[Opinion] The Phrase’ Genuine Hardship’ Deserves Liberal Interpretation

V K Subramani – [2024] 161 taxmann.com 730 (Article)

Legal provisions in tax laws (being civil laws) contain some scope for enabling the taxpayers to obtain benefit or justice in spite of not complying with the statutory mandates scrupulously. Provisions in income tax law provide relief from penalty, prosecution and even acceptance of filing ITRs beyond time to get refund or have the benefit of carry forward of loss etc. The power to excuse the taxpayer for the defaults is vested with the administrative authorities with a tinge of discretion embedded therein. Section 273A of the Income-tax Act, 1961 is a general provision empowering the PCIT or CIT to waive penalty in respect of under-reporting or misreporting of income and section 273B contains waiver from plethora of other penalty provisions.

Section 119 of the Income-tax Act has the caption “Instructions to subordinate authorities” empowering the CBDT to give such relief or exemption or extension of benefit to the taxpayers. It is a delegated legislation which the CBDT can exercise as a matter of power with a caveat in proviso to section 119(2)(c) viz., such orders have to be laid before each House of Parliament.

Recently, the Bombay High Court in Pankaj Kailash Agarwal v. Asstt. CIT [2024] 161 taxmann.com 383 has analyzed the expression “genuine hardship” thread bare and the CBDT was advised to interpret the phrase liberally. This write-up discusses the decision and the precedents.

1. Pankaj Kailash Agarwal’s case

The assessee an individual was carrying on business by name Creative Industries with the industrial unit located in Export Processing Zone (EPZ) at Haridwar (Uttaranchal). The facts of the case relate to assessment year 2016-17. The assessee was eligible for deduction under section 80-IC (of course, this section does not operate presently). The assessee got the books of account audited under section 44AB and filed the return of income before the ‘due date’ specified in section 139(1) of the Act. The assessee also obtained audit report in Form 10CCB for claiming deduction under section 80-IC. Unfortunately, the assessee relied on the auditor and did not notice the requirement of online filing of Form 10CCB so as to get the benefit of section 80-IC. The return was processed under section 143(1) with denial of deduction under section 80-IC. The assessee was still unaware of the requirement to file Form 10CCB online, meant for claiming deduction under section 80-IC. The assessee filed a rectification petition under section 154 before the Assessing Officer on 16th April, 2018.

The assessee came to know that there was an omission in not uploading Form 10CCB and accordingly the audit report in Form 10CCB dated 19th August, 2016 was uploaded online on 12th January, 2019. The assessee again filed rectification application on 13th January, 2019 and the rectification application was transferred to jurisdictional Assessing Officer. In spite of repeated reminders there was no response and hence the assessee knocked the doors of the Commissioner by complying with section 264 on 19th November, 2020. This application for revision under section 264 was dismissed on the ground that it was filed beyond time. The assessee again pursued the rectification petition with the Assessing Officer which was pending for almost 6 years.

The assessee subsequently approached CBDT for condoning the delay and to direct the Assessing Officer to allow rectification application. The assessee also explained the reason for not filing Form 10CCB within time and the reason being inadvertence or oversight by the chartered accountants. The assessee relied on certain legal decisions before CBDT.

The assessee subsequently received an order from CBDT which stated that it was issued with the approval of the Member (IT & R) and no order passed by said member was made available to the assessee or filed along with the affidavit in reply before the court. The assessee preferred writ before Bombay High Court.

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