PIL Filed with Orissa HC in view of imposition of interest & late fee for ITR of Non-Audit Cases

PIL Filed with Orissa HC in view of imposition of interest & late fee for ITR of Non-Audit Cases Although the due date for filing Tax Audit and ITR in the matter of Audit cases has been extended, please note that there is no Extension in a matter of filing Income Tax Return [ITR] in the case of non-audit cases. Thus a writ-Petition has been filed by Shri Natabar Panda Working Secretary, of Odisha Tax Advocates Association in this regard. As per the petitioner, CBDT should not to charge interest under Section 234A, interest under Section 234B, late fees under Section 234F and penalty under Section 271B for late filing return of income which is due to the inefficient and defective portal resulting in loss of time, energy, and resources of all the stakeholders; G r o u n d s A. For that the Clarification 1 of the Circular No.17/2021 dated 09.09.2021, levying interest under Section 234A due to belated filing of Income Tax Returns is arbitrary and fanciful for no fault of taxpayers and/or professionals who facilitate the in preparing and filing of returns. Whereas it may be appreciated that realizing that the new portal does not function appropriately, the Finance Department had on earlier occasions extended the time to file returns, they should have extended the time further by extending beyond 31.12.2021. Improper exercise of power conferred under Section 119 of the Income Tax Act 1961 may warrant issue of writ of mandamus. The petitioners fervently urge before this Hon’ble Court that the opposite parties are required to be restrained from levying/collecting interest under Section 234A as per Clarification 1. B. For that in absence of smooth workable portal and on existing glitches, the opposite parties ought to have waived imposition of penalty and levy of interest for failure to file returns within the time-line specified in the Income-tax Act, 1961 and rules framed thereunder. C. For that when non-compliance of provisions of Section 139, Section 80, Section 80AC for want of error free smooth transition of portal should not have entailed the taxpayers or the professionals for that purpose suffer interest under Section 234A, and fee/penalties under Section 234F and Section 271B. The petitioners submits that non-filing of return of income within the due date will lead to the following consequences:

• The taxpayer will not be able to claim the losses of the said assessment year except the loss in the head of house property [Section 80].
• The taxpayer will be liable to pay interest at the rate of 1% per month or part thereof [Section 234A].
• The taxpayer will not be able to claim the deductions under section 80IA, 80IAB, 80IB, 80IC, 80ID and 80IE [Section 80AC].
• The taxpayer will be liable to pay by way of late fee of Rs. 1,000 or 5,000 [Section 234F].

For want of proper infrastructure and smooth facility being provided by the Department, it is unwholesome for the opposite parties to suck blood as vied by “SHYLOCK”. D. For that due to circumstances beyond the control of the taxpayer or his professional who is entrusted to facilitate him in preparing and filing returns, and the technical difficulties faced, the taxpayer cannot be made to be penalized under Section 271B. Belated filing of Audit Report leads to imposition of penalty of an amount lower of one half percent of the total sales, turnover or gross receipts in the business or profession or Rs. 1,50,000/-. For that irrationality in not extending the time limit (for want of proper functioning of the newly introduced portal and ongoing pandemic situation) may necessitate this Hon’ble Court to have indulgence in the matter. The petitioners submit that the Income Tax Department vide tweet dated 22.08.2021 and vide Circular No. 17/2021, have admitted the fact that the new income tax portal was not functioning correctly and smoothly till 21.08.2021. E. For that insufficient period has been given for AIS. The petitioners submit that the function of AIS which is for the purpose of presenting the information collected and assimilated through various sources was rolled out on 01.11.2021 on the new income tax portal. The AIS has far reaching impact on the preparation and presentation of accounts and financial statements whether of any large corporate or of any small taxpayer. It is submitted that the portal is not showing the correct information in AIS report due to which lot of hardship is being caused to the taxpayers. Also, it is a cumbersome exercise to reconcile AIS and the statement of accounts. It is also submitted that rolling out AIS on 01.11.2021 does not provide ample time and opportunity to the taxpayers to reconcile. F. For that “Clarification 1” given in Circular dated 09.09.2021 in respect of Section 234A, e., interest leviability is arbitrary and violative of Article 14 of the Constitution of India, 1950. A genuine and honest taxpayer is made to suffer for the incompetence of the facility i.e., New Income Tax Portal provided for the purpose by the Government and its agency. The charging of interest under Section 234A is unjust and illogical, when the department itself has extended the due dates on account of surge of pandemic at first instance and on account of portal glitches at the second instance. G. For that when non-compliance of statutory requirement in filing returns due to technical glitches cannot be attributed to the taxpayer and/or his professional facilitating filing of return, invocation of provision under Section 234A is illegal, illogical and whimsical. Since, the infrastructure and the facility to file and comply with the requirement has to be provided by the Government of India well in time and in error free manner it is submitted that in absence of the same the taxpayers cannot be expected to remain compliant. It is submitted that unless the opposite parties provide the mechanism for smooth compliance, adherence to the statutory mandate would not be possible and therefore, there should not have been fastening of interest, penalty or late fees for the non-compliance. H. For that the grievance of the petitioners remained unattended and unheeded to by the Department even though they approached the concerned authorities well in advance. I. For that the legal maxim “lex non cogit ad impossibilia” fits appropriately to the present circumstances. The petitioners submit that in absence of a smooth filing portal the taxpayers cannot be supposed to comply in time bound dateline. Therefore, a taxpayer cannot be expected to do something which is impossible in absence of the basic infrastructure and facilities, which otherwise is the duty and responsibility of the Government. J. For that non-extension of time for filing of return of income under Section 139 (audit cases and non-audit cases) is violative of Article 14 and Article 19(1)(g) of the Constitution of India being manifestly arbitrary, discriminatory and unreasonable.   That the petitioners humbly submit that this Hon’ble Court may take cognizance of urgency in the matter and, taking into consideration the representations dated 27.12.2021 and 04.01.2022 submitted by the petitioners, the present writ petition may be said to have complied the manner prescribed in Rule 8 of the Odisha High Court Public Interest Litigation Rules, 2010. That the petitioners affirm that there is no alternative remedy than to approach this Hon’ble Court. In Dwarka Nath v. Income Tax Officer, AIR 1966 SC 81, a three-Judge Bench of the Hon’ble Supreme Court commenting on the High Court’s jurisdiction under Article 226 opined that this Article is deliberately couched in comprehensive language so that it confers wide power on High Court to “reach injustice whenever it is found”. The Constitution designedly used such wide language in describing the nature of the power. The scope of writs in India has been widened by the use of the expression “nature”.  

Prayer of Petitioner:

• Issue notice to the opposite parties as to why writ in the nature of certiorari shall not be issued quashing/striking down “Clarification 1” given in Circular dated 09.09.2021 in respect of Section 234A and issue writ of prohibition restraining the opposite parties from enforcing interest under said provision;
• Issue writ in the nature of mandamus to the opposite parties to provide for a complete smooth workable portal free from errors and glitches so as to enable the taxpayers to comply with the statutory requirements in time-bound manner;
• Issue writ directing the opposite parties to extend the due date for filing Tax Audit Reports from 15.01.2022 to 28.02.2022 since the revised schema of Form No.3CB & 3CD were released on 06.01.2022 only and the assessees are unable to provide papers/documents according to the schema after break of the surge of COVID-19;
• Issue writ directing the opposite parties not to charge interest under Section 234A, interest under Section 234B, late fees under Section 234F and penalty under Section 271B for late filing return of income which is due to the inefficient and defective portal resulting in loss of time, energy, and resources of all the stakeholders;
• Issue a writ of mandamus or any other appropriate writ, order or direction directing the opposite parties to refund the amount of interest under Section 234A, interest under Section 234B, late fees under Section 234F and penalty under Section 271B for late filing return of income, if already collected, which is due to the inefficient and defective portal;
• Issue writ of mandamus or any other appropriate writ, order or direction directing the opposite parties to allow the tax payers to claim carry forward of losses and incentive deductions even if the return of income is filed belatedly;
• Issue writ in the nature of mandamus directing the Opp. Parties to extend the due date for filing of return and Tax Audit Reports for the Assessment Year: 2021-2022 for a period of two months;
• Pass such further Order/Orders, Writ/Writs, Direction/directions as may be deemed fit and proper in the circumstances of the case;