CBDT Condonation Circulars Must Be Applied Liberally, Not Hyper-Technically: Punjab and Haryana High Court Condones 34-Day COVID Delay in Co-operative Society’s ITR, Revives Section 80P Claim

Case Name: Alaknanda Cooperative Group Housing Society Limited v. Chief Commissioner of Income Tax and Others

Date of Judgment: September 16, 2026

Citation: CWP No. 24673 of 2026

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

Held: The Punjab and Haryana High Court held that applications by co-operative societies seeking condonation of delay in filing income-tax returns for claiming deduction under Section 80P of the Income-tax Act, 1961 must be considered under CBDT Circular No. 13/2023 dated July 26, 2023. The specific circular governing delayed returns filed by co-operative societies displaces the general provisions of CBDT Circular No. 9/2015, which concerns delayed claims for refunds and carry-forward or set-off of losses.

An order rejecting condonation without even referring to the specific circular relied upon by the assessee reflects complete non-application of mind. The Chief Commissioner of Income Tax could not reject the application by relying upon an inapplicable general circular or merely because the Commissioner of Income Tax (Appeals) had previously upheld disallowance of the deduction, particularly when the Income Tax Appellate Tribunal had expressly permitted the assessee to pursue its independent condonation application.

The Court further held that circulars issued under Section 119(2)(b) to alleviate genuine hardship must receive a liberal and purposive interpretation. Tax authorities should not adopt a hyper-technical approach where the delay resulted from circumstances beyond the assessee’s control, particularly pandemic restrictions and delayed completion of a statutory audit.

Where the return was delayed by only 34 days during the COVID-19 period, the audit report was itself received after the extended due date, and the co-operative society promptly approached the authorities before filing its return in accordance with their advice, the delay constituted genuine hardship falling within clauses 6(i) and 6(ii) of Circular No. 13/2023.

Summary: The petitioner was a registered co-operative society seeking deduction under Section 80P of the Income-tax Act for Assessment Year 2020-21. The original due date for filing its income-tax return was July 31, 2020, but owing to the COVID-19 pandemic, the deadline was extended to February 15, 2021.

The petitioner’s accounts were required to be audited through the State Audit Department. It received the relevant audit report on February 22, 2021, after the extended due date for filing the return had expired.

On March 9, 2021, the petitioner applied to the Income Tax Department for condonation of the delay. By a communication dated March 17, 2021, the Department advised it to file a belated return under Section 139(4) of the Act. Acting upon that advice, the petitioner filed its return on March 20, 2021 and claimed deduction under Section 80P.

The return was processed, but the deduction was denied through an assessment order dated September 19, 2022 under Section 143(3), read with Section 144B. The Assessing Officer relied upon Section 80AC(ii), which makes timely filing of the return a condition for availing specified deductions.

The petitioner’s statutory appeal was dismissed by the Commissioner of Income Tax (Appeals) on December 12, 2025. It also approached the Income Tax Appellate Tribunal, which declined to interfere with the disallowance at that stage. However, by its order dated March 19, 2026, the Tribunal expressly granted liberty to the petitioner to pursue its separate condonation application under CBDT Circular No. 13/2023.

The petitioner had filed that application before the Chief Commissioner of Income Tax on January 12, 2026, seeking condonation of the 34-day delay. The Chief Commissioner rejected it on June 15, 2026, principally on the grounds that the appellate authority had already upheld the Section 80P disallowance and that the petitioner’s case did not fall within the categories specified in CBDT Circular No. 9/2015.

The High Court found that Circular No. 9/2015 was inapplicable. That circular governs applications involving delayed claims for refunds and carry-forward or set-off of losses. In contrast, Circular No. 13/2023 specifically addresses condonation applications by co-operative societies whose delayed returns contain claims for deduction under Section 80P. The specific circular therefore governed the petitioner’s case.

The Court found that the Chief Commissioner had not even referred to Circular No. 13/2023, despite the petitioner having based its application solely upon that circular. This omission, coupled with reliance upon the wrong circular, demonstrated complete non-application of mind.

The Chief Commissioner had also erred in relying upon the earlier dismissal of the petitioner’s appeal by the Commissioner of Income Tax (Appeals). The ITAT’s subsequent order expressly preserved the petitioner’s right to pursue condonation. Therefore, the application was required to be decided independently and uninfluenced by the earlier appellate order.

On merits, the Court noted that COVID-19 restrictions remained prevalent during February and March 2021. The statutory audit report, which had to be routed through the State Audit Department, was received only on February 22, 2021. The petitioner applied for condonation on March 9, acted upon the Department’s advice dated March 17 and filed its return within three days.

These circumstances demonstrated that the short delay was beyond the petitioner’s control and arose partly from the delayed statutory audit. Its case consequently fell within clauses 6(i) and 6(ii) of Circular No. 13/2023 and satisfied the requirement of genuine hardship.

Decision: The High Court allowed the writ petition and set aside the Chief Commissioner’s order dated June 15, 2026. Instead of remanding the matter, the Court itself condoned the 34-day delay in filing the petitioner’s income-tax return for Assessment Year 2020-21. The Income Tax Department was directed to consider the petitioner’s claim for deduction under Section 80P of the Income-tax Act afresh and in accordance with law. The Court did not itself grant the deduction on merits.