Sudden Departure of Accounts Staff in Remote Location Constitutes “Genuine Hardship”; High Court Condones Delay in Filing ITR Rejected by PCIT
ISSUE
Whether the successive resignation of key employees handling accounts and tax compliances in a company located in a remote village constitutes “reasonable cause” and “genuine hardship” under Section 119(2)(b) for condoning the delay in filing the Income Tax Return, and whether the Principal Commissioner (PCIT) was justified in rejecting the condonation application on the ground that the audit report could have been filed without such staff.
FACTS
The Assessee: A company with its place of business in a remote village (Nizigarh, Dist. Jajpur).
The Hardship: The company faced a crisis where employees handling accounts and income tax compliances resigned in quick succession within a short period (around one year).
The Delay: Due to this disruption and the loss of specialized knowledge/access to critical information, the assessee could not file its Return of Income for Assessment Year 2024-25 within the statutory deadline.
The Action: After a new employee joined and stabilized the records, the assessee filed a belated return and applied for condonation of delay under Section 119(2)(b), citing genuine hardship.
The Rejection: The Principal Commissioner of Income Tax (PCIT) rejected the application. The PCIT reasoned that if the audit report was ready, the return could have been filed even without the specific employees, labeling the explanation as “not plausible.”
HELD
Disruption of Operations: The High Court observed that the sudden departure of employees, especially those with specialized knowledge in accounts and access to critical data, significantly disrupts normal operations. This is exacerbated when the business is in a remote location where finding replacements is difficult.
Genuine Hardship: The Court held that such a situation constitutes a “reasonable and sufficient cause” preventing the timely filing of the return. It qualifies as “genuine hardship” under Section 119.
PCIT’s Error: The PCIT failed to appreciate that filing a return involves more than just uploading a document; it requires verification and access to data which was hampered by the staff attrition. The rejection order was deemed mechanical.
Verdict: The impugned order rejecting the condonation was set aside. The delay was condoned, and the Revenue was directed to accept the return. [In Favour of Assessee]
KEY TAKEAWAYS
Staff Attrition is a Valid Ground: Losing key accounts personnel, especially in smaller setups or remote areas, is a recognized ground for delay condonation. It is not “mere negligence” but a genuine operational failure.
“Genuine Hardship” Defined: The Court reiterated that “genuine hardship” implies a situation that is genuine (not fake) and has caused real difficulty (hardship) to the assessee, preventing compliance despite best efforts.
Section 119 Remedial Nature: The power to condone delay is meant to ensure substantive justice. Authorities should not take a pedantic view (like “you could have filed without them”) when the bona fides of the taxpayer are clear.
HIGH COURT OF ORISSA
Exim Infrastructure India (P.) Ltd.
v.
Central Board of Direct Taxes*
Harish Tandon, CJ.
and MURAHARI SRI RAMAN, J.
and MURAHARI SRI RAMAN, J.
W.P.(C) No.32432 of 2025
NOVEMBER 21, 2025
Ms. Kananbala Roy Choudhury, Adv. for the Petitioner. Avinash Kedia, Jr. Standing Counsel for the Respondent.
ORDER
1. Aggrieved by refusal to condone the delay in filing return of income for the Assessment Year 2024-25 vide order dated 18.08.2025 under Section 119(2)(b) of the Income Tax Act, 1961 (for short, „I.T. Act’) by the Principal Commissioner of Income Tax, Bhubaneswar-I (for short „PCIT’) – opposite party No.2, the instant writ petition has been filed under Articles 226 and 227 of Constitution of India.
2. Having place of business at a remote village, Nizigarh in the district of Jajpur, the petitioner-company faced much hurdles on account of resignation tendered by the employees, who were handling accounts and income tax related compliances with quick succession, the petitioner could not furnish return for the Assessment Year 2024-25 within the period stipulated. However, after joining of the newly appointed employee, enclosing audited accounts along with all necessary particulars, return could be submitted. The petitioner filed a petition for condonation of delay explaining therein the hardship faced by the company and showed its bona fide.
2.1. In response to such petition for condonation of delay, the petitioner was asked to furnish certain documents by letter dated 11.03.2025 which was duly responded to on 18.03.2025. Pursuant to further notice dated 16.07.2025 calling for clarification with regard to condonation of delay in filing return issued by the PCIT, the petitioner submitted a detailed reply enclosing copies of resignation letters of the employees who joined in the office but left within short span, the details of such fact is reproduced herein below:
| Sl. No. | Name of the Employee | Date of Joining | Date of Relieving |
| 1 | Abhisek Biswal | 15.05.2023 | 29.02.2024 |
| 2 | Giridhari Dey | 13.10.2023 | 31.07.2024 |
| 3 | Sakya Singh Swain | 18.07.2024 | 30.09.2024 |
| 4 | Linkan Panda | 09.01.2024 | 07.11.2024 |
2.2 It was also apprised before the said authority concerned that an affidavit affirming such fact had already been submitted for consideration. The petitioner prayed that unless the delay is condoned and the income tax return is not accepted, the petitioner could not be a position to claim refund of Rs.9,69,072/- and availed the benefit of carry forward loss to the tune of Rs.63,00,773/- in the subsequent Assessment Years, which may lead to immeasurable loss and would cause serious prejudice.
2.3. Citing judgments rendered in B.M. Malani v. CIT (SC)/[2008] 306 ITR 196 (SC)(SC), Sitaldas K.Motwani v. DGIT (Bombay)/[2010] 323 ITR 223 (Bombay)(Bom.), Pankaj Kailash Agarwal v. Asstt. CIT (Bombay)/[2024] 464 ITR 65 (Bombay) and drawing attention to Circular No.7/2023 [F. No. 312/63/2023-0T], dated 31.07.2023 and Circular No.11/2024 [F. No. 312163/2023-0T], dated 01.10.2024 issued by the Central Board of Direct Taxes, the petitioner prayed for condonation of delay taking into account the explanation proffered showing “sufficient cause” and “genuine hardship” faced by the petitioner at the relevant point of time. However, the PCIT observing that had the the audit report been made ready, the same could have been furnished before the Jurisdictional Assessing Officer even without the aid and assistance of the employee to establish genuine hardship. Having not done so, he considered the explanation so offered as not plausible and, thereby rejected the petition for condonation of delay under Section 119(2)(b) of I.T. Act.
2.4. The present writ petition is filed challenging the propriety, legality and legal justification of rejection of petition for condonation of delay.
3. Ms. Kananbala Roy Choudhury, learned Advocate appearing for the petitioner-company submitted that the factual details were furnished before the PCIT clearly stating therein that during the financial year 2023-2024 (Assessment Year 2024-25), many employees joined and left the office within short span, which caused delay in furnishing return within period stipulated. An affidavit eliciting such fact was also submitted before the authority concerned. Said fact ought to have been considered pragmatically without having pedantic approach. She drew attention of this Court to Circular No.11/2024 issued by the Central Board of Direct Tax vide F.No.312/63/2023-OT, dated 01.10.2024 whereby discretion is vested with the authority concerned for consideration of condonation of delay with the following conditions:
“6. A belated application for supplementary claim of refund (claim of additional amount of refund after completion of assessment for the same year) can be admitted for condonation provided other conditions as referred above are fulfilled. The powers of acceptance/rejection within the monetary limits delegated to the Pr.CCsIT/CCsIT/pr.CsIT/CsIT in case of returns claiming refund and supplementary claim of refund would be subject to the following further conditions:
| i. | The income of the assessee is not assessable in the hands of any other person under any of the provisions of the Act. |
| ii. | No interest will be admissible on belated claim of refunds. |
| iii. | The refund has arisen as a result of excess tax deducted/collected at source and/or excess advance tax payment and/or excess payment of self assessment tax as per the provisions of the Act. |
7. The delegation of powers, as per para 2 of this Circular shall also cover all such applications/claims for condonation of delay under section 119(2)(b) of the Act which are pending as on the date of issue of the Circular i.e. 01.10.2024.”
3.1. Placing reliance on judgments of this Court in the case of Oneness Educational and Charitable Trust v. Commissioner of Income-tax (Exemption) ITR 654 (Orissa)/2024 SCC Online Ori 1269 and order dated 17.06.2025 of this Court passed in the case of People’s Educational Action and Community Evocation v. Commissioner of Income Tax (Exemption) [W.P.(C) No.13143 of 2025, dated 17-6-2025] it is submitted that this Court having taken into account the Circulars issued by Central Board of Direct Taxes on the subject-matter for condonation of delay in filing returns, interfered with the order refusing condonation of delay.
4. Mr. Kedia, learned Junior Standing Counsel for the Department refuting such contentions of learned counsel for the petitioner, referring to order dated 18.08.2025 passed by the PCIT rejecting the petition for condonation of delay, submitted that no fault can be attributed to the authority concerned in rejecting such petition. The facts narrated and plea taken for condonation of delay did not find favour with the PCIT and the contents of affidavit was disbelieved. He further submitted that the PCIT appreciating the fact of date(s) of resignation of the employee ascribing the reason that there was sufficient time available with the petitioner-assessee to file return within the extended period, i.e., on or before 15.11.2024 attune with CBDT Circular No.13/2024 dated 26.10.2024. Therefore, he vehemently, urged not to entertain this writ petition.
5. Heard Ms. Kananbala Roy Choudhury, learned Advocate for the petitioner-company and Mr. Avinash Kedia, learned Junior Standing Counsel for the Income Tax Department.
6. This Court having perused the record finds that the petitioner has specifically placed before the PCIT material regarding non-availability of employees working in the Accounts Department of the Company. Scrutiny of the dates as culled out in the foregoing paragraph, it is manifest that personnel joined in the office during 15.05.2023 to 09.01.2024, left the office between 29.02.2024 and 07.11.2024. It is inconceivable that the new incumbent taking over the charge of the accounts department with respect to transactions of the company during the financial year 2023-24 with short span of joining could get himself acquainted with the nuances of claim made showing refund and loss of the company.
6.1. By dint of circulars issued by the Central Board of Direct Taxes, the power to condone the delay being vested in the statutory authorities, they should adopt liberal approach in considering the plight of the assessee. An assessee does not stand to benefit by lodging a claim belatedly. The PCIT, being highly placed officer, should have judicious approach in considering the facts.
6.2. However, cursory glance at the impugned order dated 18.08.2025 seems to have been passed without appropriately appreciating the genuine hardship/cause for not being able to file return within the period as stipulated in the Circular dated 26.10.2024. This Court has the occasion to refer to Oneness Educational and Charitable Trust (supra) wherein a Division Bench of this Court having taken into consideration the nuances of the term “genuine hardship” discussed the legal perspective, quashed the order rejecting the application for condonation of delay under Section 119(2)(b) of the IT Act and directed the authority to take follow up action in accordance with law.
6.3. Considering the “genuine hardship” on facts, this Court referring to Survodaya Charitable Trust v. Income Tax Officer (Exemption) (2021) 18 ITR-OL 253 (Gujarat)and the judgment dated 25.04.2025 rendered in Action Research for Health and Socio-economic Development v. Central Board of Direct Taxes (CBDT),Action Research for Health and Socio-economic Development v. Central Board of Direct Taxes (Orissa)/ W.P.(C) No.8035 of 2025 interfered with the order rejecting the application for condonation of delay.
6.4. Diligently considered the difficulties faced by the petitioner in furnishing return belatedly. From the contents extracted in the table it is apparent that during the period in question and at and around the date specified for filing return for the Assessment Year 2024-25, the employees of accounts department left the organization. A reasonable cause is an event or circumstance that is beyond the taxpayer’s control and despite the exercise of ordinary business care and prudence, such factor prevented the petitioner from discharging its responsibility to file return in time. The PCIT ought to have taken into consideration the argument that sudden departure of employees, especially those with specialized knowledge in accounts and having access to critical information, disrupted the normal operations of the organization to such an extent that timely filing became impossible despite best efforts of the petitioner. The fact of departure of the employees being asserted by way of affidavit, it could not have been lightly brushed aside by the PCIT on surmise that “if the books of account was completed the assessee could have filed physical audit report before the Jurisdictional Assessing Officer to establish the genuine hardship”.
6.5. After careful consideration of the application and the supporting documents, this Court is persuaded that the resignation of employees with quick succession within a period of around one year left the organization in disrupted condition leading to nonfiling of return within the deadline. Such aspect constitutes a reasonable and sufficient cause for condoning the delay in filing the return. The circumstances as presented by the petitioner demonstrated largely that it was beyond the control and the return could not have been furnished on exercise of ordinary business care and prudence under the prevailing conditions.
7. In the above premises, this Court does not find any justification in rejecting the application for condonation of delay vide order dated 18.08.2025 by the PCIT invoking Section 119(2)(b) of the IT Act. Consequently, the impugned order dated 18.08.2025 passed by the PCIT, Bhubaneswar-I is set aside and the authority concerned is directed to grant all consequential reliefs to the petitioner by taking into account the return/audit report pertaining to the Assessment Year 2024-25, as if the same is filed within the period specified by and under the statute coupled with the circulars/notification.
8. With the aforesaid observation made (supra) and direction issued, the writ petition stands disposed of. Accordingly, the pending Interlocutory Application (s), if any, stand disposed of.