, carrying on business of banking and established in the year 1978 for the benefit and assistance of its members none other than farmers and fishermen did not within the due date i.e. 30.11.2005, under the Income-tax Act, 1961, for short Act file the return for the assessment year 2005-06 (financial year 2004-05), but did so on 6.7.2006 after the statutory auditor appointed under the KCS Act submitted his first report, and thereafter on 30.5.2008 filed a revised return based on the second report furnished during the year 2007 claiming business loss of Rs. 1,27,77,270/-. Petitioner filed an application on 9.1.2010 invoking Section 119(2)(b) of the ‘Act’ before the Central Board of Direct Taxes, for short ‘CBDT’ to condone the delay in filing returns and to allow the claim of carry forward of business losses. The CBDT having considered the application, accepted the cause shown for the delay in filing the return of income on 6.7.2006 insofar as the assessment year 2005-06, and directed the 3rd respondent to consider all losses claimed, after ascertaining their genuineness and correctness, by order dt. 11.7.2011 Annexure-C. The 3rd respondent in compliance with the said order concluded the assessment on 2.8.2011 Annexure-D, subject-matter of appeal pending before the Commissioner of Income-tax (Appeals).

2. Petitioner having noticed that the order dt.11.7.2011 Annexure-C of the CBDT made reference to the carrying forward of loss of Rs. 1,27,77,270/- for the assessment year 2005-06, without reference to the revised return filed on 30.5.2008 filed a petition Annexure-E for rectification/amendment of the said order, which, when rejected by letter dt. 30.7.2012 Annexure-A has resulted in this petition.

3. Learned Counsel for the petitioner submits that the delay in filing the revised return on 30.5.2008 was due to the statutory auditor making available to the petitioner during the end of 2007 the final audit report Annexure.F4 though predated as 27.5.2006 indicating carrying forward of loss of Rs. 1,27,77,270/- in the Profit and Loss Account as on 31.3.2005. According to the learned counsel, the original return filed on 6.7.2006 for the assessment year 2005-06 is based upon the report Annexure-F2 also dated 27.5.2006 of the statutory auditor, disclosing loss of Rs.70,33,270/- . Learned counsel hastens to add that in the application dt. 9.1.2010 Annexure-B invoking Section 119(2)(b) of the Act it was specifically indicated that the delay in filing the return for the assessment year 2005-06 petitioner carried forward loss of Rs. 1,27,77,270/- which the CBDT made reference at paragraph 3 in its order dt. 11.7.2011 Annexure-C, being fully aware of the filing of the revised return on 30.5.2008. The explanation offered by the petitioner over sufficient cause as set out in paragraph 7 of the application, Annexure-B when considered and accepted by the CBDT, with respect to the return filed on 6.7.2006 for the assessment year 2005-06, the mistake crept in the order Annexure-C required to be revised to include the revised return filed on 30.5.2008. Learned counsel further submits that the refusal on the part of the CBDT to rectify the defect the order, Annexure-A is perverse and calls for interference.

4. Per contra, Sri. K.V. Aravind, learned standing counsel for the Income tax department seeks to sustain the orders Annexures-C and A as being well merited, fully justified and not calling for interference. Learned counsel submits that in the absence of use of the specific words ‘revised return filed on 30.5.2008’ for the assessment year 2005-06 in the application dated 9.1.2010 Annexure-B to condone the delay, the authorities were fully justified in condoning the delay only in respect of the original return filed on 6.7.2006. In addition, it is contended that CBDT being the delegatee of power under section 119 of the Act, in the matter of condonation of delay is required to scrupulously examine the applications filed and in the instant case, having done so noticed that there was no request to condone to the delay, in filing the revised return on 30.5.2008, hence the claim of the petitioner for rectification of the defect in the order Annexure-C was unsustainable.

5. Having heard the learned counsel for the parties, perused the pleadings and examined the orders impugned, the only question for decision making is:

“Whether the CBDT, in the facts and circumstances, was justified in declining to extend the benefit of accepting the cause shown to condone the delay in filing the revised return by the petitioner on 30.5.2008 for the assessment year 2005-06 ?”

6. There is no more dispute that the original return filed on 6.7.2006 for the assessment year 2005-2006 petitioner claimed loss of Rs.70,33,270/- on the basis of a first report of the statutory auditor under the KCS Act, while the revised return Annexure-F3 filed on 30.5.2008 is based upon the final report Annexure-F4 of the statutory auditor indicating Rs. 1,27,77,270/- as loss in the Profit and Loss Account as on 31.3.2005.

7. The averments in paragraph 3 of the application Annexure-B for condonation of delay makes reference to the claim of Rs. 1,27,77,270/- as carried forward loss during the assessment year 2005-06, which fact is indicated at paragraph 3 of the order dated 11.7.2011 Annexure-‘C’ of the CBDT.

8. The averments in paragraph 7 of the application dt. 9.1.2010 Annexure-B is over sufficient cause for the delay in filing the return on 6.7.2006 and the revised return on 30.5.2008, though the words ‘revised return filed on 30.5.2008’ is not specifically stated.

9. The non-filing of the return and revised return within the time stipulated under section 139 of the Act, as observed by the CBDT in the order Annexure-C, cannot be attributed to the petitioner since being a co-operative society is bound by the provisions of KCS Act to have its books of account audited by a statutory auditor and until the submission of the final audit report. The delay in submission of the reports by the statutory auditors cannot but be said to be beyond the control of the petitioner.

10. It is no doubt true that in the application, Annexure-B the words, ‘revised return filed on 30.5.2008’ is not forthcoming, nevertheless in paragraph 3 specific reference is made to the loss carried forward i.e. Rs. 1,27,77,270/- as indicated in the Profit and Loss Account as on 31.3.2005 , Annexure-F4. Regard being had to the statements made in paragraph 3 of the application Annexure-B, it cannot be doubted that the explanation at paragraph 7 over sufficient cause for the delay was not only with regard to the return filed on 6.7.2006 but also the revised return on 30.5.2008.

11. The reason assigned by the CBDT in its order Annexure-A declining the request of the petitioner to correct/revise the order dt. 11.7.2011 Annexure-C insofar as it relates to condoning the delay upto 30.5.2008 when the revised return was filed, in the factual matrix, is perverse.

12. In the result, this petition is allowed. The order dt. 30.7.2012 Annexure-A of the 1st respondent is quashed. The order dt 11.7.2011 Annexure-C stands modified to condone the delay in filing the revised return of income for the assessment year 2005-06 and in all other respects remains unaltered, by allowing the petitioner’s application Annexure – E.

[Citation : 358 ITR 23]