COVID-19 Pandemic Constitutes Genuine Hardship for Condoning 13-Day Delay in ITR Filing under Section 119(2)(b): Gujarat High Court

Introduction

The Gujarat High Court has ruled that the disruptions caused by the COVID-19 pandemic qualify as "genuine hardship," justifying the condonation of a 13-day delay in filing an income tax return for Assessment Year 2021-22. In a petition filed by Rajgreen Infralink LLP against the Principal Commissioner of Income Tax-1, Surat, a division bench comprising Honourable Mr. Justice A.S. Supehia and Honourable Mr. Justice Pranav Trivedi quashed the tax authority's rejection of the delay condonation application. This decision emphasizes the need for tax authorities to consider pandemic-related challenges when evaluating such requests under Section 119(2)(b) of the Income Tax Act, 1961.

Case Background

Rajgreen Infralink LLP, a Surat-based Limited Liability Partnership engaged in real estate development, missed the extended due date for filing its income tax return for Assessment Year (AY) 2021-22. Originally set for October 31, 2021, under Section 139(1) of the Income Tax Act, the deadline was extended to March 15, 2022, due to the ongoing COVID-19 pandemic via Central Board of Direct Taxes (CBDT) notifications. The LLP filed its return on March 28, 2022, just 13 days late, declaring an income of Rs. 4,56,17,090.

As a result of the delay, the tax authority denied a significant deduction of Rs. 4,35,00,000 under Section 80IBA, which provides incentives for affordable housing projects, in an intimation order issued on December 12, 2022, under Section 143(1). The LLP then applied for condonation of the delay on August 17, 2023, under Section 119(2)(b), which empowers tax authorities to admit belated claims to avoid genuine hardship. This application was rejected on October 27, 2023, prompting the LLP to file Special Civil Application No. 19799 of 2023 before the Gujarat High Court.

The core legal questions were whether the 13-day delay warranted condonation in light of COVID-19 disruptions and if the tax authority properly assessed claims of "genuine hardship" under the relevant provisions.

Arguments Presented

The petitioner, represented by advocate Mr. B.S. Soparkar, argued that the delay was minimal and directly attributable to the extraordinary circumstances of the COVID-19 pandemic. They highlighted nationwide lockdowns from March to May 2020, gradual reopenings with limited staff in Gujarat, resurgences in late 2020 and early 2021, capacity restrictions limiting clerical staff to 50%, and challenges in accessing bills and vouchers at construction sites due to government directives requiring on-site shelter for laborers amid the infectious disease. The petitioner cited prior Gujarat High Court rulings, such as Jay Vijay Express Carriers vs. Commissioner of Income-Tax-III (2013), Vrushti Aulkumar Shah vs. Principal Chief Commissioner of Income-tax (2023), and Shailesh Vitthalbhai Patel vs. Chief Commissioner of Income-tax (2022), to assert that pandemic-related restraints justified condonation. They criticized the rejection order for misapplying CBDT Circular No. 09/2015, which pertains to belated refund or loss carry-forward claims, not delay in return filing, and for failing to address the petitioner's specific grounds.

In opposition, Senior Standing Counsel Mr. Karan G. Sanghani for the respondent acknowledged the 13-day delay but contended that the LLP only filed belatedly upon realizing the Section 80IBA deduction would be forfeited. He argued that the extended deadline already accounted for COVID-19, and the application did not demonstrate exceptional hardship. Relying on the Delhi High Court's decision in Lava International Ltd. vs. Central Board of Direct Taxes (2024), he urged the court to refrain from interfering with the reasoned rejection order, emphasizing that tax compliance deadlines must be strictly enforced post-extensions.

Legal Analysis

The court found the respondent's reliance on CBDT Circular No. 09/2015 misplaced, noting it applies solely to belated refund claims or carry-forward losses, not condonation for delayed return filing. The bench emphasized that Section 119(2)(b) grants wide discretion to tax authorities to admit belated applications if it avoids "genuine hardship," interpreting this liberally to prevent injustice in meritorious cases.

Drawing from Vrushti Aulkumar Shah vs. Principal Chief Commissioner of Income-tax (2023), the court referenced the Bombay High Court's observation in Sitaldas K. Motwani vs. Director General of Income Tax (2009) that "genuine hardship" should be construed broadly to uphold justice. The judges stressed that the provision's purpose is to condone delays for valid reasons, prioritizing explanations for the delay over the underlying merits, though merits can be considered concurrently.

The court distinguished the LLP's situation from routine delays, recognizing pandemic-specific factors like staff restrictions, site access limitations, and the third wave (Omicron variant) as encompassing genuine hardship. It rejected the authority's view that entitlement to Section 80IBA deduction alone warranted rejection, holding that the tax officer failed to apply mind to the petitioner's detailed pandemic-related explanations.

Key Observations

• "The reasons assigned by the petitioner as mentioned above, in fact would, encompass the expression ‘genuine hardship’. The respondents did not apply its mind to the reasons assigned as mentioned hereinabove, which also includes that there was restriction of 50% of overall capacity in official clerical staff and the petitioner being infrastructure undertaking, there was directive of Central Government to provide food and shelter within construction site to the labourers, and there was limited access to the bills, vouchers and other details received at the construction site due to the COVID-19 pandemic."
• "Looking to the prevailing situation at the relevant time wherein the entire nation was facing COVID-19 pandemic, in our opinion, the explanation tendered by the present petitioner in his application seeking condonation of delay of 13 days was required to be accepted."
• "Section 119(2)(b) of the Act is a statutory authorisation whereby the Board may authorise an income tax authority to hear an application or claim for any exemption, deduction, refund or for any other relief under the Act after expiry of period specified... The object is to help the assessee who for good and valid reasons are prevented from moving an application for any purpose within the time stipulated under the Act."
• "Refusing to condone the delay could result into a meritorious matter being thrown out the very threshold defeating the cause of justice." (Quoting Sitaldas K. Motwani vs. Director General of Income Tax )

Court's Decision

The Gujarat High Court quashed the October 27, 2023, rejection order and restored the petitioner's condonation application to the respondent's file. The authority was directed to reconsider it in light of the court's observations and pass a fresh order within 12 weeks of receiving the writ.

This ruling reinforces that COVID-19-related disruptions can constitute genuine hardship for condoning minor delays in tax filings, potentially benefiting other taxpayers facing similar pandemic-induced challenges. It underscores the obligation of tax authorities to thoroughly evaluate individualized hardship claims rather than applying blanket rejections, which could influence future interpretations of Section 119(2)(b) and promote more lenient approaches to compliance lapses during crises.