The Bombay High Court ruled that the taxpayer ought not to be put to a considerable disadvantage as a result of belated advice given to it by the Chartered Accountant, especially when the issue that was being grappled with is fairly complex and for which there were no well-settled judicial precedents at the relevant time.
The ruling came after considering the findings of the field authorities that it may be possible that the taxability of certain proceeds was not known to the CA and the taxpayer, and that the CA sought legal opinion about the same, which was beyond its control in filing the ROI within the due date.
The Division Bench comprising Justice B.P. Colabawalla and Justice Amit S. Jamsandekar observed that where a taxpayer takes a course of action based on an opinion of a professional, then, in that case, there is a reasonable cause for the taxpayer to act based on such advice, and that such acts are to be regarded as bona fide.
The Bench found that the delay in the present case is not due to any negligence on the part of the Petitioner but due to inadequate advice by the Chartered Accountant, and that fact stands admitted by him in his affidavit. Accordingly, the Bench condoned the delay in filing of the ITR and quashed the order passed under Section 119(2)(b) of the Income Tax Act.
The Bench also observed that the petitioner would otherwise suffer genuine hardship if the application for condonation of delay in filing ITR was not accepted, as it would lose on genuine claims of losses. Further, the apprehension of the Revenue is appropriately taken care of by the provisions of Section 153(1B), as per which the AO will have 12 months from the end of 31st March 2026 to complete an assessment under Section 143/144 of the Income Tax Act.
Briefly, in this case, the due date for filing the ITR under Section 139(1) of the Income Tax Act was October 31, 2018; however, the petitioner filed its belated ITR on March 30, 2019, declaring a loss as per Section 72, within the time permissible under Section 139(4). Accordingly, in light of CBDT’s Circular No. 9 of 2015, the petitioner applied for condonation of the delay of 5 months under Section 119(2)(b), which was refused.
The petitioner, therefore, approached the High Court and pleaded that its Chartered Accountant (CA) was not acquainted with the legal and accounting treatment to be given apropos the compensation received in the form of Transferable Development Rights (TDR) in lieu of compulsory acquisition of certain immovable property, and, so, the petitioner had to seek appropriate legal advice. The time taken for obtaining such views caused the delay in filing of ITR.
Appearances:
Senior Advocate Percy Pardiwala, along with Advocates Sanket Bora, Archena Shetty, Vidhi Punmiya, and Amiya Das, for the Petitioner/ Taxpayer
Advocate Vikas Khanchandani, for the Respondent/ Revenue
