The Andhra Pradesh High Court has held that procedural delays should not deprive an assessee of statutory tax benefits where genuine hardship is established.
The bench of quashed an order of the Chief Commissioner of Income Tax rejecting an application for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961, and directed the Income Tax Department to treat the belated income tax return as having been filed within the prescribed time, thereby enabling the assessee to claim deduction under Section 80P.
The petitioner/assessee is a cooperative credit society registered under the Andhra Pradesh Cooperative Societies Act, 1964. The society provides credit facilities exclusively to employees of Bharat Electronics Limited, Machilipatnam.
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For Assessment Year 2019-20, the society did not file its income tax return within the due date prescribed under Section 139(1) of the Income Tax Act. Subsequently, after receiving a notice under Section 148, it filed its return on August 23, 2023, along with an application under Section 119(2)(b) seeking condonation of delay and claiming deduction under Section 80P. The society explained that it was under a bona fide belief that its activities remained exempt from income tax and became aware of the filing requirement only after consulting a tax professional upon receipt of the reassessment notice. It also relied upon CBDT Circular No. 13/2023 dated July 26, 2023, which provides relief to cooperative societies filing delayed returns.
The Chief Commissioner of Income Tax rejected the application on February 12, 2025, holding that the society had failed to establish sufficient cause or produce documentary evidence explaining the delay. According to the Department, the statutory conditions for condonation under Section 119(2)(b) had not been satisfied, and therefore the benefit of CBDT Circular No. 13/2023 could not be extended.
Aggrieved by the rejection, the cooperative society approached the Andhra Pradesh High Court through a writ petition challenging the order as arbitrary, illegal and contrary to the principles of natural justice.
The Division Bench observed that prior to the Finance Act, 2018, cooperative societies were not required to comply with the present filing requirement for availing deduction under Section 80P. However, following the amendment effective from April 1, 2018, timely filing of returns became a mandatory condition for claiming the deduction.
The Court noted that the petitioner was filing its return for Assessment Year 2019-20 under the amended regime and that this was effectively the first year in which such compliance became relevant for the society.
The High Court observed that CBDT Circular No. 13/2023 had been issued specifically because numerous cooperative societies across the country had sought condonation of delay after the legislative amendments affected their eligibility for Section 80P deductions.
The Bench held that denying relief despite the object of the circular would defeat the very purpose for which the CBDT had issued the relaxation mechanism. The Court emphasized that if the petitioner’s application were rejected, it would lose deductions that it was otherwise legally entitled to claim solely because of procedural delay.
A central aspect of the judgment is the Court’s reiteration that procedural technicalities should not override substantial justice.
The Bench observed that constitutional courts have consistently held that when substantial justice conflicts with technical considerations, the former must prevail. Since there was no dispute regarding the petitioner’s substantive entitlement to deduction under Section 80P, the Court found that denying the benefit merely on account of delayed filing would be unjust.
The High Court further held that tax authorities must adopt a liberal and pragmatic approach while considering condonation applications filed by cooperative societies under Section 119(2)(b), particularly in light of CBDT Circular No. 13/2023.
The Bench observed that many smaller cooperative societies are managed by minimal staff who may not possess adequate expertise regarding evolving tax compliance requirements. Such lack of awareness, according to the Court, constitutes a genuine hardship that deserves consideration while deciding applications for condonation of delay.
Allowing the writ petition, the Andhra Pradesh High Court set aside the order dated February 12, 2025, passed by the Chief Commissioner of Income Tax.
The Court directed the Income Tax Department to treat the return filed by the petitioner as having been filed within the prescribed time, thereby enabling the society to avail the deduction under Section 80P in accordance with law. No order as to costs was passed.
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