Financial capacity of a corporate assessee cannot be a ground to deny relief under Section 119(2)(b).

The Petitioner-Company filed its Income Tax returns for Assessment Years (A.Y.) 2019-20, 2020-21, and 2021-22 but failed to claim deductions under Section 80JJAA of the Income Tax Act, 1961, due to alleged oversight and lack of advice from its then-Chartered Accountant.

Upon discovering the error in October 2022 through a different consultant, the Petitioner filed an application under Section 119(2)(b) of the Act seeking condonation of delay (ranging from 279 to 721 days) to file Form 10DA and revised returns.

The Respondent rejected this application via an order dated 23.01.2025, primarily on the grounds that Section 80JJAA requires filing before the due date, the Petitioner failed to take legal action against its previous auditor, and that as a "body corporate" with financial capacity, it could not claim "genuine hardship."

1. Whether the Respondent’s rejection of the condonation of delay application based on the Petitioner's status as a body corporate and its financial capacity was legally sustainable under Section 119(2)(b).

2. Whether the failure to initiate legal proceedings against a defaulting Auditor is a valid ground for dismissing a claim of "genuine hardship."

The court primarily applied Section 119(2)(b) of the Income Tax Act, 1961, which empowers the Board/Authorities to admit belated applications for exemptions or deductions to avoid "genuine hardship".

It relied on the principle that "genuine hardship" is the soul of this provision and must be interpreted broadly to achieve substantial justice.

The court further referenced Commissioner of Income Tax v. Sun Engineering Works (P.) Ltd. (1992), which establishes that an assessee cannot claim new deductions during reassessment proceedings under Section 147 if they were not claimed in the original or revised return, necessitating the Section 119(2)(b) route.

It distinguished Gaurangbhai Chimanbhai Kapadiya v. Union of India (2024), noting that condonation is generally permissible unless the assessee is a habitual defaulter.

The Court held that the Respondent’s reasoning was flawed and went beyond the scope of Section 119(2)(b). Firstly, the Court rejected the "novel" argument that a body corporate cannot face genuine hardship due to its financial capacity, stating that the authority cannot use financial status as a bar to examine a substantial meritorious claim.

Secondly, the Court found that the Respondent had no basis to doubt the Auditor’s certificate admitting inadvertence; the absence of a formal legal complaint against the Auditor did not negate the fact that a mistake had occurred.

The Court emphasized that the provision is "justice-oriented" and intended to prevent taxpayers from being penalized for bona fide errors that result in paying more tax than legally required.

Since the deduction could not be claimed in subsequent reassessment proceedings per the Sun Engineering rule, the Petitioner’s only remedy was the condonation application, making the Respondent's perfunctory rejection a denial of substantial justice.

The Court quashed and set aside the Respondent’s order dated 23.01.2025. The matter was remanded to the Respondent authority to decide the Section 119(2)(b) application afresh on its merits within twelve weeks. The writ petition was allowed, and the connected civil application was disposed of.