Income Tax: In the instance where the assessee, a hospital, requested a refund of Tax Deducted at Source (TDS) and simultaneously applied for the condonation of a 26-day delay in filing its tax return, it is pertinent to note the context. The assessee faced significant operational challenges during the second wave of the COVID-19 pandemic. Given these extraordinary circumstances, the assessee’s request for condonation of the 26-day delay in filing should be considered legitimate and, therefore, the delay is to be duly condoned.
[2024] 158 taxmann.com 296 (Gujarat)
HIGH COURT OF GUJARAT
Amit Hospital (P.) Ltd.
v.
Principal Commissioner of Income-tax.
SUNITA AGARWAL, CJ.
AND ANIRUDDHA P. MAYEE, J.
R/SPECIAL CIVIL APPLICATION NO. 20543 OF 2023
DECEMBER 19, 2023
Under Section 119 of the Income-tax Act, 1961, which authorizes the Central Board of Direct Taxes to issue instructions to subordinate authorities, a significant case arose for the Assessment Year 2020-21. The assessee, a hospital, filed for a refund of Tax Deducted at Source (TDS), submitting alongside a draft profit and loss statement for the said assessment year. Additionally, the assessee requested the condonation of a 26-day delay in filing their return.
The Additional Joint Commissioner of Income Tax (Addl JCIT) initially refused to condone this delay, citing an absence of genuine hardship and raising doubts about the accuracy of the refund claim. The assessee, however, attributed the delay to the unprecedented challenges posed by the COVID-19 pandemic, such as staff shortages and the hospital’s transition into a dedicated COVID-19 care facility.
Upon review, it was held that given the overwhelming challenges presented by the second wave of the COVID-19 pandemic, the assessee’s plea for the condonation of the 26-day delay should indeed be granted. Furthermore, it was determined that since the assessee’s claim was related to the refund of TDS deducted through the calculation of advance tax paid, it was inappropriate for the revenue authority to dismiss the correctness of the claim in a cursory manner at the stage of admission of the application, without a detailed examination of the profit and loss account of the assessee.
Additionally, it was emphasized that the dominant purpose of Section 119(2)(b) is to facilitate the condonation of delays and that the power conferred upon statutory authorities should be exercised with prudence and a proper application of mind. Consequently, the second ground for the rejection of the application seeking condonation of the delay for filing the return and the claim for Tax Refund for Assessment Year 2020-21 was deemed unsustainable.
The judgement, encapsulated in paragraphs 14, 19, 20, and 21, ruled in favor of the assessee, underscoring the necessity of a considerate and detailed approach in dealing with such cases, particularly under extraordinary circumstances like the COVID-19 pandemic.
Circulars and notifications – CBDT circular No. 09/2015 dated 09.06.2015.
| ■ | The assessee-hospital sought a refund of TDS amounting to Rs. 26,22,330/- and submitted a draft profit and loss statement for the assessment year 2020-21 along with the application, which also requested condonation of a 26-day delay in filing the return. | |
| ■ | However, the Addl JCIT refused to condone the delay, citing a lack of genuine hardship and questioning the correctness of the refund claim. The revenue also contended that the assessee’s explanation, attributing the delay to a decrease in patients in the Cathlab Department and the negative impact on revenue and gross profit for A.Y. 2020-21, was unbelievable, as supporting documents like the IPD register were not provided. | |
| ■ | In the instant writ petition, the assessee argued that the delay was due to COVID-19-related issues, such as staff unavailability and the hospital’s conversion into a dedicated Covid care facility. |
DECISION HELD BY HONOURABLE HIGH COURT
| ■ | Sub-section 2(b) of section 119(2)(b) provides that the Board to authorise any income tax authority, not being a commissioner (Appeals) to admit an application or claim for refund etc. after expiry of the period specified under the Act for making such application or claim and deal with the same on merits in accordance with law. [Para 14] | |
| ■ | CBDT circular No. 09/2015 dated 09.06.2015 has been issued to prescribing guidelines on the condonation of delay and the procedure to be followed in dealing with the applications under Section 119(2)(b). [Para 15] | |
| ■ | In the instant case, the petitioner had claimed for refund of TDS to the tune of Rs.26,22,330/- and submitted a draft profit and loss statement for the assessment year 2020-21 along with the application seeking condonation of delay of 26 days in filing the return. While refusing to condone the delay on the ground that no genuine hardship could be said to have been caused to the petitioner, the respondent No. 2 had also held that the claim for refund was not correct and the statement made in the table extracted in the order shows very strange circumstances as the claim of the petitioner that due to decrease in the number of patients in Cathlab Department, its revenue had negatively impacted and correspondingly in gross profit for A.Y. 2020-21 was unbelievable as also the applicant had not submitted any documents such as IPD register etc. to substantiate the same. [Para 18] | |
| ■ | Having noted the ratio of the decisions relied upon by the petitioner as also the statutory scheme and the guidelines prescribed by CBDT, the first ground for rejection of the application seeking condonation of delay in submitting the return that no genuine hardship can be said to have been caused to the petitioner is a result of is an arbitrary approach of respondent No. 2. As noted above, the delay was merely 26 days and judicial notice can be taken to the fact that the country was facing overwhelming situation of second wave of Covid-19, which turned out to be fatal between the last week of March, 2021 till June, 2021, the entire set up of the whole country was paralyzed. Hospitals were flooded with patients and lot of death had occurred during the said period. The petitioner being a hospital establishment, having been declared a dedicated Covid facility by the District Administration, demonstrably was dealing with unprecedented adverse circumstances. The claim of the applicant that the delay of 26 days had occurred because of the absence of account staff or the staff being pre-occupied with other Covid duties and also dealing with the hospital administration due to flooding of patients, the claim of the petitioner that it was a genuine hardship, is found to be correct. [Para 19] | |
| ■ | As regards the second ground on the merits of the claim, suffice it to note that the claim of the petitioner is for refund of the TDS deducted by calculation of the advance tax paid, without going into the merit of the profit and loss account of the petitioner in detail, it was not permitted for respondent No. 2 to hold that applicant has failed to establish the correctness of the claim in a cursory manner at the stage of admission of the application. [Para 20] | |
| ■ | The dominant purpose of section 119(2)(b) is to condone the delay and the power conferred on the statutory authorities is to be exercised with caution and proper application of mind, it is opined that even the second ground for rejection of the application seeking condonation of delay for filing of return and claim for refund for A.Y. 2020-21, cannot be sustained. [Para 21] | |
| ■ | For the above discussion, the order dated 04.10.2023 passed by the respondent No. 2 namely Additional / Joint Commissioner is hereby set aside. It is further provided that the application seeking condonation of delay under section 119(2)(b) for filing income tax return for A.Y. 2020-21 is liable to be admitted by condonation of delay of 26 days in submitting the return for A.Y. 2020-21. With the admission of the application, the petitioner is permitted to file the return by waiving the time limit and the same shall have to be scrutinized in accordance with the provisions of the Income Tax Act, 1961. [Para 22] | |
| ■ | With the above observations and directions, the present writ petition stands disposed of. [Para 23] |
