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Income Tax Authorities Can Condon Delay Despite CBDT Time Limit:
A Division Bench of the has reinforced the discretionary power of income tax authorities to condone delays in filing returns, holding that rejection merely due to a time limit set by a CBDT circular is unsustainable under .
The judgment, delivered by Justice Ninala Jayasurya and Justice T.C.D. Sekhar on , came in two writ petitions filed by Sri Vani Educational Society, a registered charitable trust. The society had faced a total demand of Rs 4.79 crore for , primarily because its Form-10B was not filed within the prescribed deadlines, leading to denial of exemption under .
When Heart Ailment and Pandemic Delayed Paperwork
Sri Vani Educational Society, registered under since , had been consistently claiming tax exemptions. For the , its chartered accountant, G.R. Sathyanarayana, suffered a heart ailment and was hospitalized at Care Hospital, Musheerabad, Hyderabad, in . This caused a delay of just 13 days in filing Form-10B—the document mandatory for claiming exemption. For the subsequent two years, the society attributed delays to the COVID-19 pandemic, though it had filed within extended due dates.
Despite these genuine reasons, the tax authorities rejected the society's applications under Section 119(2)(b) for , citing a CBDT circular that prescribed strict time limits. The orders, passed on , held that the society had not shown for the delay.
Section 119(2)(b): A Liberal Mandate
The High Court scrutinized the provision and emphasized its legislative intent. The bench observed that Section 119(2)(b) empowers the Board to authorise any income-tax authority to admit an application or claim after the expiry of the prescribed period if it is "" to avoid .
"A reading of the above provision would clearly indicate that the intention of the legislature was to take a
, whenever an application is filed under the above provision of law,"
the court noted.
Crucially, the bench pointed out that Section 119(2)(b) does not prescribe any specific time limit for condoning delay, leaving discretion to the authorities to consider the difficulties faced by the assessee. The reasoning given by the fourth respondent while rejecting the applications did not stand legal scrutiny, the court added.
Circulars Cannot Bind Courts
A key finding was that CBDT circulars, while binding on tax authorities, have no binding effect on the High Court when it exercises its under Article 226 of the Constitution. The court explicitly stated:
"Further, the reasoning given by the 4th respondent, while rejecting the applications of the petitioner do not stand for legal scrutiny inasmuch as the circulars issued by
would be binding on the authorities, however the same is not binding on this Court, especially while exercising jurisdiction under
."
The bench further held that fixing a time limit through a circular was not tenable as it would run contrary to the plain language of Section 119(2)(b).
Precedent and Final Order
The court relied on its own coordinate bench decision in and a judgment of the in , both of which had taken a similar liberal view on .
Setting aside the impugned orders, the High Court allowed the condonation applications, directing the authorities to permit the society to file Form-10B along with returns and process them in accordance with law. The consequential demand notice dated , was also quashed. The writ petitions were allowed with no order as to costs.
Key Observations from the Judgment
-
On interpretation of Section 119(2)(b):
"the intention of the legislature was to take a , whenever an application is filed under the above provision of law."
-
On the effect of CBDT circulars:
"the circulars issued by would be binding on the authorities, however the same is not binding on this Court, especially while exercising jurisdiction under ."
-
On the scope of discretion:
"there is no specific time prescribed for , meaning thereby discretion is given to the 4th respondent to exercise the same in proper prospective, especially taking into account the difficulties faced by the assesses."
Implications for Taxpayers
The ruling clarifies that tax authorities cannot mechanically reject condonation applications solely because of CBDT time limits. —such as medical emergencies or pandemic disruptions—must be considered on merits. This provides significant relief to charitable trusts and other assessees who face procedural delays beyond their control.
