HC Condones Delay in Filing ITR as Co. Was Under Bonafide Belief That It Can’t File ITR If AAR Ruling is Pending

Case Details: M/s.Tiong Woon Project & Contracting Pte. Ltd vs. The Deputy Director of Income Tax - [2024] 158 taxmann.com 656 (Madras)

Judiciary and Counsel Details

• • Senthilkumar Ramamoorthy, J.
  • G. Baskar for the Petitioner.
  • Prabhu Mukund Arunkumar for the Respondent.

Facts of the Case

The petitioner was a company incorporated in Singapore undertaking turnkey construction projects involving erection, installation, and commissioning. In relation to three projects, the petitioner approached the Authority for Advance Rulings (AAR) and requested a ruling with regard to the tax liability in India. The due date for filing the return of income for the relevant assessment year was 30.09.2012, and the extended deadline under Section 139(4) of the Income Tax Act, 1961 (the Income Tax Act) was 31.03.2014.

Referring to the provisions of Section 245(R)(1) providing that the AAR shall not allow an application where the question raised in the application is already pending before any income tax authority, the petitioner did not furnish the returns of income for the relevant AY as it would result in the pending applications.

Subsequently, the questions were answered, holding that the income is taxable in India, and the petitioner filed the return of income for that year in March 2017, along with an application for condonation of delay. However, the application for condonation of delay was rejected.

Aggrieved by the order, the assessee filed a writ petition to the Madras High Court.

High Court Held

The High Court held that section 119(2)(b) enabled the Board to condone the delay in filing return of income. The provision indicated that the Board may admit an application if it is desirable or expedient to condone the delay to avoid genuine hardship.

In the instant case, the petitioner explained the delay and that it relied on the provision of Section 245R(2). The section empowers the AAR not to allow an application for an advance ruling where the question raised in the application is already pending before any income tax authority or the Appellate Tribunal. The petitioner asserted and contended that it was under the bona fide belief that the filing of income returns would qualify as a pending proceeding before the assessing officer.

It was held that the petitioner’s assertion that it believed bona fide that it could lose the valuable right of requesting an advance ruling by filing the returns of income while the applications are pending before the AAR cannot be disregarded as lacking credibility.

If the petitioner had filed the returns of income prior to the due dates, it was likely that the applications for advance ruling would have been held to be not maintainable as per the proviso to Section 245R(2). Accordingly, the writ petition was allowed.