Case Note & Summary
The petitioner, M/s. Bombay Mercantile Coop Bank Ltd., a multi-state cooperative bank registered under the Multi State Cooperative Society Act, filed a writ petition under Article 226 of the Constitution of India challenging the order dated 18-3-2010 passed by the Central Board of Direct Taxes (CBDT), Ministry of Finance, Government of India. The impugned order rejected the petitioner's application under Section 119(2)(b) of the Income Tax Act, 1961 for condonation of delay in filing the return of income for Assessment Year 2001-2002 and to allow carry forward of loss. The petitioner had declared a loss of Rs. 15,94,19,523/- in its return, which was filed after the statutory due date. The delay occurred because the statutory auditors for Assessment Year 2000-2001 were appointed by the Commissioner of Corporation and Registrar Cooperative Societies on 3-9-2001 and had to audit 53 branches across the country, completing the audit only on 15-11-2001, and the audit under Section 44AB was completed on 28-11-2001. The return was filed the next day. Additionally, there was a change in management as the new Managing Director joined only on 26-5-2001, and the Board of Directors could not approve the annual accounts before 31-10-2001. The petitioner filed an application under Section 119(2)(b) citing these reasons. The CBDT rejected the application without properly considering the grounds. The High Court, after hearing both sides, found that the CBDT's order was passed without application of mind and was cryptic. The court set aside the impugned order and directed the CBDT to reconsider the application afresh, taking into account the reasons given by the petitioner and the CBDT circular No.8 of 2001. The court also directed that the petitioner be given a hearing before a fresh decision is made.
Headnote
A) Income Tax - Condonation of Delay - Section 119(2)(b) of Income Tax Act, 1961 - CBDT Circular No.8 of 2001 - The petitioner, a multi-state cooperative bank, filed a return of loss after the due date due to delay in statutory audit and change in management. The CBDT rejected the application for condonation of delay without considering the reasons given. The High Court held that the CBDT's order was passed without application of mind and quashed it, directing the CBDT to reconsider the application afresh. (Paras 1-10) B) Income Tax - Carry Forward of Loss - Section 72 of Income Tax Act, 1961 - The petitioner sought to carry forward the loss of Rs. 15,94,19,523/- for Assessment Year 2001-2002. The court held that the right to carry forward loss is subject to the return being filed within the time allowed under Section 139(3) or upon condonation of delay under Section 119(2)(b). (Paras 2-3) C) Administrative Law - Non-Application of Mind - The CBDT's order rejecting the condonation application was found to be cryptic and without proper consideration of the grounds urged by the petitioner. The court held that such an order cannot be sustained and must be set aside. (Paras 8-10)
Issue of Consideration
Whether the CBDT's rejection of the petitioner's application under Section 119(2)(b) of the Income Tax Act, 1961 for condonation of delay in filing the return for Assessment Year 2001-2002 was valid and justified.
Final Decision
The High Court allowed the writ petition, quashed the impugned order dated 18-3-2010, and directed the CBDT to reconsider the application under Section 119(2)(b) afresh, after giving the petitioner a hearing, in accordance with law and in light of the observations made in the judgment.
Law Points
- Condonation of delay under Section 119(2)(b) of Income Tax Act
- 1961
- CBDT circular No.8 of 2001
- power of CBDT to condone delay
- non-application of mind by CBDT
- reasonable cause for delay
- carry forward of loss
