Income Tax | Bombay High Court: Assessee Not Liable For Delay In Return Filing Caused By CA’s Belated Advice; CBDT’s Rejection Quashed
Sanchayita Lahkar
The High Court of Judicature at Bombay, Division Bench of Justice B. P. Colabawalla and Justice Amit S. Jamsandekar held that an assessee should not be penalised for a delay in filing an income tax return caused by a chartered accountant’s belated advice. The Court set aside the Central Board of Direct Taxes’ decision refusing to condone a five-month delay in the filing of the return for Assessment Year 2018-19 and directed that it be treated as valid under Section 153(1B) of the Income Tax Act. The case concerned the tax treatment of compensation received through Transferable Development Rights arising from compulsory land acquisition. The Bench noted that the delay resulted from inadequate professional advice rather than any negligence on the part of the assessee and directed the Revenue to complete the assessment in accordance with law.
The petitioner, a limited liability partnership engaged in real estate development, filed a writ petition challenging an order dated August 7, 2024 issued by the Central Board of Direct Taxes (CBDT). The order had rejected the petitioner’s application seeking condonation of a five-month delay in filing its return of income for the Assessment Year 2018–19. The due date for filing a return under Section 139(1) read with Section 139(3) of the Income Tax Act, 1961 was October 31, 2018. The petitioner filed the return on March 30, 2019, within the extended time permitted under Section 139(4). In June 2023, the petitioner submitted an application under Section 119(2)(b) of the Act, relying on CBDT Circular No. 9 of 2015, to condone the delay.
The petitioner contended that the delay occurred because its chartered accountant required additional time to obtain legal opinions on the appropriate tax and accounting treatment of compensation received in the form of Transferable Development Rights (TDR) arising from compulsory acquisition of immovable property. The petitioner filed the accountant’s affidavit and copies of legal opinions obtained between May 2018 and March 2019 to substantiate its explanation. It further argued that the inability to file the return on time prevented it from carrying forward business losses, causing genuine hardship under Section 119(2)(b).
The respondents opposed the petition, submitting that the petitioner had sufficient time to file the return and failed to exercise due diligence. It was contended that the delay was due to lack of supervision, did not constitute genuine hardship, and that the condonation would allow unverified claims, potentially leading to revenue loss. The petitioner responded that Section 153(1B) of the Act safeguarded the revenue’s interests by allowing assessment within twelve months from the end of the financial year in which the delayed return was filed.
“We are of the view that the Petition deserves to be allowed.” The Court recorded that grave hardship would be suffered if the delay was not condoned because “genuine losses will not be permitted to be carried forward.” It noted that “the delay in the present case is not due to any negligence on the part of the Petitioner but due to inadequate advice by the Chartered Account, which fact stands admitted by him in his affidavit.”
The Court stated that “it is settled law that where an Assessee takes a course of action bases on an opinion of a professional, then, in that case, there is a reasonable cause for the Assessee to act based on such advice and that such acts are to be regarded as bona fide.” It further observed that the petitioner “ought not to be put to a considerable disadvantage as a result of belated advice given to it by the Chartered Accountant, especially when the issue that was being grappled with is fairly complex and for which there were no well settled judicial precedents at the relevant time.”
Referring to the impugned order’s own language, the Court quoted that “The field authorities have stated that it may be possible that taxability of certain proceeds was not known to the CA and the assessee and that the CA sought legal opinion about the same, which was beyond its control in filing the ROI within the due date.” The Court also noted the further statement that “a more diligent and disciplined taxpayer may have sought the legal opinion on time and could have filed its ROI within the due date, more so, if it wanted to carry forward the losses of the A.Y.2018‑19 to subsequent years.”
On the Revenue’s apprehension regarding expired assessment timelines, the Court recorded that “the apprehension … is appropriately taken care of by the provisions of Section 153(1B) of the Act.” It stated that “The AO will have 12 months from the end of 31st March 2026 to complete an assessment, i.e. he will have time till 31st March 2027 to frame an assessment under Section 143/144 of the Act in accordance with law.”
Addressing the timing of the Section 119(2)(b) application (15 June 2023), the Court stated it had queried counsel and recorded the explanation that the petitioner was initially unaware of the procedure, that profits for A.Ys. 2019‑20 to 2021‑22 were inadequate to absorb the large loss (Rs. 4,47,30,811/‑) from A.Y. 2018‑19, and that only in June 2023 did improve business conditions in A.Y. 2022‑23 indicate the possibility of set‑off, prompting the application. The Court concluded, “We are satisfied with the aforesaid explanation.”
“The impugned Order dated 7th August 2024 passed by Respondent No. 1 under Section 119(2)(b) of the Act is hereby quashed and set aside. The delay in filing the return of income for the A.Y.2018‑19 is hereby condoned. The ROI filed on 30th March 2019 shall be treated to be a return filed in accordance with Section 153(1B) and the time frame to complete the assessment mentioned therein shall apply. The Revenue is directed to frame the assessment in accordance with law. All rights and contentions of the Petitioner as well as of the Revenue are kept open.” The petition was disposed with “no order as to costs”
Advocates Representing the Parties
For the Petitioners: Percy Pardiwala, Senior Advocate, a/w Sanket Bora, Archena Shetty, Vidhi Punmiya, Amiya Das i/b. SPCM Legal, Advocates for the Petitioner.
For the Respondents: Mr. Vikas Khanchandani.
Case Title: Balaji Landmarks LLP Eartwhile; Balaji Landmarks Private Limited v. Central Board of Direct Taxes (CBDT) & Ors.
Neutral Citation: 2025: BHC‑AS:46182‑DB
Case Number: Writ Petition No. 16638 of 2024
Bench: Justice B. P. Colabawalla; Justice Amit S. Jamsandekar
