An error on part of the auditor must be accepted as a reasonable cause shown by the trust management for delay in granting permission: Bombay High Court

The Bombay High Court ruled that the accountant’s error cannot be rejected, but must be accepted as a reasonable cause put forward by the trust management.

The bank of Justice KR Shriram And Judge Neela Gokhale has observed that an assessee, a public charity with nearly thirty years of experience, who otherwise satisfies the condition for availing exemption, cannot be denied the same merely on the ground of limitation, especially when the legislature has conferred wide discretionary powers to condone such practices. delay from the concerned authorities.

The petitioner/proprietor, a charitable trust, registered under the Bombay Public Trusts Act, 1950, filed its return of income, declared the income as ‘Nil’ and claimed a refund of Rs. 70,710/-. The accounts of the petitioner have been audited and the audit report for AY 2016-2017 has also been submitted. Along with the ROI, the petitioner was required to file Form No. 10B, but the petitioner did not file the same. It was filed with a delay of approximately 1257 days.

The taxpayer has filed an application under Section 119(2)(b) of the Income Tax Act, 1961, for condonation of delay in filing Form 10B. In the application, the petitioner explained the cause of the delay to the registered accountant or company auditor. According to the petitioner, when the Form No. 10B was sent to the Department for submission after filing the return, the department staff refused to acknowledge the manual submission and the petitioner was told to submit it online.

The request for forgiveness of the delay was denied. The explanation was rejected on the ground that the petitioner should have uploaded Form 10B immediately but should have waited till February 15, 2020. Moreover, in view of non-filing of Form 10B, the petitioner’s returns were processed under Article 143(1) on March 17, 2018 , and the petitioner did not file a rectification request until January 24, 2020, which was deleted on June 18, 2020. Form 10B was filed only on February 15, 2020, i.e. after filing the rectification request.

The respondent or the department did not accept the petitioner’s explanation of ‘inattention’ and ‘inadvertent errors’, etc. as ‘sufficient’ reason to condone the delay. When the petitioner has been filing his returns and Form 10B for many years, the petitioner must be very well aware of the rules and regulations and therefore the delay cannot be tolerated.

The court noted that petitioner does not appear to have been lethargic or in good faith in filing the claim after the statute of limitations, which should be relevant to the desirability and expediency of exercising such power.

“We are aware that such routine exercise of powers would be neither expedient nor desirable as the entire machinery of tax calculation, processing of assessments and further recoveries or refunds would go out of control if such powers were routinely exercised without taking into account take into account its desirability. and the expediency of doing so to avoid real hardship,” the court said.

The court found that the delay was not deliberate or intentional. The petitioner cannot be prejudiced due to ignorance or mistake committed by a professional engaged by the petitioner. The department should have exercised the powers granted.

Counsel for petitioner: Sham V. Walve

Counsel for Defendant: Dinesh Gulabani

Case Title: Al Jamia Mohammediyah Education Society vs. Income Tax Commissioner (Exemptions)

Case number: Writ Petition No. 1689 of 2024

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