Hindalco Industries Limited v. Union of India

2 Petitioner during AY 2009-10 had filed its return of Fringe Benefit Tax (FBT) amounting to Rs.10,23,47,059/- under Section 115WD(1) of the act showing the value of chargeable fringe benefits at Rs.30,11,09,327/alongwith the return of income tax. Assessee company also annexed by way of note with FBT return that certain sums were included as chargeable to FBT out of abandunt caution and that the same should not be chargeable to FBT. Similar claim was made for AY-2007-08. For AY-2007-08, the Assessing Officer (AO) did not allow these claims. On appeal, the Commissioner of Income Tax (Appeals) (CIT)(A), by an order dated 31st August 2016, allowed those claims of assessee. Since the CIT(A) allowed those claims, petitioner filed an application under Section 264 of the Act for refund of the FBT return. On the issue of delay, it is petitioner’s case that there was no delay because only when the CIT(A) allowed the appeal, it was ascertained that the amounts included in the FBT returns were not chargeable to FBT. The fact that CIT(A) took almost 5 or 6 years to decide assessee’s appeal, cannot be held to the prejudice of assessee. It was also submitted that application for condonation of delay should be liberally considered. It was submitted by Mr. Jain that a litigant does not stand to benefit by lodging the appeal or an application late and refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. Mr. Jain submitted that against this, when the delay is condoned, the highest that can happen is that a case would be decided on merits after hearing the parties. Relying on judgment of the Apex Court in Collector, Land Acquisition vs Mst. Katiji[1], Mr. Jain submitted that the authority should not take a pedantic approach and the doctrine must be applied in pragmatic manner. Mr. Jain submitted that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

3 Per contra, Mr. Sharma submitted that even if the application filed under Section 264 of the Act, there are no explanations given for delay, save and except quoting headnote of judgment of Madras High Court in Subuthi Finance Limited Vs. Commissioner of Income Tax[2]. Mr. Sharma stated that petitioner ought to have articulated the reason for delay. Therefore, the observation by the commissioner that assessee has not given any reason for the said inordinate delay, except mention in the petition “condonation of delay”, cannot be faulted with.

4 Mr. Jain responded in rejoinder that during the personal hearing petitioner made detailed submissions and post personal hearing also filed written submissions in which, all what was submitted in court today has been explained. Mr. Jain also submitted that copies of the judgments were also tendered. 1 (1987) 167 ITR 471(SC) 2 (2012) 20 taxmann.com 838 (mad)

5 On the issue of condonation of delay in an application filed under Section 264 of the Act, this court and many other courts including the Apex Court have held that authorities should not take a pedantic approach but should be liberal. The courts have held that the words ‘sufficient cause' should be given a liberal construction so as to advance substantial justice when no negligence nor inaction nor want of bonafide is imputable to assessee. The courts have held that the principle of advancing substantial justice is of prime importance and while considering the question of condonation, the revisional authority is not all together excluded from considering the merits of the revision petition.

6 It is also note worthy to mention that under Section 264 of the Act, the Commissioner is empowered either on his own motion or on an application made by assessee to call for the record of any proceedings under the Act and pass such order thereon not being an order prejudicial to assessee and this power has been conferred upon the Commissioner in order to enable him to give relief to the assessee in cases of overassessment. As observed by the Hon’ble Gujarat High Court in Digvijay Cement Co. Ltd. vs. CIT 3, the power conferred on commissioner is wider in terms. The revisional power is coupled with a duty to exercise it in the interests of justice of the parties and the revisional authority must act according to the rules of reason and justice. 3 (1994) 210 ITR 797 (Guj)

7 It will be useful to reproduce paragraphs 9 and 10 of an order of this court in Octra Health Private Limited Vs. Additional Commissioner of Income Tax (HQ) Pune & Ors.4, which read as under:

9. While considering the genuine hardship, the PCCIT was not expected to consider a solitary ground as to whether the assessee was prevented by any substantial cause from filing the corrections within a due time. Other factors also ought to have been taken into account. The phrase “genuine hardship” used in Section 119(2)(b) of the Act should have been construed liberally. The Legislature has conferred the power to condone the delay to enable the authorities to do substantial justice to the parties by disposing the matters on merits. The expression ‘genuine’ has received a liberal meaning in view of the law laid down by the Apex Court and while considering this aspect, the authorities are expected to bear in mind that ordinarily the applicant, applying for condonation of delay, does not stand to benefit by lodging erroneous returns. Refusing to condone the delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a nondeliberate action. There is no presumption that a delay in correcting an error or responding to a notice of invalid return received under Section 139(9) of the Act is occasioned deliberately or on account of culpable negligence or on account of mala-fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. The approach of authority should be justice-oriented so as to advance cause of justice. If the case of an applicant is genuine, mere delay should not defeat the claim. We find support for this view in Sitaldas

Taxation), New Delhi [2010 (87) taxman.com 44 (Bombay)], relied upon by Mr. Walve, where paragraph nos. 13 to 17 read as under: “13.Having heard both the parties, we must observe that while considering the genuine hardship, Respondent No. 1 was not expected to consider a solitary ground so as to whether the petitioner was prevented by any substantial cause from filing return within due time. Other factors detailed hereinbelow ought to have been taken into account.

14. The Apex Court, in the case of B.M. Malani v. CIT [2008] 10 SCC 617, has explained the term "genuine" in following words:

4 Writ Petition No.15544 of 2023 dated 19th December 2023 (unreported) “16.The term ‘genuine’ as per the New Collins Concise English Dictionary is defined as under: ‘Genuine’ means not fake or counterfeit, real, not pretending (not bogus or merely a ruse)’.

17. ******

18. The ingredients of genuine hardship must be determined keeping in view the dictionary meaning thereof and the legal conspectus attending thereto. For the said purpose, another well-known principle, namely, a person cannot take advantage of his own wrong, may also have to be borne in mind.....” (p. 624). The Gujarat High Court in the case of Gujarat Electric Co. Ltd. (supra) was pleased to hold as under: “... The Board was not justified in rejecting the claim for refund on the ground that a case of genuine hardship was not made out by the petitioner and delay in claiming the relief was not satisfactorily explained, more particularly when the returns could not be filed in time due to the ill health of the officer who was looking after the taxation matters of the petitioner....” (p. 737). The Madras High Court in the case of R. Seshammal (P.) Ltd. (supra), was pleased to observe as under: “This is hardly the manner in which the State is expected to deal with the citizens, who in their anxiety to comply with all the requirements of the Act pay monies as advance tax to the State, even though the monies were not actually required to be paid by them and thereafter, seek refund of the monies so paid by mistake after the proceedings under the Act are dropped by the authorities concerned. The State is not entitled to plead the hypertechnical plea of limitation in such a situation to avoid return of the amounts. Section 119 of the Act vests ample power in the Board to render justice in such a situation. The Board has acted arbitrarily in rejecting the petitioner's request for refund.” (p.187)

15. The phrase “genuine hardship” used in section 119(2)(b) should have been construed liberally even when the petitioner has complied with all the conditions mentioned in Circular dated 12-10-1993. The Legislature has conferred the power to condone delay to enable the authorities to do substantive justice to the parties by disposing of the matters on merit. The expression “genuine” has received a liberal meaning in view of the law laid down by the Apex Court referred to hereinabove and while considering this aspect, the authorities are expected to bare in mind that ordinarily the applicant, applying for condonation of delay does not stand to benefit by lodging its claim late. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. The approach of the authorities should be justice-oriented so as to advance cause of justice. If refund is legitimately due to the applicant, mere delay should not defeat the claim for refund.

16. Whether the refund claim is correct and genuine, the authority must satisfy itself that the applicant has a prima facie correct and genuine claim, does not mean that the authority should examine the merits of the refund claim closely and come to a conclusion that the applicant's claim is bound to succeed. This would amount to prejudging the case on merits. All that the authority has to see is that on the face of it the person applying for refund after condonation of delay has a case which needs consideration and which is not bound to fail by virtue of some apparent defect. At this stage, the authority is not expected to go deep into the niceties of law. While determining whether refund claim is correct and genuine, the relevant consideration is whether on the evidence led, it was possible to arrive at the conclusion in question and not whether that was the only conclusion which could be arrived at on that evidence.