(b) cannot be rejected solely under CBDT’s six-year limitation.){kind=link}
The Andhra Pradesh High Court, in M/s Bhupathi Hotels Limited v. The Centralized Processing Centre, Bengaluru & Others, considered whether applications seeking condonation of delay for income tax refund claims could be rejected solely because they were filed beyond the six-year period prescribed in CBDT Circular No. 9/2015.
The common order was passed in Writ Petition Nos. 10785 and 11521 of 2025 concerning refund claims for Assessment Years 2013–14 and 2015–16. The petitioner had approached the Principal Commissioner of Income Tax under Section 119(2)(b) of the Income Tax Act, 1961, seeking condonation of delay in claiming refunds.
Background of the Dispute
The petitioner stated that it had filed its income tax returns for Assessment Years 2013–14 and 2015–16 but could not pursue the refund claims within time due to financial difficulties, closure of its business operations and health problems faced by its Managing Director.
Applications seeking condonation of delay were filed on 8 February 2023. The Principal Commissioner rejected the applications by separate orders dated 29 January 2024, relying on CBDT Circular No. 9/2015 dated 9 June 2015.
The rejection orders recorded that no application for condonation of delay relating to a refund or loss claim could be entertained beyond six years from the end of the relevant assessment year.
Scope of Section 119(2)(b)
The High Court examined Section 119(2)(b), which authorises the Central Board of Direct Taxes to permit an income tax authority to admit a delayed claim for exemption, deduction, refund or other relief where such intervention is considered desirable or expedient for avoiding genuine hardship.
The Court observed that the legislative intention underlying the provision requires a liberal approach while considering applications involving genuine hardship. It noted that Section 119(2)(b) itself does not prescribe a specific limitation period for condoning delay.
Accordingly, the competent authority is required to exercise its discretion in a proper and reasonable manner after considering the circumstances and difficulties faced by the assessee.
CBDT Circular Cannot Override the Statutory Provision
The High Court acknowledged that CBDT circulars are binding on departmental authorities. However, such circulars are not binding on a constitutional court exercising jurisdiction under Article 226 of the Constitution.
The Court held that the six-year limitation prescribed in CBDT Circular No. 9/2015 could not be applied in a manner that runs contrary to the scope and purpose of Section 119(2)(b).
Therefore, the petitioner’s applications could not be rejected merely because they had been filed beyond the six-year period stipulated in the circular.
The petitioner had initially challenged the validity of the circular. However, the challenge to the circular itself was not pressed during the hearing.
Decision of the High Court
The Andhra Pradesh High Court set aside the orders dated 29 January 2024 rejecting the petitioner’s condonation applications.
The respondents were directed to consider the petitioner’s refund claims afresh and pass appropriate orders within six weeks from the date of receipt of the High Court’s order.
The writ petitions were accordingly allowed without any order as to costs.
Significance of the Judgment
The decision emphasises that applications under Section 119(2)(b) must be examined with reference to genuine hardship and the statutory purpose of granting relief in appropriate cases.
Tax authorities should not mechanically reject delayed refund claims solely by referring to the limitation period contained in an administrative circular. The surrounding facts, reasons for delay and hardship asserted by the taxpayer must receive proper consideration before a decision is taken.
The judgment is relevant for taxpayers, advocates, Chartered Accountants and tax consultants dealing with delayed refund claims, belated returns and applications for condonation under Section 119(2)(b) of the Income Tax Act.