A Delhi High Court judgment has clarified that a minimal, bonafide delay in filing an income tax return does not justify automatic denial of loss carry forward benefits under the Income Tax Act. The ruling reinforces that the Assessing Officer’s discretion under Section 119(2)(b) must be exercised with regard to proportionality and genuine hardship, not rigid adherence to circulars that conflict with statutory intent.
Background & Facts
The Dispute
The petitioner, Padmalochanan Radhakrishnan, filed his income tax return for Assessment Year 2022-23 on 07.08.2022, seven days after the statutory due date of 31.07.2022 under Section 139(1). The return was filed under Section 139(4) as a belated return. The petitioner claimed a capital loss for carry forward to Assessment Year 2023-24 under Section 80. The Assessing Officer rejected this claim, relying on CBDT Circular No. 11 of 2024, which purported to bar consideration of loss carry forward claims where returns are filed beyond the due date under Section 139(1).
Key Facts
- Due date for filing return for AY 2022-23: 31.07.2022
- Petitioner filed return on: 07.08.2022 (7 days late)
- Return processed under Section 143(1) but loss carry forward claim disallowed
- Petitioner filed application under Section 119(2)(b) for condonation of delay on 15.09.2022
- Application rejected on 17.10.2025 and reaffirmed on 30.10.2025 on grounds of Circular No. 11 of 2024
- No allegation of mala fide, fraud, or deliberate evasion by the petitioner
- The delay was due to unavoidable personal circumstances, as stated in the petition
Procedural History
- 31.07.2022: Statutory due date for filing return for AY 2022-23
- 07.08.2022: Petitioner filed belated return under Section 139(4)
- 15.09.2022: Application under Section 119(2)(b) for condonation of delay submitted
- 17.10.2025: Order rejecting condonation and loss carry forward claim issued
- 30.10.2025: Reiteration of rejection by higher authority
- 25.11.2025: Writ Petition No. 29778 of 2025 filed before Delhi High Court
- 05.05.2026: Hearing concluded; judgment delivered
Relief Sought
The petitioner sought quashing of the orders dated 17.10.2025 and 30.10.2025, and a direction to the Assessing Officer to condone the 7-day delay and allow the carry forward of capital loss under Section 80.
The Legal Issue
The central question was whether Section 119(2)(b) of the Income Tax Act permits an Assessing Officer to deny condonation of a minor, bonafide delay in filing a return solely on the basis of CBDT Circular No. 11 of 2024, thereby disallowing the statutory right to carry forward losses under Section 80.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that the 7-day delay was trivial, non-mala fide, and did not prejudice revenue collection. Reliance was placed on the Madras High Court’s judgment in Regan Powertech Private Ltd. v. CBDT, which held that delays should be condoned unless there is evidence of deliberate evasion. It was contended that Circular No. 11 of 2024 cannot override the statutory discretion vested in authorities under Section 119(2)(b). The petitioner emphasized that Section 139(4) explicitly permits belated filing and does not extinguish rights to loss carry forward; such rights are governed by Section 80, not procedural compliance with Section 139(1).
For the Respondent
The respondents contended that Section 139(4) permits filing of belated returns but does not confer the benefit of loss carry forward, which is only available if the return is filed under Section 139(1). They argued that Circular No. 11 of 2024, issued under Section 119(2)(b), provides clear procedural guidelines and that the Assessing Officer was bound to follow it. The circular, they asserted, was a valid exercise of administrative power to standardize condonation practices and prevent abuse.
The Court's Analysis
The Court examined the interplay between statutory provisions and administrative circulars. It held that while circulars provide guidance, they cannot curtail or override statutory rights conferred by the Income Tax Act. The Court observed that Section 119(2)(b) explicitly grants the authority to condone delay in filing returns for the purpose of claiming refunds, deductions, or carry forward of losses. The circular’s restriction - that no condonation shall be entertained for loss carry forward claims if filed beyond the due date - effectively nullifies this statutory discretion.
"No assessee would stand to benefit by filing the return belatedly. Unless the appellants have reason to believe that the assessee had wantonly and purposely filed the return belatedly for certain mala fide reasons, the delay in filing the return under normal circumstances should be condoned."
The Court relied on this principle from Regan Powertech, affirming that the burden lies on the revenue to prove mala fide intent, not on the assessee to justify minor delays. The Court further cited Collector, Land Acquisition v. MST Kartiji, emphasizing the doctrine of proportionality: a 7-day delay, with no evidence of fraud or evasion, is de minimis and cannot justify denial of a substantive right.
The Court rejected the argument that Section 139(4) excludes loss carry forward, noting that Section 80 makes no such distinction. The denial of carry forward was not based on statutory text but on an administrative circular that exceeds its rule-making authority. The Court concluded that the Assessing Officer had misconstrued the law by treating the circular as mandatory rather than advisory.
The Verdict
The writ petition succeeded. The Delhi High Court quashed the orders dated 17.10.2025 and 30.10.2025. The Assessing Officer is directed to condone the 7-day delay in filing the return for AY 2022-23 and process the claim for carry forward of capital loss under Section 80. The return filed on 07.08.2022 shall be treated as valid for the purpose of loss adjustment. No costs were awarded.
What This Means For Similar Cases
Condonation of Minor Delays Is Mandatory in Absence of Mala Fide
- Practitioners must now argue that any delay under 30 days, absent evidence of fraud or deliberate evasion, must be condoned under Section 119(2)(b)
- Circulars cannot override statutory rights; reliance on CBDT circulars to deny loss carry forward is legally untenable
- Assessing Officers must record reasons for rejecting condonation applications, especially where delay is minimal
Loss Carry Forward Is a Substantive Right, Not Procedural
- Section 80 rights are independent of whether the return was filed under Section 139(1) or (4)
- Denial of carry forward based solely on filing under Section 139(4) is contrary to the Act’s scheme
- Taxpayers may now challenge denials of carry forward even if returns are belated, provided the delay is bonafide
Circulars Are Advisory, Not Absolute
- CBDT Circulars must be read as interpretative aids, not as statutory mandates
- Authorities cannot use circulars to create new disqualifications not present in the Act
- Future litigation should cite Regan Powertech and Kartiji to establish proportionality as the governing standard
