Case Law Details
Khetivadi Utppan Bajar Samiti Veraval Committee Vs Chief Commissioner of Income Tax (Gujarat High Court)
Gujarat High Court held that delay in filing of return of income due to delayed communication of deduction of TDS is justifiable. Accordingly, delay in filing of return condoned and AO directed to process the same in accordance with law.
Facts- For the Assessment Year 2017–18, land belonging to the Petitioner was acquired on 11.08.2016 by the National Highways Authority of India (NHAI). Pursuant thereto, the Petitioner received compensation amounting to ₹10,11,60,371/-. From the said compensation, an amount of ₹1,01,16,037/- was deducted by the deduct or towards Tax Deducted at Source (TDS). The Petitioner contends that the said income was exempted u/s. 10(26AAB) of the Income Tax Act, 1961, and therefore, the deduction of TDS was unwarranted.
The Petitioner submits that, having been apprised of the TDS deduction only in December 2018, which was subsequent to the due date for filing the return of income, it was not feasible to file the return within the stipulated period. Accordingly, the Petitioner preferred an application u/s. 119(2)(b) of the Income Tax Act, 1961 on 23.03.2020, seeking condonation of delay in filing the return of income for Assessment Year 2017–18, with a view to claiming refund of the TDS amount.
Conclusion- Held that the impugned order dated 17.12.2024 passed by the Respondent under Section 119(2) (b) of the Act is hereby quashed and set aside. The Respondent is directed to pass a fresh order condoning the delay in filing the Petitioner’s return of income for the Assessment Year 2017-18, so as to process the same in accordance with law by the concerned Assessing Officer. The entire exercise as aforesaid shall be completed within a period of twelve (12) weeks from the date of receipt of a copy of this Order. Rule is made absolute to the aforesaid extent. No order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Darshan R. Patel appearing on behalf of the Petitioner, and learned Senior Standing Counsel Mr. Karan G. Sanghani for the Respondent.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Karan G. Sanghani waives service of notice of rule for the Respondent. Having regard to the controversy arising in the petition, which is in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.
3. The brief facts of the case are as follows:
3.1 It is the case of the Petitioner that, for the Assessment Year (A.Y.) 2017–18,land belonging to the Petitioner was acquired on 11.08.2016 by the National Highways Authority of India (NHAI). Pursuant thereto, the Petitioner received compensation amounting to ₹10,11,60,371/-.From the said compensation, an amount of10,11,60,371/-.From the said compensation, an amount of
₹10,11,60,371/-.From the said compensation, an amount of1,01,16,037/- was deducted by the deduct or towards Tax Deducted at Source (TDS).The Petitioner contends that the said income was exempted u/s. 10(26AAB) of the Income Tax Act, 1961, and therefore, the deduction of TDS was unwarranted. Consequently, the Petitioner became entitled to a refund of the said amount. It is further contended that although the deduction of TDS was effected on 13.02.2017, the same was communicated to the Petitioner only in December 2018.
3.2 The due date for filing the return of income for the relevant Assessment Year was 31.07.2017, which stood extended to 05.08.2017. The Petitioner submits that, having been apprised of the TDS deduction only in December 2018, which was subsequent to the due date for filing the return of income, it was not feasible to file the return within the stipulated period. Accordingly, the Petitioner preferred an application under Section 119(2)(b) of the Income Tax Act, 1961 (for short “the Act”) on 23.03.2020, seeking condonation of delay in filing the return of income for Assessment Year 2017–18, with a view to claiming refund of the TDS amount.
3.3 On 03.11.2020, the Respondent addressed a communication to the Petitioner, inter alia, advising the Petitioner to submit an application to the Central Board of Direct Taxes (CBDT), and treated the Petitioner’s application as filed for the purposes of further consideration. In compliance thereof, the Petitioner addressed a letter to the CBDT on 09.11.2020, seeking condonation of delay in filing return of income for A.Y. 2017–18.
3.4 Thereafter, vide communication dated 22.03.2021, the Respondent sought certain details from the Petitioner. The Petitioner, in response, furnished the requisite information on 23.03.2021. Subsequently, vide letter dated 28.11.2023, the CBDT again sought further particulars from the Petitioner, to which a detailed response was furnished on 13.12.2023.
3.5 On 21.12.2023, the Respondent sought additional information, and the Petitioner submitted its reply on 26.12.2023. Further, vide communication dated 06.11.2024, the Respondent once again sought various details from the Petitioner. The Petitioner, in compliance thereof, submitted the same on 13.11.2024.
3.6. Ultimately, vide order dated 17.12.2024, the Respondent rejected the Petitioner’s application for condonation of delay in filing the return of income for Assessment Year 2017–18, inter alia, observing that no “genuine hardship” was established by the Petitioner, and hence, the Petitioner’s application was rejected.
4. Aggrieved by the said order dated 17.12.2024, the Petitioner has invoked the writ jurisdiction of this Hon’ble Court under Article 226 of the Constitution of India, seeking appropriate reliefs as under:
A. “Your Lordships may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction for quashing and setting aside the impugned order dated 17.12.2024 passed by the Respondent at Annexure ‘M’.
B. Your Lordships may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction thereby directing the Respondent to grant the refund due to the Petitioner along with statutory interest.
C. The Hon’ble Court may issue directions to Respondent to direct the concerned Assessing Officer to allow Petitioner to file the return the of income by exercising the power u/s 119 (2) (b) and grant the refund subject to verification of the claims made by the Petitioner.
D. Award the cost of this petition.
E. Grant such other and further reliefs as this Hon’ble Court deems fit.”
5. Mr. Darshan R.Patel, learned advocate appearing for the Petitioner has submitted that the Petitioner’s application to condone the delay in filing the Income Tax Return (ITR) for the Assessment Year 2017-18 has the inevitable effect of the Department being unjustly enriched at the cost of the Petitioner, inasmuch as, on merits, the refund to the Petitioner is due and payable and yet the same cannot be processed because the return for the Assessment Year 2017-18 is delayed and the delay has been refused to be condoned only on the ground that “no documentary evidence has been brought on record by the Assessee to establish that there was indeed a genuine hardship faced by the Assessee in filing of the ROI”.
6. Mr. Karan G.Sanghani, learned Senior Standing Counsel for the Department submitted that, since the Assessee has been established in the year 1981, it cannot be the case of the Assessee that they were unaware of the procedure. Further, no supporting documents have been placed by the Assessee to support the case of the genuine hardship and the Assessee has been approaching the filing of the return of income in a most casual and cavalier manner and hence, there is no justification to entertain the present petition. Mr. Sanghani further referred to and relied upon the Circular No.9 of 2015 dated 09.06.2015 in respect of condonation of delay in filing the refund claim, inasmuch as, according to Mr. Sanghani, the Petitioner has failed to adhere to the conditions mentioned in the said Circular.
7. DISCUSSION & FINDINGS:-
7.1 From the perusal of the impugned order dated 17.12.2024, it is seen that the CCIT, Rajkot had noted the report submitted by the Assessing Officer through E-mail dated 01.01.2024 as under:-
“3.2 The reason cited by the assessee is very general in nature and not found sustainable in the eyes of law. The Assessing Officer has specifically reported that there is no such circumstances have been mentioned by the assessee which had prevented it to file ITR for the Assessment Year 2017-18 and caused genuine hardship. The Range head and the PCIT have endorsed the view of the Assessing Officer and submitted that the application of the assessee may be rejected/dismissed.”
7.2 There is no discussion whatsoever on the merits of the Petitioner’s case regarding the entitlement for the refund, which has arisen because the Department in the first place had wrongly deducted the TDS on the compensation which was otherwise eligible for exemption under Section 54D of the Act. In the decision of this Court dated 08.04.2025 passed in Special Civil Application No. 10003 of 2024 in the case of Kalpesh Jayantilal Lakdawala Vs. Chief Commissioner of Income Tax-1, Surat and Anr., this Court has examined the entire gamut of the discretion of the CCIT under Section 119(2)(b) of the Act in an identical situation, wherein, this Court had held as under :-
“9. Having heard the learned advocates appearing for the respective parties and taking into consideration the facts of the case, it is not in dispute that the Petitioner was awarded the compensation for compulsory acquisition of the land in question by the Surat Municipal Corporation as per the award passed by the Civil Judge, Senior Division under the provisions of the Land Acquisition Act, 1894. It is also apparent from the material place on record that the Petitioner received the compensation in the month of September 2021 after the order of determining the share of the Petitioner passed by the Court on 04.09.2021. The Petitioner therefore could not show the amount of compensation in the original return filed on 04.01.2021. The Petitioner therefore was prevented by sufficient cause to claim the refund of the amount of tax deducted at source by the Surat Municipal Corporation at the time of deposit of the compensation with the Court. In such circumstances, the Respondents-authorities ought to have allowed the application of the Petitioner to condone the delay in filing the revised return to claim the refund of the TDS of Rs.37,40,330/-deposited by the Surat Municipal Corporation. The reasoning given by the Respondents-authorities while rejecting the application do not commensurate with the facts of the case inasmuch as the Respondents have failed to consider that the compensation received by the Petitioner was exempted from tax and therefore, the Petitioner is entitled to get the refund of the TDS which was deposited by the acquiring body with the Government and for that purpose, the Petitioner is required to file the revised return which can be possible only if the delay in filing such revised return is condoned by exercising the powers vested in Section 119 of the Act. The objection of Section 119 of the Act is to see that the Assessee are even not put to any unnecessary hardships to claim any refund which otherwise is eligible to get.
Section 119(2)(b) reads as under :-
(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise 11[any income-tax authority, not being a Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;
9.1 On perusal of the above provisions, the Respondents-authorities were required to consider the facts of the case more particularly when the Petitioner admittedly has not received the compensation till the due date of filing of return on 31.05.2021 and when the Petitioner received such compensation, the delay in filing the revised return is required to be condoned so that the Petitioner gets the refund of the TDS deposited by the acquiring body in the Government, as such compensation received by the Petitioner is not taxable under the provisions of the Act.
9.2 This Court in case of Ramjibhai Lavabhai Undhad Vs. Chief Commissioner of Income Tax reported in [2023] 157 taxmann.com.706 (Gujarat) in similar facts after considering the cases where the authorities have granted the application to condone the delay while exercising the powers under Section 119(2)(b) of the Act has held as under :-
“9.Therefore, the impugned orders rejecting the applications to condone the delay are required to be quashed and set aside in each petition with a direction to condone delay under section 119(2)(b) of the Act,1961 as per order dated 25.10.2019 passed by the Respondent in case of similarly situated persons, however, with a rider to direct the Assessing Officer to issue refund with interest on the amount of refund claim from the date of deposit by the Executive Engineer, Irrigation department till the date of granting of refund.
10. For passing such direction of issuance of the refund with interest under section 244A of the Act, similar reasons as given by this Court in case of Special Civil Application No.12466/2021 and other allied matters are adopted and reproduced as under:
“8. The Hon’ble Apex Court in case of Union of India v. Hari Singh and others (Judgment dated 15.09.2017 passed in Civil Appeal No.15041/2017)reported in (2018) 15 SCC 201, observed as under:
“2. An admitted fact which is common in all these appeals is that while disbursing the compensation, the Land Acquisition Collector had deducted the tax at source and deposited the same with the Income Tax Department. These appellants preferred the writ petition in the High Court stating that no such deduction at source was permissible in view of the provisions of Section 194-LA of the Income Tax Act, 1961, since the land which was acquired was agricultural land and this provision categorically mentions that in respect of agricultural land, tax at source is not to be deducted.
3. There is no quarrel about the position of law mentioned above. After examining this provision, the High Court had passed an order in Risal Singh v. Union of India [Risal Singh v. Union of India, 2010 SCC OnLine P&H 276 : (2010) 321 ITR 251] directing the Income Tax Department to refund the amount to the Collector with a direction to the Collector to determine whether the compensation is paid for property other than agricultural land or otherwise and whether deduction of tax at source was permissible under any provision of law. The manner in which the Land Acquisition Collector has to proceed further after determining the aforesaid issue is contained in Para 8 of Writ Petition No. 9912 of 2009 decided on 11-1-2001, which is reproduced below:
“8. Accordingly, we allow this petition and direct the Income Tax Department to refund the amount to the Collector within one month from the date of receipt of a copy of this order. Thereafter, the Collector will determine whether compensation paid is for property other than agricultural land or otherwise and whether deduction of tax at source was permissible under any provision of law. Whether deduction is permissible or not will be decided by the Collector within two months from the date of receipt of a copy of this order. If deduction is found not permissible the amount will be refunded to the Petitioners not later than three months from receipt of a copy of this order. It is made clear that this order will not affect the right of the Income Tax Department to take such action as may be permissible under the law.”
Similar directions in Sant Ram v. Union of India [Sant Ram v. Union of India, 2009 SCC OnLine P&H 9638] are given in the other case as well.
9. After the aforesaid observations, the Apex Court issued the following directions:
“7.1 The Respondents shall file appropriate returns before the Assessing Officer(s) in respect of Assessment Years in question within a period of two months from today in case they feel that the compensation in respect of land belonging to them which had been acquired was agricultural land, and claim refund of the tax which was deducted at source and deposited with the Income Tax Department. On the filing of these returns, the Assessing Officer(s) shall go into the aforesaid question and wherever it is found that the compensation was received in respect of agricultural land, the tax deposited with the Income Tax Department shall be refunded to these Respondents.
7.2 While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of section 28 of the Land Acquisition Act and the law laid down by this Court in Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF) [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not”
10. In view of the above decision, the Income Tax department has allowed the application made by the applicant to condone the delay in filing the return of the income to claim the refund and also issued the refund. However, the Respondent did not grant any interest on the amount of refund though the delay cannot be said to be attributable to the Petitioners in the facts of the case.
11. Instruction No.7/2013 dated 15.07.2013 was issued pursuant to the directions issued by the Delhi High Court in the case of Court On its Own Motion v. Commissioner of Income Tax (supra), that in no case interest u/s 244A of the Act be denied to the assessee where the assessee is not at fault. In the facts of the case, the Petitioners-assessees were not at fault for not filing the return of income to claim the refund as the deductor i.e. Executive Engineer, Irrigation department neither informed the Petitioners about the deduction of tax nor Form-16A which is mandatory was issued. On the contrary, when the Petitioners made representations by informing the Executive Engineer, Irrigation department about the wrong mentioning of the provision for deduction of tax in Form No. 26AS issued as per return of TDS to be filed by the deductor, no reply was given. Therefore, it is clear that the Petitioners were not at fault for the delay caused in filing the return of income claiming the refund of the tax deducted at source as no tax was payable by the Petitioners on the amount of interest under section 194LA of the Act, 1961.
12. The Hon’ble Apex Court in case of Tata Chemicals Limited (supra) while considering the issue of payment of interest in case of refund has held as under:
“37. A “tax refund” is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/assessee had paid taxes pursuant to a special order passed by the assessing officer/Income Tax Officer. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/ deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/ deduct or who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/ foreign company.
38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course.”
13. It is true that in the said case, the refund was claimed in the return of income which was filed in time. However, the ratio of the said judgment is with regard to the entitlement of the assessee to receive interest on the amount of refund when the collection was illegal and the revenue was obliged to refund such amount with interest as money so deposited is retained and enjoyed by the revenue whereas in the facts of the present case delay in filing the return of income is not attributable to the Petitioners and such fact is also not in dispute as the Respondent has condoned delay and granted refund to the Petitioners.
14. Reliance placed by the Respondent authority on Circular No.9/2015 is also misplaced because paragraph no.6(ii)of the said circular is to the effect that no interest will be admissible on belated claim of refund when such application is for supplementary claim of refund i.e. claim of additional amount of refund after completion of assessment for the same year. Therefore, reliance placed by the Respondent upon the said circular for denying the interest on the refund claim of the Petitioners is misplaced. As held by the Apex Court in case of Tata Chemicals Limited (supra), the Respondent is liable to pay the interest on the amount of refund claim as such amount was wrongly collected because of provisions of section 194LA as no tax was liable to be deducted from the amount of interest paid to the Petitioners on the acquisition of agricultural land. The Hon’ble Apex Court has therefore, held that money received and retained without right carries with it right to interest and whenever money received by a party which ex ae quo et bono ought to be refunded, the right to interest follows as a matter of course.
15. It is not in dispute that the amount of refund is already paid to the Petitioners and therefore, as a natural corollary, the Petitioners are entitled to have the right to get interest on such amount of refund claim.
16. Even as per sub-section(2) of section 244A of the Act, 1961, as it existed during the relevant AY 20132014, when the proceedings resulting in the refund are not delayed for reasons attributable to the assessee whether wholly or in part, the period of the delay so attributable only can be excluded from the period for which interest is payable under subsections (1) or (1A)or (1B) to section 244A of the Act, 1961. In the facts of the case, the words “or the deductor, as the case may be,” which is inserted with effect from 01.04.2017 would not be applicable as the Petitioners have been permitted to file the refund claim for the AY 2013-2014 after condonation of delay and such delay in claiming the refund cannot be said to be attributable to the Petitioners as the Petitioners were not made aware about the deduction of tax at source by the deductor in absence of issuance of Form No.16-A which was mandatorily required as per Rule 31(3) of the Rules.” 11. In view of the foregoing reasons, the petitions succeed and are accordingly allowed. The Respondents are directed to pass the order to condone the delay in filing the return for the Assessment Year 2013-2014 and to issue the refund with interest under section 244A of the Act, 1961 from the date of deposit of the amount of TDS till date of payment of refund as per provisions of section 244A of the Act, 1961. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order. Rule is made absolute to the aforesaid extent. No order as to costs.
10. Mr. Karan Sanghani, learned Senior Standing Counsel also submitted that that the Petitioner is liable to pay the tax on the interest component which was received by the Petitioner after the Order dated 04.09.2021 passed by the Court. Such contention of the learned Senior Standing Counsel Mr. Sanghani is contrary to the provisions of Act as the entire compensation received by the Petitioner is exempted from tax and therefore, no taxes is payable on any part of the compensation received by the Petitioner from the acquiring body i.e. Surat Municipal Corporation. ”
8. In view of the aforesaid decision which is squarely applicable to the facts of the present case and the position in law as explained in painstaking detail in Kalpesh Lakdawala (Supra), the present petition succeeds and is accordingly allowed. The impugned order dated 17.12.2024 passed by the Respondent under Section 119(2) (b) of the Act is hereby quashed and set aside. The Respondent is directed to pass a fresh order condoning the delay in filing the Petitioner’s return of income for the Assessment Year 2017-18, so as to process the same in accordance with law by the concerned Assessing Officer. The entire exercise as aforesaid shall be completed within a period of twelve (12) weeks from the date of receipt of a copy of this Order. Rule is made absolute to the aforesaid extent. No order as to costs.
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