Bombay High Court Rules Assessee Cannot Be Penalized for Chartered Accountant’s Belated Advice in Tax Filing

 

Balaji Landmarks LLP Eartwhile vs. Central Board Of Direct Taxes (Case No. No. 16638 OF 2024)

Facts:

1.  The assessee, Balaji Landmarks LLP, was required to file its return of income, which declared a substantial loss, by the due date of October 31, 2018, as stipulated under Section 139(3) read with Section 139(1) of the Income Tax Act, 1961.

2.  However, the assessee filed its return belatedly on March 30, 2019. While this filing was within the extended timeline permissible under Section 139(4) for a belated return, it jeopardized the assessee’s right to carry forward its significant business losses amounting to ₹4,47,30,811.

3.  The root of the delay, as presented to the court, was the complexity surrounding the accounting and legal treatment of compensation received in the form of Transferable Development Rights (TDR) in exchange for the compulsory acquisition of immovable property.

4.   The assessee’s Chartered Accountant (CA) was not well-acquainted with the nuances of this transaction and, as a result, the advice needed to file the return was delayed. This crucial fact was admitted by the CA in a sworn affidavit submitted to the court.

5.  Recognizing the potential adverse consequences, the assessee filed an application on June 15, 2023, under Section 119(2)(b) of the Act, seeking condonation of the five-month delay.

Hon Bombay HC held as below:

1.  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.

2.  The delay is not due to any negligence on the part of the assessee, but to inadequate advice by the Chartered Accountant, a fact admitted by him in his affidavit.

3.  Refusing to condone the delay would impose grave hardship on the assessee. The inability to carry forward and set off a genuine, substantial business loss against future profits would have severe financial repercussions, which the Court deemed a disproportionate penalty for a procedural delay not of the assessee’s own making.

The copy of the order is as under:

WRIT PETITION NO. 16638 OF 2024