Delhi HC Denies Relief: Late I-T Return Penalty Upheld

The Delhi High Court has dismissed a writ petition from a technology company seeking forgiveness for its delayed income tax return filing for FY20. The Central Board of Direct Taxes (CBDT) had refused to exercise its authority under section 119 of the Income-Tax Act to condone the delay, and the High Court found no basis to challenge this decision.

This ruling has sparked widespread discussion among tax professionals, including IT officials. A key consequence of failing to file timely returns is the loss of the ability to carry forward losses, which is usually available for up to eight subsequent years, along with other tax benefits. A government representative stated that this order would deter taxpayers from negligently delaying compliance with statutory provisions.

Senior standing counsel for the I-T department, along with an advocate involved in the case, remarked, “Genuine hardship is crucial for the CBDT to exercise this discretion. The taxpayer’s claims, such as the delay being due to Covid fallout, a one-time mistake, or financial crisis, were deemed factually incorrect and unsustainable by the High Court.”

Many taxpayers affected by the pandemic found it difficult to file their I-T returns and pay dues. For FY20, the CBDT extended the deadline for filing I-T returns to February 15, 2021, for large taxpayers needing a tax audit, and to January 10, 2021, for others. Nevertheless, some taxpayers sought condonation for delays beyond these extended deadlines.

The High Court noted that authorities had considered various factors when the technology company requested condonation. The company had until February 15, 2021, to file its I-T return but filed it on March 30, 2021, despite having its financials signed on July 31, 2020. This indicated negligence.

Additionally, it was noted that the company had a history of filing belated I-T returns, and the delay for FY 2019-20 was not an isolated incident. In response to a show cause notice, the company attributed the delay to financial difficulties. However, its financial statements for the period showed a profit of Rs 24.8 crore and a cash flow of Rs 12.3 crore, indicating no financial hardship.

The High Court concluded that the “power of condonation under section 119(2) can be exercised only in extraordinary circumstances that lead to delays in statutory compliance. This power cannot be exercised routinely.”