Bombay High Court Condones Delay in Income Tax Filing by Balaji Landmarks LLP

Court sets aside CBDT's rejection, allowing carry forward of losses for AY 2018-19

In a significant ruling, the Bombay High Court has condoned the delay in the filing of income tax returns by Balaji Landmarks LLP for the Assessment Year 2018-19, overturning an earlier decision by the Central Board of Direct Taxes (CBDT) that rejected the company's application for condonation. The court's decision allows the company to carry forward losses incurred during the said assessment year, offering relief from potential financial hardship.

The case, heard by Justices B.P. Colabawalla and Amit S. Jamsandekar, revolved around a five-month delay in filing the returns, attributed to inadequate advice from the company's Chartered Accountant regarding the treatment of compensation received in the form of Transferable Development Rights (TDR). Balaji Landmarks LLP argued that this professional advice constituted a reasonable cause for the delay, a contention supported by affidavits and legal opinions presented during the proceedings.

The court acknowledged the genuine hardship the company would face if the delay was not condoned, as it would prevent the carry forward of losses to subsequent years, a critical financial strategy for the entity. The judges emphasized the importance of bona fide belief based on professional advice, noting that the complexity of the legal and accounting issues involved justified the time taken to seek appropriate counsel.

The court also addressed concerns from the Revenue Department about potential leakage due to condonation of the delay. It pointed out that statutory provisions under Section 153(1B) of the Income Tax Act safeguard the Revenue's interests by extending the time frame for completing assessments following condonation.

Ultimately, the court quashed the CBDT's order dated August 7, 2024, and directed the Revenue to complete the assessment in accordance with the extended timeline provided by law. The judgment underscores the balance between procedural adherence and the practical realities faced by taxpayers, especially in instances involving complex legal interpretations.

This ruling is expected to set a precedent for similar cases where taxpayers face genuine difficulties due to professional advice, reinforcing the judiciary's role in ensuring equitable tax processes.

Bottom Line:

Income Tax Act - Condonation of delay in filing return of income - Delay caused due to inadequate advice from Chartered Accountant regarding complex legal and accounting treatment - Bona fide belief based on professional advice constitutes reasonable cause for condonation of delay - Grave hardship to assessee if delay not condoned.

Statutory provision(s): Income Tax Act, 1961 Section 119(2)(b), Section 153(1B)

Balaji Landmarks LLP Eartwhile ; Balaji Landmarks Private Limited v. Central Board of Direct Taxes (CBDT), (Bombay)(DB) : Law Finder Doc Id # 2802254