Bombay High Court Condones 5-Month Delay in Filing Loss ITR; CBDT’s Rejection Set Aside

Balaji Landmarks LLP (formerly Balaji Landmarks Pvt. Ltd.) filed its return of income for AY 2018–19 belatedly on 30 March 2019, five months after the due date of 31 October 2018 prescribed under Section 139(1) read with Section 139(3). Since the return declared a loss, timely filing was essential to carry forward the loss under Sections 72 and 80.

On 15 June 2023, the assessee applied to the CBDT under Section 119(2)(b) seeking condonation of delay, relying on CBDT Circular No. 9/2015. The delay was explained as arising from the Chartered Accountant’s lack of clarity regarding the tax treatment of TDR compensation received for compulsory acquisition of immovable property. The assessee furnished an affidavit of the CA, multiple legal opinions, and supporting judicial precedents to establish bona fides.

However, the CBDT rejected the application on 7 August 2024, holding that the assessee lacked diligence, had ample time to file the return, and the delay did not constitute “genuine hardship.” Aggrieved, the assessee filed the present writ petition before the Bombay High Court.

Main Issue: Whether the CBDT was justified in refusing to condone a 5-month delay in filing a loss return, when the delay was attributable to professional uncertainty on taxability of TDR and its non-condonation would bar the assessee from carrying forward genuine losses.

HC’s Rulling: The Bombay High Court allowed the petition and set aside the CBDT’s rejection order. The Court held that the delay arose from the CA’s inadequate advice on a complex and unsettled tax issue constituting a reasonable and bona fide cause. It noted that the assessee had a consistent history of timely filing and would suffer genuine hardship if the loss could not be carried forward.

The Court also rejected the Revenue’s apprehension that condoning the delay would permit unverified claims. Section 153(1B) expressly grants the Assessing Officer fresh time 12 months from the end of the financial year in which the condoned return is filed to complete assessment, safeguarding revenue interests.

Finding the explanation for the timing of the 119(2)(b) application satisfactory, the Court condoned the delay, directed that the return filed on 30 March 2019 be treated as a valid return under Section 153(1B), and instructed the Assessing Officer to frame assessment in accordance with law. All rights and contentions were kept open.

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