Respondent No.1 ought to have followed the exercise of delegated authority in terms of the law delegating such authority. The law, read with the relevant circular, mandated that the benefits of an enabling provision ought to percolate to the Assessee so as to save it from the rigours of law.
Dawat E Islami Hind v. Commissioner of Income-tax (Exemptions)
[2026] 183 taxmann.com 720 (Bombay)[09-02-2026]
By the Taxation Laws (Amendment) Act, 1970, Section 119 was substituted to widely broaden the power of the Central Board of Direct Taxes (“CBDT”) to issue instructions to subordinate authorities. Prior to its amendment, Section 119 did not have the depth, clarity and scope of implementation in the administration of functions of subordinate authorities and effective implementation of the Act.
Para 14 of the Departmental Circular No.56 dated 19-03-1971 contains detailed background of the substitution of Section 119 which describes the gamut of powers that the Board can exercise.
“…the Board has been specifically empowered to issue administrative directions and instructions for the purpose of proper and efficient management of the work of assessment and collection of revenue.”
Para 14 further highlights the nature of orders that may be issued by the Board, with the aim of relaxation of any provisions, but not in any manner interfering with the powers and discretion of the Appellate Authorities or in the carrying out of any assessment proceedings.
In para 15, the Circular discusses the significance of the insertion of the new sub-section (2) to Section 119. Sub-section (2) enlarges the powers of the Board in cases where provisions of the Act bars income tax authorities from entertaining any application or allowing any benefit or any other relief on the grounds of limitation (delay on account of time bar. Under this sub-section the Board is vested with powers to issue directions to the Commissioners of Income Tax or the Assessing Officers to admit such applications and deal with them on merits. The Board has issued various Circulars and Notifications from time to time to deal with class or classes of cases where it considers necessary to deal with the issue of limitation.
Section 119(2)(b) of the Income Tax Act, 1961 is reproduced as under:
Instructions to subordinate authorities.
119. (1) ***
(2) Without prejudice to the generality of the foregoing power,-
| (a) *** |
| (b) | the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any income-tax authority, not being a Joint Commissioner (Appeals) or a Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; |
| (c) *** |
As mentioned above, the CBDT issues various guiding circulars and notifications from time to time.
In a recent Writ Petition filed before the Hon’ble High Court of Bombay, the Petitioner Trust was aggrieved with an order of the CIT (E) which had rejected its application to condone a delay of 50 days in filing of audit report in Form 10B.
Before proceeding further, a brief note on Form 10B and its significance.
Form 10B is to be filed by every Trust in compliance with the provisions of Section 12A for purpose of claiming benefit under section 11 of the Act. Section 11 exempts incomes of the nature described therein from forming part of Total Income for any assessment year. Failure to file Form 10B within the time limit provided for would result in a Trust being subjected to income tax. For a Public Trust, its activities are dependent on receipts, which come to it by way of donations. The receipts are utilised towards the objects of the Trustand are generally expended during the year. In cases where the entire amount is not utilised, section 11 provides for a certain portion of the receipts to be carried forward for the next five financial year periods, to be spent on the objects of the Trust. Taxing a Trust, therefore, would mean cause huge financial distress.
Of course, to be entitled to a benefit, the Trust is required to be compliant with the laws and timelines. But often, due to various reasons, there could be a cause for delay, and such delay could prove costly to the Trust, but for sub-section (2), more specifically clause (b) therein. An assessee Trust can seek relief of condonation of delay in filing of Form 10B, amongst various other reliefs that can be remedied under Section 119, by making an application in terms of sub-section (2) clause (b) to the CIT (E). It is necessary to understand that the power of the CBDT to provide relief u/s 119 is a delegated power and the authorities are required to carry out the function within the domain of the section and the directory circulars issued from time to time.
In the Writ Petition before the High Court, we highlighted the fact of an abuse of delegated power by the authority, which resorted to non-existent conditions to reject the Petitioner’s leave to grant a mere fifty days’delay. The CIT(E) referred to the Petitioner’s alleged conduct of being a habitual defaulter in the five immediately preceding five years, ignoring the subsequent five years’ timely compliances. Most importantly, the alleged delay in the earlier assessment years were a non-starter; the law had in fact not laid down any timeline. The law was explained to the Hon’ble Court, year wise, to bring about the fact that it was not just an abuse of delegated power but also displayed how the authorities did not have the requisite knowledge of law to occupy positions that vest them with delegated discretionary authority.
The Hon’ble High Court while allowing the Writ Petition, in para 21 of its order brought about an important principle of administrative law into the exercise of discretion by the Income Tax authorities. Para 21 reads as under:
- 21. Considering the law as applicable for the earlier relevant Assessment Years, we find that Respondent No.1failed in application of mind while dealing with the condonation of delay. As discussed above, the Respondent No.1 ought to have followed the exercise of delegated authority in terms of the law delegating such authority. The law, read with the relevant circular, mandated that the benefits of an enabling provision ought to percolate to the Assessee so as to save it from the rigours of law. In the present case, considering that the delay was merely fifty days, and further considering that the main ingredient on which Respondent No.1 based its rejection of the application was a perceived delay in earlier years, we find that there has been a gross violation of the directions under Section 119(2)(b) read with the Circular for the relevant period issued thereunder. Respondent No.1 was necessarily bound to follow the law both in letter and spirit and not cause its exercise of discretion to be coloured by non-existent conditions.
More often than not, an assessee suffers at the hands of various tax authorities, be they under the Income Tax Act or the Goods and Services Tax Act or any other law determining revenue or taxes payable by a person. Such revenue generating laws provide for various exercise of powers by the authorities administering the law. Many of the discretionary powers vested with authorities become the source and cause of harassment. In a country and under a regime which brazenly touts itself as providing ease for business, the reality is harsh and far from truth. Hope in times to come, assessees, dealers and those who are subjected to paying taxes take more initiative to demand benefits rather than subject to the draconian abuse of powers.
