The Delhi High Court has ruled that disagreements among a company’s directors cannot be cited as “genuine hardship” under Section 119(2)(b) of the Income Tax Act, 1961, to justify late filing of its Income Tax Return, especially when no substantial proof supports such a claim.

A Division Bench of Justice V. Kameswar Rao and Justice Madhu Jain underlined that a company, being an independent legal entity, is obliged to fulfil statutory compliances regardless of internal unrest. The Court observed:

“Internal dispute among Directors cannot form a basis to condone delay. When a company continues its operations, such a dispute cannot excuse non-filing of the ITR, which is a mandatory requirement.”

The Bench further highlighted that the petitioner failed to produce any document evidencing director-level conflict, making the justification untenable. Section 119(2)(b) provides relaxation only in matters involving real and proven hardship.

In this case, the petitioner, involved in digital marketing services, delayed filing its ITR for AY 2018-19 by as many as 30 months. The company sought condonation claiming persistent disagreements among directors caused resignations and disrupted functioning.

The Revenue countered that corporate governance issues do not hinder statutory duties such as engaging a chartered accountant for tax filing. It stressed that personal disputes of directors cannot be projected as organizational hardship.

Rejecting the plea, the High Court held that the explanation lacked credibility and that allowing such a long delay on vague grounds would defeat the intent behind Section 119(2)(b). Referring to Sitaldas K. Motwani, the Court noted that while “genuine hardship” must be interpreted liberally, such leniency cannot extend to baseless claims.

Thus, the writ petition was dismissed.

Case Title: M/S Sirez Limited v. Union of India & Ors.
Case No.: W.P.(C) 405/2024