Condonation of Delay in ITR Filing u/s 119(2)(b) of the Income Tax Act, 1961

Introduction

The Income Tax Act, 1961 establishes specific timelines for the filing of income tax returns (ITR). However, taxpayers may encounter unexpected situations that lead to delays in meeting these deadlines. To address such challenges, Section 119(2)(b) offers relief by allowing the condonation of delay in claiming refunds and carrying forward losses.

The Central Board of Direct Taxes (CBDT), through Circular No. 11/2024 (issued on October 1, 2024), has updated the guidelines for managing these applications. This article aims to provide an in-depth understanding of the provisions, eligibility criteria, procedures, and implications of the new CBDT circular.

1. Understanding Section 119(2)(b) of the Income Tax Act

1.1 Purpose

Section 119(2)(b) empowers the CBDT to direct income tax authorities to:

• Accept delayed ITRs that claim refunds, deductions, exemptions, or carry-forward of losses.
• Provide relief to taxpayers who miss statutory deadlines due to genuine hardships.

1.2 Eligibility for Condonation

Taxpayers may apply for condonation if:

• The delay is caused by a reasonable cause beyond the taxpayer's control (e.g., medical emergencies, technical issues, or natural calamities).
• The taxpayer demonstrates genuine hardship due to the non-acceptance of the delayed claim.

2. Key Highlights of CBDT Circular No. 11/2024

2.1 Delegation of Powers for Condonation Applications

The revised circular assigns decision-making authority based on the claim amounts:

2.2 Time Limits for Filing Applications

• Applications must be submitted within five years from the end of the relevant assessment year.
• If the delay results from a court case, the five-year period excludes the litigation duration. The application must be filed within six months of the final court order.

2.3 Processing Timelines

Authorities are required to decide on condonation applications within six months from the end of the month in which the application is received.

2.4 Conditions for Acceptance

• The taxpayer's claim must be genuine.
• The income should not be taxable in another person's hands.
• No interest will be granted on late refund claims.
• The refund must arise from excess tax deductions, advance tax, or self-assessment tax.

3. Filing a Condonation Application

3.1 Steps for Online Filing

• Login to the Income Tax e-filing portal.
• Navigate to 'Condonation Request' under the 'Services' tab.
• Select 'Allow ITR filing after time-barred' and fill in the necessary details.
• Upload supporting documents (e.g., medical certificates, IT portal screenshots, court orders).
• Submit the request and complete e-verification.

3.2 Offline Filing(More Preferred)

• Submit a written application to the relevant income tax authority.
• Attach supporting documents that justify the delay.
• Clearly mention the claim amount and relevant assessment year.
• Await a decision, which will be communicated in writing.

4. Implications of the New Guidelines

4.1 Benefits to Taxpayers

• Faster Processing: The clarified timelines reduce uncertainty.
• Streamlined Authority Levels: Application review becomes more straightforward.
• Clarity in Conditions: Prevents arbitrary rejections of applications.

4.2 Limitations

• No Automatic Approval: Justification for the delay is necessary.
• No Interest on Delayed Refunds: Refunds are granted without interest.
• Time Limits: Applications beyond five years (except court cases) will not be entertained.

5. Judicial Precedents Supporting Condonation

CIT v. G.M. Knitting Industries Pvt Ltd: This case set a precedent for accepting delayed claims when genuine hardship exists.

The Travancore Cements Employees Co-Operative Bank Ltd. v. Commissioner of Income Tax (Kerala High Court, 2014): The High Court held that if an assessee fails to file the return on time due to delays in receiving an audit report, the application for condonation can be rejected.

M/S Regen Infrastructure & Services Pvt. Ltd. v. CBDT (Madras High Court, 2016): The High Court held that the CBDT should have condoned a one-day delay in filing a return caused by technical issues with the e-filing portal.

Manjulaben Bipinchandra Patel v. Deputy Commissioner of Income Tax (ITAT Ahmedabad, 2024): The Tribunal upheld the Commissioner's decision that the assessee, who failed to file a return on time to carry forward a business loss, was ineligible for condonation of delay under Section 119(2)(b).

6. Practical Scenarios Where Condonation Can Help

7. Real-Life Examples

Medical Emergency: Mr. A, a salaried employee, was hospitalized for six months due to a critical illness and missed the ITR filing deadline. He applied for condonation with hospital records as proof, and the income tax authority accepted his request, allowing him to claim a refund.

• Technical Glitch: Ms. B attempted to file her ITR before the due date but encountered persistent technical failures on the tax portal. She submitted IT portal error logs as evidence, and her request for condonation was approved.
• Litigation Delay: A company involved in prolonged litigation over tax liability applied for a refund after the court ruling in its favor. The tax department excluded the litigation period and granted the refund.
• Natural Disaster: Mr. C, a businessman, lost crucial financial documents in a flood, causing a delay in filing his ITR. He submitted an affidavit along with local government records confirming the disaster, and his application was accepted.

8. Conclusion

CBDT's Circular No. 11/2024 significantly enhances the efficiency and fairness of condonation application handling. Taxpayers are encouraged to file requests promptly with the appropriate documentation and, if necessary, seek professional assistance. By adhering to the guidelines outlined in Section 119(2)(b), taxpayers can ensure that legitimate claims for refunds and loss carry-forwards are not lost due to procedural delays.

Other Option

An alternative option for taxpayers is the form ITR-U, which allows late filing. However, this comes with a significant penalty: taxpayers may incur a penalty of 25% or 50% of the additional tax under Section 139(8A). This penalty can be avoided through the Condonation Request process governed by Section 119(2)(b), provided the request is approved. We will delve deeper into this topic in a future article.

The author can also be reached at varunmukeshgupta96@gmail.com