Karnataka H.C : Where assessee sold her immovable property and made investment in infrastructure bonds though with delay of about six months, since assessee had satisfied condition for availing exemption under section 54EC, assessee could not be denied exemption merely on bar of limitation; thus, said delay was to be condoned

High Court Of Karnataka

Dr. (Smt.) Sujatha Ramesh vs. Central Board of Direct Taxes, New Delhi

Section 54EC, 119

Assessment year 2013-14

Vineet Kothari, J.

Writ Petition No. 54672/2015 (T-IT)

October  24, 2017

ORDER

1. The petitioner, Dr. Sujatha Ramesh, has filed this petition in this Court, aggrieved by the order passed by the Respondent, Commissioner of Income Tax (OSD-ITA), Central Board of Direct Taxes, on 26-11-2014 under Section 119 (2)(b) of the Income Tax Act, 1961, refusing to condone the delay of about six months in making the eligible investment in the Infrastructure Bonds in terms of Section 54 EC of the Act, to claim exemption from Capital Gain Tax in respect of immovable property sold by her during the Assessment Year 2013-14 which exemption was available to her in terms of the provision of Section 54EC of the Act, subject to the condition of making such eligible investment of the sale proceeds in the Infrastructure Bonds within a period of six months from the transaction of sale of immovable property. The said investment was required to be made by the assessee on or before 26-01-2013, but she actually invested this amount on 23-07-2013.

2. To seek the condonation of delay under Section 119(2)(b) of the Act, the petitioner moved Central Board of Direct Taxes (CBDT) vide her representation Annexure-E dated 05-04-2013 and assigned the following reasons for seeking condition of delay. The relevant para of her Representation is quoted below for ready reference.

“I am a consulting doctor regularly assessed for Income Tax in ward 6(4) in Bangalore.

In the financial year relevant to Assessment year 2013-14, I have a sold a site which was at Bangalore for a total consideration of Rs.1,25,00,000/- on 27.07.2012 (One crore twenty five lakh).

Out of this consideration, I have purchased a flat in Bangalore and I wish to invest Rs.50 lakhs in capital gain exemption bonds U/s. 54 EC.

I sold my site on 27.07.2012. I should have deposited in Bonds before 26.01.2013; however I could not put money in such deposits within this time period.

I went to USA in this period for my personal work and stayed there for some time. In this period the purchase of bonds as required under Income Tax Act 1961 was not carried out. I wish to submit at this stage a request for a one time extension of time for the purchase of bonds, which will save a substantial amount in tax for me. This will be a big amount for a middle class person like me. It will not be out of place to bring this to your kind notice, since we do not have much savings or provisions for pension, since I am a private consultant. I am given to understand that the board has the powers to relax the period of purchase for the bonds. I request the Board to kindly exercise the power U/s. 119(2)(c) and permit me to invest in bonds U/s. 54ED. I will be very grateful to the board if it kindly relaxes the time period and permits me to invest in the specified bonds. If such relaxation is kindly made by the board then I will be entitled to claim U/s. 54ED. It is further submitted that the due date of filing income tax return is on 31.07.2013. I may kindly be permitted to invest in the bonds at the earliest so that I can get the deduction U/s. 54ED. I request the board once again to kindly pass the favorable order at the earliest and communicate to me.

Thank you very much for your kind consideration. I look forward to hearing from you.

Yours Faithfully

Sd/-

Smt. Dr. Sujatha Ramesh

April 5, 2013.”

3. The respondent, Central Board of Direct Taxes (CBDT), however refused to condone the said delay and rejected the said application by the impugned order, Annexure-A dated 26-11-2014 assigning the following reasons in the impugned order.

“2. A report from Chief Commissioner of Income Tax, Bangalore-II has also been considered by the Board where it has been pointed out that the applicant returned from her first visit to USA on 01.12.2012 and left India for USA again on 20.02.2013. An eligible purchase of bonds could have been made by the applicant on or before 26.01.2013 as per the provisions of section 54EC. Thus, between her two visits to USA, the applicant had 57 days in India to make investments in the eligible bonds. Moreover, it has also been reported that even in her absence from India on 02.11.2012, a cheque was issued by her for payment of advance for property. Therefore, it is not understood why purchase of infrastructure bonds could not be made by her by issuing a cheque when another large value transaction for property advance was effected by her while remaining outside the country.

3. In view of the above and the fact that with the under the modern technology- enabled banking system, physical presence in India is not necessary, there does not appear to be merit in the argument that the applicant was prevented from making timely investment in eligible bonds due to her absence from India. Moreover, she was in India continuously for almost 2 months between her visits to USA but yet she did not make the eligible investment. Considering the fact that there are commission agents dealing in REC and NHAI Bonds, who collect cheque and documents from home, the applicant had abundant time to make the investments before leaving for the USA as well as between her two trips.

4. In view of the above, this case does not satisfy the requirement of genuine hardship envisaged in section 119(2)(b) and, accordingly, the petition is rejected.

This is issued with the approval of Chairperson, CBDT.

Sd/- 26.11.2014

(Anand Jha)

Commissioner of Income Tax(OSD-ITA)”

4. Assailing the said order, the learned counsel for the petitioner Mr. V. Raghuraman relied upon the following decisions of different High Courts and urged that the assessee-petitioner was prevented by sufficient cause and a genuine hardship and difficulty was faced by her during her short stay of 57 days in India, where she came from USA to meet her family members and her stay between the period 01-12-2012 and 20-02-2013 of 57 days did not give her sufficient time to make above stated eligible investment in the Infrastructure Bonds of National Highway Authority of India before the cut off date on 26-01-2013 which investment she of course belatedly made later on, albeit with the delay of about six months on 23-07-2013 for the minimum lock-in period of 3 years as required by the terms of the said National Highway Infrastructure Bonds.

5. Learned counsel Mr. V. Raghuraman, submitted that a fair and dispassionate view of the facts in the case of the assessee ought to have persuaded the Respondent (CBDT) which has a wide discretion in the matter under Section 119 of the Act, to condone the comparatively smaller delay of six months and allow the assessee to avail the said exemption from capital gain tax in terms of Section 54 EC of the Act. He placed reliance on the following decisions in this regard.

(i) Artist Tree (P.) Ltd. v. Central Board of Direct Taxes [2014] 369 ITR 691/52 taxmann.com 152/[2015] 228 Taxman 108 (Bom.). The relevant para 11 to 14 and 23 of the said judgment are quoted below for ready reference.

“11. The expression “genuine hardship” came up for consideration of the Supreme Court in the case of B.M. Malani (Supra), wherein, by reference to New Collins Concise English Dictionary, the Supreme Court accepted the position that “genuine” means not fake or counterfeit, real, not pretending (not bogus or merely a ruse). Further, a genuine hardship would, inter alia, mean a genuine difficulty. The ingredients of genuine hardship, must be determined keeping in view the dictionary meaning thereof and legal conspectus attending thereto. For the said purpose, another well known principle, namely, that a person cannot take advantage of his own wrong, may also have to be borne in mind. Compulsion to pay any unjust dues per se would cause hardship. But a question as to whether the default in payment of the amount was due to circumstances beyond the control of the assessee, also bears consideration.”

12. In the case of R. Seshammal (supra), the Madras High Court was pleased to observe as under (page 187 of 237 ITR):

“This is hardly the manner in which the State is expected to deal with the citizens, who in their anxiety to comply with all the requirements of the Act pay monies as advance tax to the State, even though the monies were not actually required to be paid by them and there after seek refund of the monies so paid by mistake after the proceedings under the Act are dropped by the authorities concerned. The State is not entitled to plead the hyper technical plea of limitation in such a situation to avoid return of the amounts. Section 119 of the Act vests ample power in the Board to render justice in such a situation. The Board has acted arbitrarily in rejecting the petitioner’s request for refund” (Emphasis Supplied)

13. In the case of Sitaldas Motwani (supra), this court has held that the expression “genuine hardship” used in section 119(2)(b) of the said Act should be construed liberally, particularly in matters of entertaining of applications seeking condonation of delay. This court was pleased to observe as under (page 228 of 323 ITR):

“The phrase ‘genuine hardship’ used in section 119 (2)(b) should have been construed liberally even when the petitioner has complied with all the conditions mentioned in Circular dated October 12, 1993. The Legislature has conferred the power to condone delay to enable the authorities to do substantive justice to the parties by disposing of the matters on the merits. The expression ‘genuine’ has received a liberal meaning in view of the law laid down by the apex court referred to hereinabove and while considering this aspect, the authorities are expected to bear in mind that ordinarily the applicant, applying for condonation of delay does not stand to benefit by lodging its claim late. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold an cause of justice being defeated. As against this, when delay is condoned the highest that can happen is that a cause would be decided on the merits after hearing the parties. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a vested right in injustice being done because of a non- deliberate delay. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. The approach of the authorities should be justice oriented so as to advance the cause of justice. If refund is legitimately due to the applicant, mere delay should not defeat the claim for refund.” (Emphasis 1 Supplied)

14. In the case of Bombay Mercantile Co-operative Bank Ltd. (supra), this court again observed that it is well settled that in matters of condonation of delay highly pedantic approach should be eschewed and a justice-oriented should be adopted. It also observed that a party should not be made to suffer on account of technicalities.

23. In the light of the aforesaid discussion, we are of the opinion that an acceptable explanation was offered by the petitioner and a case of genuine hardship was made out. The refusal by the Central Board of Direct Taxes to condone the delay was a result of adoption of an unduly restrictive approach. The Central Board of Direct Taxes appears to have proceeded on the basis that the delay was deliberate, when from the explanation offered by the petitioner, it is clear that the delay was neither deliberate nor on account of culpable negligence or any mala fides. Therefore, the impugned order dated May 16, 2006, made by the Central Board of Direct Taxes refusing to condone the delay in filing the return of income for the assessment year 1997-98 is liable to be set aside.

(ii) In Jay Vijay Express Carriers v. CIT [2013] 34 taxmann.com 61/215 Taxman 562 (Gujarat) , in relevant para 16 of the said judgment, the Court held as under:

“16. In our opinion, in the present case, there would be genuine hardship, if the time limit is not extended as otherwise, the entire claim of Rs.17,84,323/- would be destroyed. The petitioner would neither get deduction in the assessment year 2005-06 nor in the year 2008- 09 as per then prevailing Section 40(a)(ia) of the Act. In our opinion, 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. Before proceeding further we may caution that undoubtedly such powers are not to be exercised in routine manner to extend limitation provided by the Act for various stages. We are conscious that such routine exercise of powers would neither be expedient nor desirable, since the entire machinery of tax calculation, processing of assessment and further recoveries or refunds, would get thrown out of gear, if such powers are routinely exercised without considering its desirability and expedience to do so for avoiding genuine hardship. In the present case, however, considering special facts, we are of the opinion that the Commissioner ought to have exercised such powers. It is true that the Appellate Commissioner recorded that the petitioner did not remain present in the appellate proceedings. However that by itself would not take away the petitioner’s case for genuine hardship nor contrary to what is vehemently contended before us by the counsel for the Revenue, convince us to hold that filing of revised return beyond limitation lacked bona fides.”

6. On the other hand, Mr. Indrakumar, learned Senior Counsel appearing for the respondent- Income Tax Department submitted that the exemption provision in the taxing statute should be construed strictly. The limitation prescribed for such investment to avail the exemption under Section 54EC of the Act, cannot be liberally construed, and where belatedly the said eligible investment was made with a delay of six months, the reasons assigned by the Central Board of Direct Taxes in the impugned order are sustainable reasons and even without the physical presence of the assessee in India before the cut off date, such investment could be made even by electronic medium and therefore, the condonation of delay should not be granted as a matter of right to the assessee-petitioner to claim the exemption and therefore, the impugned order does not require any interference by this Court.

7. He relied upon the decision of the Hon’ble Supreme Court in the case of State of Jharkhand v. Ambay Cements [2005] Sales Tax Cases Vol. 129. The relevant extract of the said judgment is quoted from the Head Note below for ready reference:

“An exception or an exempting provision in a taxing statute should be construed strictly. If the condition under which an exemption is granted stands changed on account of any subsequent event the exemption would not operate. (see paras 23 and 24)

Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. If the statute provide that a particular thing should be done, it should be done in the manner prescribed and not in any other way (see para 26).”.

8. In the case of B.M. Malani v. CIT [2008] 306 ITR 196/174 Taxman 363 (SC), the Court observed:—

“8. The term ‘genuine’ as per the New Collins Concise English Dictionary is defined as under:

“‘Genuine’ means not fake or counterfeit, real, not pretending (not bogus or merely a ruse)”.

For interpretation of the aforementioned provision, the principle of purposive construction should be resorted to. Levy of interest although is statutory in nature, inter alia for recompensating the Revenue from loss suffered by non-deposit of tax by the assessee within the time specified therefor. The said principle should also be applied for the purpose of determining as to whether any hardship had been caused or not. A genuine hardship would, inter alia, mean a genuine difficulty. That per se would not lead to a conclusion that a person having large assets would never be in difficulty as he can sell those assets and pay the amount of interest levied.

The ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, another well-known principle, namely, a person cannot take advantage of his own wrong, may also have to be borne in mind. The said principle, it is conceded, has not been applied by the Courts below in this case, but we may take note of a few precedents operating in the field to highlight the aforementioned proposition of law. (See Priyanka Overseas (P.) Ltd. & Anr. v. Union of India & Ors. 1991 Suppl. (1) SCC 102, para 39, Union of India & Ors. v. Maj.Gen.(Retd.) Madan Lal Yadav (1996) 4 SCC 127 at 142, paras 28 and 29, Ashok Kapil v. Sana Ullah (dead) & Ors. (1996) 6 SCC 342 at 345, para 7, Sushil Kumar v. Rakesh Kumar (2003) 8 SCC 673 at 692, para 65, first sentence, Kusheshwar Prasad Singh v. State of Bihar & Ors. (2007) 11 SCC 447, paras 13, 14 and 16)”.

9. Having heard the learned counsels for the parties, upon consideration of the relevant facts and legal position, this Court is of the opinion that the present petition deserves to be allowed.

10. The undisputed fact is that the petitioner- assessee made the eligible investment in the Infrastructure Bonds of National Highway Authority of India, albeit with the delay of about six months. The substantial condition for availing the exemption under Section 54EC of the Act, thus stood satisfied. The question before the Central Board of Direct Taxes was not about the merit of the claim of exemption itself, but the question was of the exercise of its discretion in condoning the said delay of six months under Section 119 (2)(b) of the Act.

11. The said provisions couched in very wide terms are quoted below for ready reference.

Instructions to subordinate authorities:

“119. (1) the Board may, from time to time, issue such orders, instructions and directions to other income- tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:

** ** **
(2) Without prejudice to the generality of the foregoing power:—

(a) ** ** **

(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize any income-tax authority, not being a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law:”

12. It is true that the so called reasons assigned by the respondent Central Board of Direct Taxes (CBDT) in the impugned order, on the face of it, do not appear to be whimsical or arbitrary reasons and it is equally true that such investment could be made by assessee very well before the cut off date also when she was physically present in India or even when she had gone back to USA on 20th February 2013. Nonetheless, the delay of six months in the circumstances in which it occurred, especially, in view of the fact that the investment condition was undisputably met by the assessee could have been condoned taking a judicious and holistic view of the facts. The wide powers of the Central Board of Direct Taxes or other higher authorities of the Department to whom such powers can be delegated under Section 119 of the Act, need not always take only a pro revenue approach in such matters. Their approach in such cases should be equitious, balancing and judicious which should reflect the application of mind to the facts of the case and before denying the genuine claim of the assessee on the grounds of mere delay in making such claim, something more than the user of innocuous terms as employed in the present case, should be forthcoming. Technically, strictly and literally speaking, the Board might be justified in denying the exemption from capital gains tax by rejecting such condonation application, but an assessee, who substantially satisfies the condition for availing such exemption should not be denied the same, merely on the bar of limitation, especially, when the legislature has conferred wide discretionary powers to condone such delay on the highest executive authority of the Central Board of Direct Taxes under the Act.

13. The general and wide powers given to the Board in this regard, “if it considers it desirable or expedient so to do for avoiding genuine hardship in any case..…”, not only gives wide powers to the Board, but confers upon it a obligation to consider facts relevant for condonation of delay as well as the merit of the claim simultaneously. If the claim of exemption or other claim on merits is eminently a fit case for making such claim, it should not normally be defeated on the bar of limitation, particularly, when the delay or the time period for which condonation is sought is not abnormally large. It will of course depend upon the facts of the each case, where such a time period or the merit of the claim deserves such exercise of discretion in favour of the assessee under Section 119 (2)(b) of the Act or not and therefore, no straight jacket formula or guidelines can be laid down in this regard. However, such orders passed by the Central Board of Direct Taxes being a quasi-judicial order is always open to judicial review by the higher constitutional courts. If the good conscience of the Courts is pricked, even though such orders rejecting the claims on the bar of limitation may appear to be prima facie tenable, the Courts may exercise their jurisdiction to set aside such orders and allow the claims on merits, setting aside the bar of limitation.

14. The present case is one of such nature, where the Court finds that the substantial conditions for claiming the exemption from capital gain tax stood satisfied and the prescribed investment was made by the assessee in the Bonds of the National Highways Authority, for the minimum lock-in period of three years also is an undisputed fact, and therefore, the delay in making such investment of six months deserved to be condoned, in view of the fact that, the assessee- petitioner, a Doctor by profession was traveling from India to USA a long distance country where she normally resided and came to India not only to meet her family members, but to sell the immoveable property belonging to her and sought to avail the genuine exemption from such tax liability upon making the investment in the prescribed investment in the form of Bonds of Infrastructure which she did make in the National Highways Authority.

15. In these circumstances, this Court is inclined to allow this petition. The same is accordingly allowed. The impugned order vide Annexure-A passed by the respondent, Central Board of Direct Taxes on 26-01-2014 is set aside and the assessee is held entitled to the exemption from Capital Gain Tax under Section 54 EC of the Act and the respondent authority or the authorities below Central Board for Direct Taxes are directed to give effect to such exemption to the assessee and pass necessary consequential orders in this regard.

No orders as to costs.

[Citation : 401 ITR 242]