Delay in Filing Revised Income Tax Return Cannot Be Rejected Mechanically: Punjab & Haryana High Court Holds Section 119(2)(b) Requires Examination of ‘Genuine Hardship’ and Correctness of Refund Claim

Case Name: Rajbir Singh v. Principal Commissioner of Income Tax, Panchkula and Others

Date of Judgment: 23 September 2026

Citation: CWP No. 18800 of 2023

Bench: Hon’ble Mr. Justice Deepak Sibal and Hon’ble Mr. Justice Sunish Bindlish.

Held: The Punjab and Haryana High Court held that an application under Section 119(2)(b) of the Income Tax Act, 1961 seeking condonation of delay for filing a revised return cannot be rejected mechanically or by importing the test applicable under Section 5 of the Limitation Act, 1963. The statutory inquiry under Section 119(2)(b), read with CBDT Circular No. 9/2015 dated 09.06.2015, is materially different: the competent authority must examine whether the refund claim is correct and genuine and whether refusal to entertain it would result in genuine hardship to the assessee.

The Court observed that Circular No. 9/2015 permits condonation of delay in refund claims, subject to the prescribed six-year outer limit, and expressly requires the competent authority to satisfy itself regarding the genuineness of the claim and the existence of genuine hardship. The purpose of Section 119(2)(b) is to enable relaxation of statutory timelines in deserving cases so as to avoid genuine hardship.

The High Court found that the Principal Commissioner of Income Tax had failed to undertake the independent inquiry contemplated by the circular. Merely relying upon reports of subordinate authorities, stating that another favourable appellate order had not been accepted by the Revenue, or observing in a single sentence that “no case is made out for hardship” did not satisfy the statutory requirement of a reasoned consideration.

The Court further held that the Revenue could not defend the impugned order before the High Court on a ground which had not formed part of the order itself. Relying upon the principle in Mohinder Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405, it reiterated that the validity of an administrative or statutory order must be judged on the reasons recorded in the order and cannot subsequently be supplemented through fresh grounds in litigation.

Importantly, the Court clarified that proceedings under Section 119(2)(b) are not governed by the same “sufficient cause” standard applicable to condonation of delay under Section 5 of the Limitation Act. While the circumstances explaining delay may remain relevant, a day-to-day or standalone explanation of delay is not the controlling test. The primary considerations remain the correctness and genuineness of the claim, genuine hardship and compliance with the outer time-limit stipulated by the CBDT Circular.

Summary: The petitions were filed by former employees of HMT Limited’s Tractor Division at Pinjore, which had become financially unviable and was eventually closed pursuant to a Union Cabinet decision dated 27.10.2016. The employees had not received salaries since July 2014 and certain statutory dues were also pending. HMT subsequently offered its permanent employees a Voluntary Retirement Scheme/Voluntary Separation Scheme in connection with closure of the Tractor Division.

The lead petitioner, Rajbir Singh, opted for VRS and received ₹29,14,500. In Form 16 issued by HMT Limited, exemption of ₹5 lakh was granted under Section 10(10C) of the Income Tax Act and the balance amount was treated as taxable. Acting on the figures appearing in Form 16, the petitioner filed his income tax return for Assessment Year 2017-18.

Subsequently, another similarly situated HMT employee, Prempal, pursued a claim for exemption under Section 10(10B) instead of Section 10(10C). The CIT(A) allowed his appeal, relying inter alia upon the Madras High Court judgment in Hindustan Photo Film Workers’ Welfare Centre (CITU) v. Government of India, (2018) 400 ITR 299 (Madras). Similar disputes involving other HMT employees were eventually decided by the ITAT in favour of the assessees.

After learning of the favourable appellate decision, the petitioner filed an application before the PCIT on 10.08.2020 seeking condonation of delay to file a revised return for Assessment Year 2017-18 so that he could claim exemption under Section 10(10B) instead of Section 10(10C). According to him, the revised claim would result in a refund of approximately ₹7.19 lakh. The PCIT rejected the application on 19.01.2022, principally observing that the favourable CIT(A) order relied upon by the petitioner had not been accepted by the Department on merits, that there was no appellate order in the petitioner’s own case and that no case of genuine hardship had been made out.

The High Court examined the statutory framework governing refunds and delayed claims. It noted that Section 237 recognises the entitlement to refund of tax paid in excess of what is properly chargeable, while Section 239 requires the claim to be made through a return. Section 119(2)(b) empowers the CBDT to authorise income tax authorities to admit belated claims for exemption, deduction, refund or other relief where necessary to avoid genuine hardship. CBDT Circular No. 9/2015 lays down the conditions and procedure governing exercise of that power.

The Court held that the PCIT had not independently evaluated whether the petitioner’s substantive refund claim was correct or genuine. Nor had the authority meaningfully considered the petitioner’s circumstances while determining genuine hardship. The Court noted that the petitioner had lost employment on closure of HMT’s Tractor Division, that the refund claimed was substantial from his perspective, and that appellate authorities in several cases involving similarly situated employees had taken a favourable view regarding applicability of Section 10(10B).

The Court also rejected the Revenue’s argument that the petitioner had furnished no explanation for the delay. The petitioner had stated that his original return was filed on the basis of the employer’s Form 16, which treated the payment under Section 10(10C), and that the legal basis for a claim under Section 10(10B) became apparent to him only after later appellate decisions involving similarly situated employees. The Court held that it was therefore incorrect to say that no explanation whatsoever had been furnished.

At the same time, the High Court did not adjudicate the petitioner’s substantive entitlement to exemption under Section 10(10B). It confined itself to examining the legality of the PCIT’s rejection of the condonation application and left the merits of the tax claim to be determined afresh by the competent authority.

Decision: The High Court allowed the writ petitions and quashed the PCIT’s order rejecting the application for condonation of delay. The matter was remitted to the Principal Commissioner of Income Tax for fresh consideration of the petitioner’s application seeking permission to file a revised return for Assessment Year 2017-18.

The PCIT was directed to afford the petitioner an opportunity of hearing, consider the material on record and pass a reasoned order within three months from receipt of the High Court’s order. The Court expressly clarified that it had expressed no opinion on the merits of the petitioner’s claim for exemption/refund, which was to be independently decided by the competent authority in accordance with law.