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Right to deduction: whether lost by delayed returns
Mon, 08 Nov 2010
The Hindu

Right to deduction: whether lost by delayed returns?

QUESTION: Fourth proviso to Sec. 10B inserted with effect from assessment year 2006-07 would bar deduction under Sec. 10B, where return is not filed within the time allowed under Sec. 139(1). Similarly, Sec. 80AC would bar deduction for returns delayed beyond the time limit under Sec. 139(1) for deduction under Sec. 80IA, 80IAB, 80IB, 80IC, 80ID or 80IE from the same assessment year. Returns are delayed for various reasons beyond the control of the assessee. The law takes into consideration such contingencies by providing for delayed return till one year after the assessment year under Sec. 139(4). Such bar has great hardship in such cases. What are the remedies for an assessee prevented by sufficient cause for the delay in the return?

ANSWER: Sec. 119(2)(b) empowers the Central Board of Direct Taxes (CBDT) to “admit an application or claim for any exemption, deduction, refund or any other relief under this Act”, in cases of genuine hardship for any case or class of cases by admitting such applications by relaxing the time limit, so that the claim could be decided on merits in accordance with law. It is for the assessee hit by the time limit from availing himself of the incentive provisions to make out a case of genuine hardship preventing the assessee from timely filing of return and file an application to the Board for relaxation of the time limit.

A hope has been offered recently by the Tribunal in Asst. CIT v Dhir Global Industrial (P) Ltd. (2010) 45 DTR (Del)(Trib) 290, wherein the Tribunal was dealing with a case of delay of less than two months, where the delay was attributed to the problems created by the requirement of e-filing of return, where the system did not accept the return requiring modifications of the software, which took time.

The Tribunal found the explanation for the delay to be acceptable. The assessing officer, it was held, was bound to consider the reason for the delay in the view that the time limit for filing return under Sec. 139(1) was directory and not mandatory.

It relied upon the cases relating to delayed audit reports, where the delay was condoned, where such delay was explained in the view that such time limits should be taken to be directory. It is true that in the case of delayed audit reports, the preponderant view of the courts is that such time limit is directory.

It would be reasonable for the CBDT to accept the decision of the Tribunal, where there is satisfactory reason for the delay. If such a view is not taken, the CBDT would be burdened with petitions under Sec. 119(2)(b) so that it could accept the view that the assessing officer can condone the delay, where it is explained, in the light of the law relating to similar requirements as for audit reports.

The provisions setting out the time limit should not work as punitive ones, so that the purpose behind the relief is not frustrated.
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