Vijayawada Thermal Power Station Employees Co. Op Credit Society Ltd. Vs the Chief Commissioner of Income Tax

VIJAYAWADA THERMAL POWER STATION EMPLOYEES CO OP CREDIT SOCIETY LTD, CO-OP CREDIT SOCIETY LTD., REP. BY ITS PRESIDENT - R. HEMADRI. IBRAHIMPATNAM, KRISHNA DISTRICT, ANDHRA PRADESH - 521456

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...PETITIONER

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AND

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THE CHIEF COMMISSIONER OF INCOME TAX, HYDERABAD. IT TOWER, AC GUARDS, MASAB TANK, HYDERABAD-500004.

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THE INCOME TAX OFFICER WARD 11, VIJAYAWADA, C.R. BUILDING, VIJAYAWADA, ANDHRA PRADESH - 520002.

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...RESPONDENT(S):

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Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased topleased to issue a writ, order or direction, more particularly one in the nature of Writ of Mandamus, declaring the Rejection Order dt. 21.07.2025 passed by the 1STREspondent u/s 119(2)(b) of the Income-tax Act for A.Y. 2021-22 vide DIN No. ITBA/COM/F/17/2025- 26/1078722277(1) without properly considering the contentions raised in the condonation application as well as Circular No. 13/2023 issued by the CBDT, as void, illegal, and contrary to the

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Principles of Natural Justice, apart from being barred by limitation and pass

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IA NO: 1 OF 2025

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to stay all further proceedings pursuant to the intimation issued u/s 143(1) dt. 13.12.2024 and consequent order dt. 21.07.2025 passed by the 1ST Respondent u/s 119(2Xb) of the Incometax Act for A.Y. 2021-22 vide DIN No. ITBA/COM/F/17/202526/1078722277(1), and may pass

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Counsel for the Petitioner:

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1.DUNDU MANMOHAN

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Counsel for the Respondent(S):

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1.Y N VIVEKANANDA

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The Court made the following order: (per Hon’ble Sri Justice R Raghunandan Rao)

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The petitioner is a credit cooperative society established and run for the benefit of the employees of the Vijayawada Thermal Power Station.

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The term of office of the managing committee of this society had expired in January, 2019. Thereafter, the affairs of the society were being managed by the person in charge, pending the constitution of the next managing committee, by way of election. The said elections could not be conducted, on account of the COVID pandemic in 2020-21. Ultimately, the elections for the managing committee were conducted and the committee was formed on 14.10.2022.

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The petitioner was required to file its returns, under the Income Tax Act, for the assessment year 2021-22, by the extended last date of 15.03.2022. However, the petitioner did not file its returns by that date and came to file the said returns only on 14.08.2023. On account of the delay of approximately one and half years, the petitioner had also filed an application under Section 119 2(b) of the Income Tax Act, for condonation of delay in the filing of the returns. The grounds raised by the petitioner for condonation of such delay were two fold. Firstly, the petitioner condoned that the audit of the accounts of the petitioner which had to be conducted by the cooperative department, under the provisions of the AP Cooperative Societies Act, 1964, was not being completed by

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the audit authorities under the said Act, on account of the backlog in conduct of audits, which had been stalled on account of the COVID pandemic. As the audit was getting delayed, the managing committee had obtained permission for conduct of this audit by a private auditor, and got the same completed on 14.08.2023. Immediately thereafter, the petitioner had filed returns on the same day. The petitioner contended that the said delay occurred solely because the audit report was not available. Secondly, the petitioner also took ground that the audit could not be completed on account of the absence of a managing committee. The petitioner contended that the person in charge was able to maintain the affairs of the petitioner society, with great difficulty on account of the COVID pandemic and the necessity to ensure proper credit facility to about 1700 members of the society. It was contended that, on account of these difficulties, the person in charge could not take appropriate steps for filing returns within time.

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The 1^st respondent-Chief Commissioner, by order dated 22.07.2025, had rejected the application. The Chief Commissioner took the view that there is no justification for the delay as no reasonable cause for the delay has been furnished. The 1^st respondent also took the view that the CBDT had itself extended the due date for filing of returns for the assessment year 2021-22, and non filing of the returns within that time is not justifiable. The 1^st respondent also considered the circular No.13 of 2023, dated 26.07.2023, wherein guidelines had been issued, to the

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authorities under Section 119 2(b) of the Income Tax Act, to consider applications for condonation of delay, where such delay occurred on account of non preparation of audit reports, in cases where such an audit is to be done by an authority named in a state law. The 1^st respondent took the view that the said guideline would be applicable only when the audit report is actually prepared by the auditor designated under the State Act and that provision would not be applicable, if the audit is conducted by a private auditor.

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Aggrieved by this order of rejection, the petitioner had approached this court by way of the present writ petition.

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Sri D.Manmohan, learned counsel appearing for the petitioner had contended that, the 1^st respondent had misunderstood the ambit of the guidelines set out in circular No.13 and that the benefit of that circular should have been given to the petitioner. The learned counsel would also contend that the finding of the 1^st respondent that no material was available for considering the application of the petitioner is also incorrect inasmuch as, the necessary documentation showing that there was no managing committee till 14.10.2022 had been submitted and the same had not been considered.

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Sri Y.N.Vivekananda, learned Standing Counsel appearing for the respondents, on the other hand, would contend that the grounds raised by the petitioner, did not make out a case for condonation of delay and

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that the 1^st respondent-Chief Commissioner had taken an appropriate view of the matter. The learned Standing Counsel would submit that, it was not necessary for a managing committee to be set up and the returns could have very well be filed by the person in charge himself. He would further submit that, the benefit of the circular would be available to explain the delay caused by non-preparation of the audit reports only if such audit is completed by the auditor named under State Law and the same would not be available for a private auditor.

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8. The relevant guidelines in circular No.13 of 2023 read as follows:

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6. In the context of para-5 above, the CCsIT/DGsIT while deciding such applications for condonation of delay in furnishing return of income, shall satisfy themselves that the applicant’s case is a fit case for condonation under the existing provisions of the Act. The CCsIT/DGsIT shall examine the following while deciding such applicants-

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(i). The delay in furnishing the return of income within the due date under sub-section(1) of section 139 of the Act was caused due to circumstances beyond the control of the assessee with appropriate documentary evidence/s;

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(ii). where delay in furnishing return of income was caused due to delay in getting the accounts audited by statutory auditors appointed under the respective State Law under which such person is required to get his accounts audited, the date of completion of audit vis-à-vis the due date of furnishing the return of income under sub-section (1) of section 139 of the Act; and

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(iii). Any other issue indicating towards tax avoidance or tax evasion specific to the case, which comes into the light in the course of verification and having bearing either in the relevant assessment year or establishing connection of relevant assessment year with other assessment year/s. 6.1. The cases falling under para 6(iii) above, would require further necessary action as per law.

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Guideline 6(ii) states that, any delay which occurs in the filing of the return, on account of delay in getting the accounts audited by the statutory auditors appointed under the respective State Law, would require the authority, under section 119 2(b), to condone the delay on account of such delay in obtaining the audit report.

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In the present case, there is no dispute that the account of the cooperative society, such as the petitioner, have to be audited by the cooperative department. This would mean, that the petitioner society would have no control over the timeline in which such an audit would be completed. Keeping this in mind, the said guidelines appears to have been framed in the circular. The petitioner, moved for replacing the audit by the cooperative department with an audit conducted by a private auditor. For this purpose, permission had to be taken from the cooperative department and the audit by a private auditor commenced after such permission had been taken. In the circumstances, guidelines 6(ii) would operate on all fours. The view that the guideline is not available if the audit is conducted by a private auditor, does not take into account the fact that such a private auditor would step in only when the auditor, designated under the State Law, had delayed the audit beyond a reasonable time and steps are taken for completion of the audit through a private auditor.

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In such circumstances, the petitioner was entitled for condontion of delay in terms of guidelines 6(ii) of circular No.13 of 2023.

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For the aforesaid reasons, this writ petition is Allowed, setting aside the order of rejection of the Chief Commissioner dated 22.07.2025, passed under Section 119 2(b) of the Income Tax Act, with a further direction that the said returns filed by the petitioner shall be taken into

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account for all proceedings under the Income Tax Act.

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There shall be no order as to costs.

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As a sequel, pending applications, if any, shall stand closed.

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R RAGHUNANDAN RAO, J

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T.C.D. SEKHAR, J