Audit Delay Beyond Assessee’s Control Must Be Considered While Deciding Delay Condonation: Orissa High Court

The Orissa High Court has set aside an order passed by the Principal Chief Commissioner of Income Tax (PCCIT), Odisha Region, refusing to condone delay in filing income tax returns by the Reserve Bank Employees Co-operative Credit Society Limited for Assessment Years 2018-19 to 2022-23. The bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman has observed that the tax authority failed to properly appreciate the concept of “genuine hardship” under Section 119(2)(b) of the Income Tax Act, 1961, particularly when the delay was caused due to non-availability of statutory auditors under the State cooperative law. The petitioner is a cooperative credit society registered under the Odisha Cooperative Societies Act, 1962, and is statutorily required to have its accounts audited by auditors appointed or authorized by the Auditor-General of Cooperative Societies (AGCS). The society claimed that it could not file its income tax returns within the prescribed time under Section 139(1) of the Income Tax Act because its accounts were not audited on time due to an acute shortage of departmental auditors. The society explained that despite repeated requests made since 2019, the AGCS failed to arrange timely audits. Although permission was later granted to engage a Chartered Accountant from an approved panel, the process suffered prolonged administrative delays, resulting in the completion of audits only on 25 January 2024—well beyond the due dates for the relevant assessment years. Given these circumstances, the society applied for condonation of delay under Section 119(2)(b) of the Income Tax Act, seeking permission to file returns along with audit reports and to claim deductions available under Section 80P. While the Principal Commissioner of Income Tax initially examined the request, the matter was referred to the PCCIT, who rejected the application on 13 June 2024. The PCCIT treated the society as a “regular non-filer” and relied heavily on past conduct, including delays in years prior to the assessment years in question, to deny relief. The central issue before the High Court was whether the PCCIT had exercised discretion judiciously while rejecting the application for condonation of delay, particularly in light of CBDT Circular No.13 of 2023, which expressly empowers tax authorities to condone delay where cooperative societies could not file returns on time due to audit delays under State laws. The court held that the PCCIT’s approach was legally flawed and excessively technical. The Court observed that while deciding an application under Section 119(2)(b), the authority must confine itself to the relevant assessment years and examine whether the delay was caused by circumstances beyond the assessee’s control. The Court noted that the delay in audit was not attributable to the petitioner but stemmed from systemic and administrative lapses on the part of statutory authorities responsible for appointing auditors under the Odisha Cooperative Societies Act. Importantly, this factual position was not disputed by the Income Tax Department. The High Court took serious note of CBDT Circular No.13 of 2023 and the Ministry of Cooperation’s advisory dated 3 August 2023, both of which acknowledge widespread audit delays faced by cooperative societies and specifically permit condonation of delay for Assessment Years 2018-19 to 2022-23 in deserving cases. The Bench held that once the Central Government itself recognized such delays as a systemic issue causing genuine hardship, the PCCIT ought not to have adopted a rigid or pedantic interpretation of the law. The Court reiterated that “genuine hardship” must be construed liberally to advance substantial justice. It emphasized that an assessee ordinarily gains nothing by delaying statutory compliance and that denial of condonation results in serious prejudice, including the loss of legitimate tax deductions. The Court stressed that refusal to condone delay effectively deprived the cooperative society of its statutory entitlement under Section 80P, which could adversely affect its financial stability and functioning. The court order suffered from non-application of mind and arbitrary exercise of discretion, the High Court quashed the PCCIT’s order dated 13 June 2024. The matter was remitted with a direction to condone the delay and permit the society to file its returns along with audit reports for the relevant assessment years in accordance with law. Case Details Case Title: The Reserve Bank Employees Co-operative Credit Society Limited Versus The Principal Chief Commissioner of Income Tax Odisha Region Case No.: W.P.(C) No.7708 of 2025 Date: 09.01.2026 Counsel For Petitioner: Rudra Prasad Kar Senior Advocate Counsel For Respondent: Subash Chandra Mohanty Click Here To Read Order Read More: Reaction To Alleged Hate Speech Can’t Itself Be Criminalised: Madras High Court

Audit Delay Beyond Assessee’s Control Must Be Considered While Deciding Delay Condonation: Orissa High Court

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