Madras High Court Allows Belated Condonation Application under Section 119(2)(b) Despite CBDT Circular

Background and Context

The Madras High Court, in Arulmigu Gnanamalai Murugan Educational Trust Vs CIT (Exemption) (Madras High Court), examined the extent of discretionary power available to income-tax authorities under Section 119(2)(b) of the Income Tax Act 1961, particularly in the context of limitation prescribed through CBDT circulars.

The dispute arose from an order dated 08.09.2025 by the Commissioner of Income Tax (Exemption), rejecting an application for condonation of delay under Section 119(2)(b). The assessee, a registered educational and charitable trust, had approached the High Court by way of a writ petition challenging this rejection.

At the core of the matter were two legal issues:

  • Whether the CBDT Circular No.16/2024 dated 18.11.2024, which restricts condonation powers beyond three years from the end of the relevant financial year, could curtail the statutory discretion vested in authorities under Section 119(2)(b); and
  • Whether, on the facts of the case, the delay in filing the return and consequent condonation request ought to be excused, particularly considering the assessee’s charitable character and the reasons for delay.

Factual Matrix

Nature of the Assessee and Filing Delay

  1. The assessee, Arulmigu Gnanamalai Murugan Educational Trust, is an educational and charitable trust.
  2. The statutory audit report, which is a prerequisite for filing the return of income for trusts claiming exemption, was stated to have been finalized only on 30.12.2020.
  3. Due to this delay in finalizing the audit report, the return of income could ultimately be filed only on 15.02.2022.

The assessee explained that it was not in a position to file a complete and compliant return earlier because the audited figures were not available until late December 2020. This audit delay formed the primary basis for seeking condonation of delay in relation to the relevant return and associated claims.

Demand Notice and Subsequent Proceedings

  • A demand notice dated 24.06.2025 was issued to the assessee by the income-tax authorities, evidently proceeding on the premise that the belated return or delayed compliance had adverse consequences.
  • Upon receipt of the demand notice, the assessee submitted its reply and subsequently filed an application before the Commissioner seeking condonation of delay under Section 119(2)(b).
  • The Commissioner, however, by order dated 08.09.2025, rejected the condonation request.

Aggrieved by this rejection, the assessee approached the Income Tax Appellate Tribunal. The Tribunal declined to entertain the appeal, holding that no appeal lies against such an order passed under Section 119(2)(b). With no statutory appellate remedy available, the assessee invoked the writ jurisdiction of the Madras High Court.

Revenue’s Stand: Reliance on CBDT Circular

Circular No.16/2024 dated 18.11.2024

On behalf of the Revenue, learned senior standing counsel Mr. V. J. Arul Raj argued that: