Kerala High Court Upholds Five-Year Condonation Limit Under Section 119(2)(b): Refund Claim for AY 2018-19 Dismissed

Case Overview

Case: Suresh Velu Ellathukalathil Vs PCIT (Kerala High Court)

The Kerala High Court recently dismissed a writ petition filed by an individual assessee challenging the rejection of a condonation application submitted under Section 119(2)(b) of the Income Tax Act, 1961. The dispute centred on whether a belated income tax return filed for Assessment Year 2018-19, with the sole object of claiming a refund, could be entertained after the revised five-year limitation period prescribed by the CBDT had already come into force.

Background and Facts of the Case

The assessee, an individual covered under the Income Tax Act, 1961, had submitted an application before the Principal Commissioner of Income Tax (PCIT) seeking condonation of delay in filing income tax returns for AY 2018-19. The purpose of filing the belated return was to claim an income tax refund.

The PCIT rejected the application by relying on the revised CBDT circular, observing that the application had been filed beyond the five-year period computed from the end of the relevant assessment year. The authority concluded that it lacked the competence to entertain such an application under the prevailing circular framework.

Aggrieved by this rejection, the assessee approached the Kerala High Court by way of a writ petition.

Arguments Raised by the Assessee

The assessee put forth the following contentions before the High Court:

  • **Reliance on CBDT Circular No. 9/2015 (Ext.P4)😗* It was contended that the earlier circular permitted condonation of delay for a period of up to six years from the end of the relevant assessment year. Since the assessee's application, when measured against this earlier circular, fell within the permissible window, it ought to have been entertained.

  • Vested Right Argument: The assessee argued that a legitimate expectation or vested right had crystallised under CBDT Circular No. 9/2015, and that the subsequent reduction of the limitation period from six years to five years via a later circular could not be applied retrospectively to defeat that right.

  • Section 148 Argument: The assessee placed reliance on a decision of the Madras High Court in W.P. No.7433 of 2019 and W.M.P. No.8101 of 2019, where a learned Single Judge had observed that since the Income Tax Department had failed to issue a notice under Section 148 of the Income Tax Act, 1961, this failure warranted interference by the court. By extension, the assessee argued that the department's omission to invoke Section 148 should have some bearing on the condonation proceedings.

Revenue's Counter-Arguments

The Standing Counsel representing the Revenue offered a clear and structured rebuttal:

  • The earlier CBDT Circular No. 9/2015 (Ext.P4) stood superseded by a subsequent circular issued on 01.10.2024 (Ext.P5), which unambiguously reduced the permissible condonation period from six years to five years.