The resolution professional never filed the company's returns during the insolvency process. The new management filed them late and the carry forward of losses has gone. Will the Board condone the delay?
It must, on these facts. The Gujarat High Court quashed the Board's order refusing condonation under s.119(2)(b) for Assessment Years 2018-19 and 2019-20 and condoned the delay itself, holding that where the suspended management had lost all powers from the date of admission under the Insolvency and Bankruptcy Code and the resolution professional had neither had the accounts audited nor filed the returns, and the new management filed them promptly after the resolution plan was approved, refusing condonation would frustrate the very purpose of the approved resolution plan and would amount to genuine hardship.
Decided by the High Court (Bhargav D. Karia J and P.M. Raval J) on 2025-05-09, reported as R/Special Civil Application No. 501 of 2024 (Gujarat High Court); Neutral Citation C/SCA/501/2024; Assessment Years 2018-19 and 2019-20. It bears on section 119(2)(b), section 139(1), section 139(3), section 139(4), section 80, section 72, section 79, section 2(18), section 143(3), section 144B of the Income Tax Act 1961, in Assessment & Scrutiny, Appeals and How Tax Law Is Read matters.
For a company that has come out of a corporate insolvency resolution process, the brought-forward loss is often the largest single asset the resolution applicant has paid for, and s.79(2)(c) protects it against the change in shareholding — but s.80 read with s.139(3) will still destroy it if the loss year's return was never filed in time. This is the decision that closes that gap, and it does so on two grounds worth separating. The first is ordinary condonation law: genuine hardship calls for a liberal rather than a technical approach, and the Board's reasoning that the new management should have carried out due diligence and been willing to bear the consequences was rejected, because the petitioner only came into the picture after the plan was approved. The second is specific to insolvency: the approved resolution plan itself contained a relief and concessions clause asking that carry forward and set off of the corporate debtor's brought-forward losses be allowed, and the Court held that an authority refusing condonation would be disregarding a plan that binds it. That is a powerful argument, but it depends on the plan actually containing such a clause, so the drafting of Annexure 5 to the plan matters. Note what the Court did not do: it said in terms that it had not gone into whether the losses are available, only whether refusing condonation caused genuine hardship. The quantum and eligibility of the losses remain for the assessment. Compare Balaji Landmarks LLP v CBDT, separately in this library, which reaches the same result on ordinary genuine-hardship grounds without an insolvency plan in the picture.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
An operational creditor's application under s.9 of the Insolvency and Bankruptcy Code 2016 against the petitioner was admitted by the NCLT, Ahmedabad on 12 November 2018 with a moratorium under s.14, from which date the suspended management lost all powers to manage the company. The Committee of Creditors approved a resolution plan on 19 September 2019 by one hundred per cent voting and the NCLT approved it on 4 September 2020. The resolution applicant, on taking control, found that the accounts had not been audited and the returns had not been filed by the resolution professional; it had the accounts for Assessment Years 2018-19 and 2019-20 audited on 28 November 2020 and filed the return for Assessment Year 2019-20 under s.139(4) on 30 November 2020, a delay of 365 days, and the return for Assessment Year 2021-22 on 15 March 2022 setting off brought-forward business losses. The return for Assessment Year 2021-22 was taken up for scrutiny and the brought-forward losses were disallowed on the ground that the AY 2019-20 return had been filed beyond the due date; the final assessment order under s.143(3) read with s.144B dated 21 December 2022 was challenged in Special Civil Application No. 432 of 2023, in which ad interim relief was granted. The petitioner then applied on 2 January 2023 under s.119(2)(b) for condonation for Assessment Year 2018-19 as well, obtained a direction from the Court on 20 February 2023 for disposal within six weeks, and after a contempt petition the Board rejected the application by order dated 3 November 2023. Annexure 5, paragraph 9, of the approved resolution plan sought relief from the applicable provisions of s.79 read with s.2(18) on the change in shareholding and the carry forward and set off of brought-forward losses as on the effective date.
The petition succeeded and was allowed; the Board's order dated 3 November 2023 rejecting the s.119(2)(b) application for Assessment Years 2018-19 and 2019-20 was quashed and set aside, the delay in filing the returns for those years was condoned, and the respondent authority was directed to complete the assessment of the petitioner company in accordance with law (para 11); rule was made absolute with no order as to costs (para 12). The Court held that the petitioner company came into the picture as regards management and control only after approval of the resolution plan, that on finding the audit not carried out and the returns not filed it acted immediately, that the plan itself provided for carry forward and set off of brought-forward losses as on the effective date so that the petitioner has the right to carry forward losses and an authority refusing to allow it would disregard a plan binding on it, and that with no lapse on the petitioner's part the purpose of the plan would be frustrated and genuine hardship caused if the delay were not condoned (para 10).
The Court framed two issues: whether the authority had correctly applied the term 'genuine hardship', and whether the resolution plan approved by the NCLT provided for any set off or carry forward of the losses of the erstwhile company (para 8). On the first it followed Shailesh Vitthalbhai Patel v. Chief Commissioner of Income Tax (2022) 145 Taxmann.com 10 (Guj.), in which the same Court had held that in condonation matters, where condonation is to be permitted to avoid genuine hardship, a liberal rather than a technical approach is expected from the authorities, and had quashed a refusal to condone a twenty-three day delay (para 9). On the facts, the petitioner came into control only on approval of the plan and moved at once to have the accounts audited and the returns filed (para 9). On the second issue the Court set out Annexure 5, paragraph 9, of the plan and held that it provides for carry forward and set off of brought-forward losses of the corporate debtor as on the effective date, so that the petitioner has the right to carry forward losses of the previous year and the authority in failing to allow it would disregard the entire resolution plan, which is binding on it too; the Court added expressly that it had not gone into whether the losses are available, being concerned only with genuine hardship (para 10). The Revenue's reliance on B.U. Bhandari Nandgude Patil Associates v. CBDT (2018) 164 DTR 201 and on Ranka v. Rewa Coal Field Limited AIR 1962 SC 361 did not displace that conclusion (paras 7.1 and 7.2).
If the delay is not condoned in the facts and circumstances of the present case, more particularly, when we do not find any lapse on the part of the petitioner in filing the return of the concerned Assessment Year, very purpose of resolution plan as approved by the NCLT, Ahmedabad would be frustrated and not condoning the delay would amount to genuine hardship.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppIt must, on these facts. The Gujarat High Court quashed the Board's order refusing condonation under s.119(2)(b) for Assessment Years 2018-19 and 2019-20 and condoned the delay itself, holding that where the suspended management had lost all powers from the date of admission under the Insolvency and Bankruptcy Code and the resolution professional had neither had the accounts audited nor filed the returns, and the new management filed them promptly after the resolution plan was approved, refusing condonation would frustrate the very purpose of the approved resolution plan and would amount to genuine hardship. This was decided by the High Court (Bhargav D. Karia J and P.M. Raval J) and bears on section 119(2)(b), section 139(1), section 139(3), section 139(4), section 80, section 72, section 79, section 2(18), section 143(3), section 144B of the Income Tax Act 1961. It is reported as R/Special Civil Application No. 501 of 2024 (Gujarat High Court); Neutral Citation C/SCA/501/2024; Assessment Years 2018-19 and 2019-20. For a company that has come out of a corporate insolvency resolution process, the brought-forward loss is often the largest single asset the resolution applicant has paid for, and s.79(2)(c) protects it against the change in shareholding — but s.80 read with s.139(3) will still destroy it if the loss year's return was never filed in time. This is the decision that closes that gap, and it does so on two grounds worth separating. The first is ordinary condonation law: genuine hardship calls for a liberal rather than a technical approach, and the Board's reasoning that the new management should have carried out due diligence and been willing to bear the consequences was rejected, because the petitioner only came into the picture after the plan was approved. The second is specific to insolvency: the approved resolution plan itself contained a relief and concessions clause asking that carry forward and set off of the corporate debtor's brought-forward losses be allowed, and the Court held that an authority refusing condonation would be disregarding a plan that binds it. That is a powerful argument, but it depends on the plan actually containing such a clause, so the drafting of Annexure 5 to the plan matters. Note what the Court did not do: it said in terms that it had not gone into whether the losses are available, only whether refusing condonation caused genuine hardship. The quantum and eligibility of the losses remain for the assessment. Compare Balaji Landmarks LLP v CBDT, separately in this library, which reaches the same result on ordinary genuine-hardship grounds without an insolvency plan in the picture. If it applies to you, the first step is this: Where the corporate debtor's returns were not filed during the moratorium, apply under s.119(2)(b) for condonation for each affected year as soon as the new management takes over, and record the date of the NCLT order approving the plan as the date from which the applicant could act.
An operational creditor's application under s.9 of the Insolvency and Bankruptcy Code 2016 against the petitioner was admitted by the NCLT, Ahmedabad on 12 November 2018 with a moratorium under s.14, from which date the suspended management lost all powers to manage the company. The Committee of Creditors approved a resolution plan on 19 September 2019 by one hundred per cent voting and the NCLT approved it on 4 September 2020. The resolution applicant, on taking control, found that the accounts had not been audited and the returns had not been filed by the resolution professional; it had the accounts for Assessment Years 2018-19 and 2019-20 audited on 28 November 2020 and filed the return for Assessment Year 2019-20 under s.139(4) on 30 November 2020, a delay of 365 days, and the return for Assessment Year 2021-22 on 15 March 2022 setting off brought-forward business losses. The return for Assessment Year 2021-22 was taken up for scrutiny and the brought-forward losses were disallowed on the ground that the AY 2019-20 return had been filed beyond the due date; the final assessment order under s.143(3) read with s.144B dated 21 December 2022 was challenged in Special Civil Application No. 432 of 2023, in which ad interim relief was granted. The petitioner then applied on 2 January 2023 under s.119(2)(b) for condonation for Assessment Year 2018-19 as well, obtained a direction from the Court on 20 February 2023 for disposal within six weeks, and after a contempt petition the Board rejected the application by order dated 3 November 2023. Annexure 5, paragraph 9, of the approved resolution plan sought relief from the applicable provisions of s.79 read with s.2(18) on the change in shareholding and the carry forward and set off of brought-forward losses as on the effective date. The matter was decided on 2025-05-09 by the High Court (Bhargav D. Karia J and P.M. Raval J). On those facts the High Court held as follows. The petition succeeded and was allowed; the Board's order dated 3 November 2023 rejecting the s.119(2)(b) application for Assessment Years 2018-19 and 2019-20 was quashed and set aside, the delay in filing the returns for those years was condoned, and the respondent authority was directed to complete the assessment of the petitioner company in accordance with law (para 11); rule was made absolute with no order as to costs (para 12). The Court held that the petitioner company came into the picture as regards management and control only after approval of the resolution plan, that on finding the audit not carried out and the returns not filed it acted immediately, that the plan itself provided for carry forward and set off of brought-forward losses as on the effective date so that the petitioner has the right to carry forward losses and an authority refusing to allow it would disregard a plan binding on it, and that with no lapse on the petitioner's part the purpose of the plan would be frustrated and genuine hardship caused if the delay were not condoned (para 10).
The Court framed two issues: whether the authority had correctly applied the term 'genuine hardship', and whether the resolution plan approved by the NCLT provided for any set off or carry forward of the losses of the erstwhile company (para 8). On the first it followed Shailesh Vitthalbhai Patel v. Chief Commissioner of Income Tax (2022) 145 Taxmann.com 10 (Guj.), in which the same Court had held that in condonation matters, where condonation is to be permitted to avoid genuine hardship, a liberal rather than a technical approach is expected from the authorities, and had quashed a refusal to condone a twenty-three day delay (para 9). On the facts, the petitioner came into control only on approval of the plan and moved at once to have the accounts audited and the returns filed (para 9). On the second issue the Court set out Annexure 5, paragraph 9, of the plan and held that it provides for carry forward and set off of brought-forward losses of the corporate debtor as on the effective date, so that the petitioner has the right to carry forward losses of the previous year and the authority in failing to allow it would disregard the entire resolution plan, which is binding on it too; the Court added expressly that it had not gone into whether the losses are available, being concerned only with genuine hardship (para 10). The Revenue's reliance on B.U. Bhandari Nandgude Patil Associates v. CBDT (2018) 164 DTR 201 and on Ranka v. Rewa Coal Field Limited AIR 1962 SC 361 did not displace that conclusion (paras 7.1 and 7.2). In the words reproduced by the source cited on this page: "If the delay is not condoned in the facts and circumstances of the present case, more particularly, when we do not find any lapse on the part of the petitioner in filing the return of the concerned Assessment Year, very purpose of resolution plan as approved by the NCLT, Ahmedabad would be frustrated and not condoning the delay would amount to genuine hardship." The decision followed or applied Shailesh Vitthalbhai Patel v. Chief Commissioner of Income Tax (2022) 145 Taxmann.com 10 (Guj.) — followed; B.U. Bhandari Nandgude Patil Associates v. CBDT (2018) 164 DTR 201 — relied on by the Revenue, not followed; Ranka v. Rewa Coal Field Limited AIR 1962 SC 361 — relied on by the Revenue, not followed.
It was decided by the High Court on 2025-05-09 and is reported as R/Special Civil Application No. 501 of 2024 (Gujarat High Court); Neutral Citation C/SCA/501/2024; Assessment Years 2018-19 and 2019-20. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 119(2)(b), section 139(1), section 139(3), section 139(4), section 80, section 72, section 79, section 2(18), section 143(3), section 144B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The petition succeeded and was allowed; the Board's order dated 3 November 2023 rejecting the s.119(2)(b) application for Assessment Years 2018-19 and 2019-20 was quashed and set aside, the delay in filing the returns for those years was condoned, and the respondent authority was directed to complete the assessment of the petitioner company in accordance with law (para 11); rule was made absolute with no order as to costs (para 12). The Court held that the petitioner company came into the picture as regards management and control only after approval of the resolution plan, that on finding the audit not carried out and the returns not filed it acted immediately, that the plan itself provided for carry forward and set off of brought-forward losses as on the effective date so that the petitioner has the right to carry forward losses and an authority refusing to allow it would disregard a plan binding on it, and that with no lapse on the petitioner's part the purpose of the plan would be frustrated and genuine hardship caused if the delay were not condoned (para 10). It arises in Assessment & Scrutiny, Appeals and How Tax Law Is Read matters, on section 119(2)(b), section 139(1), section 139(3), section 139(4), section 80, section 72, section 79, section 2(18), section 143(3), section 144B of the Income Tax Act 1961, and was decided by Bhargav D. Karia J and P.M. Raval J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the insolvency chronology on affidavit: the date of admission and imposition of the moratorium under s.14 of the Code, the date the Committee of Creditors approved the plan, the date of the NCLT approval order, and the dates on which the new management had the accounts audited and filed the returns. Extract the relief and concessions clause of the approved resolution plan and put it before the Board; here Annexure 5, paragraph 9, asked the Board to exempt the corporate debtor from s.79 read with s.2(18) on the change in shareholding and to allow carry forward and set off of brought-forward losses as on the effective date. Meet the Board's standard objection — that a resolution applicant should have done due diligence — by showing that the applicant had no control until after approval and acted promptly once it did. If the Board sits on the application, seek a direction for time-bound disposal; the petitioner here obtained one and then had to move a contempt petition before the order came. Do not assume condonation settles the losses; ask for the assessment to be completed in accordance with law, which is what the Court directed.
Searched for later treatment; none was found. That is not the same as a source affirming it. The revenue took this judgment to the Supreme Court and lost on limitation, which leaves the judgment standing but not affirmed. No later decision citing this judgment has been found. What surfaces under the name is a set of documents including two Supreme Court daily orders, of which the relevant one is Central Board of Direct Taxes & Ors v Technovaa Plastic Industries Private Limited, SLP (C) Diary No. 3069/2026, decided 13 March 2026: the Court recorded that 'The special leave petition is barred by 162 days delay', that the 'Cause shown is absolutely insufficient', refused condonation and dismissed the petition. Under Kunhayammed a dismissal of this kind is not an affirmance and merges nothing into the Supreme Court's order, so this is not authority strengthened by the Supreme Court - it is simply a judgment the revenue can no longer challenge in that matter. No later decision was found applying, doubting or distinguishing the s.119(2)(b) holding. Weigh it for what it is. It is a Division Bench judgment of one High Court on a condonation application, and a dismissal of the special leave petition on limitation decides nothing on the merits: the revenue remains free to contest the same point in another matter, and outside Gujarat this is persuasive authority rather than binding. The condonation was granted on the facts of a corporate debtor whose returns had not been filed by the resolution professional at all; the further a case moves from those facts, the less the judgment carries. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
One point of attribution matters. The passage about s.79 read with s.2(18) is not the Court's own analysis: it is paragraph 9 of Annexure 5 to the approved resolution plan, reproduced by the Court within its paragraph 9. The Court's own words are in paragraph 10, and the key quote is taken from there and has been confirmed word for word a second time. The order runs to twelve numbered paragraphs with sub-numbered paragraphs 5.1 to 5.8, 6.1 to 6.3 and 7.1 to 7.2; paragraph 11 is the operative quashing and condonation and paragraph 12 makes the rule absolute. Two internal inconsistencies in the record as reproduced: paragraph 5.3 says the return for Assessment Year 2021-22 was filed belatedly on 15 March 2022 setting off brought-forward business losses, while paragraph 5.4 refers to 'Assessment Year 2011-22', evidently a slip for 2021-22; and paragraph 5.3 refers only to the AY 2019-20 return having been filed by the new management, the AY 2018-19 return not having been filed by the resolution professional at all, which is why the condonation application covered both years. The neutral citation is C/SCA/501/2024. What the judgment leaves standing is worth stating precisely, because the provisions in play do different work. Section 80 read with s.139(3) is what destroys a s.72 business loss where the loss year's return went in after the s.139(1) due date; condonation under s.119(2)(b) repairs that default and nothing else. Section 79 read with s.2(18), the change-in-shareholding bar, is a separate obstacle, and the Court recorded in terms that it had not gone into whether the losses are available — it set out the plan's relief clause to show that a refusal would cut across a plan binding on the authority, not to rule on s.79. The return on which the set-off was claimed, for Assessment Year 2021-22, was assessed under s.143(3) read with s.144B by the order of 21 December 2022, and that assessment is the subject of a separate petition, Special Civil Application No. 432 of 2023, which this judgment does not dispose of. A reader should not take the losses as allowed. Two gaps in the record as reproduced. The accounts for both years were audited on 28 November 2020 and the return for Assessment Year 2019-20 was filed under s.139(4) on 30 November 2020, with the delay put at 365 days; no filing date is given anywhere for the Assessment Year 2018-19 return, although the condonation covers that year. And the Board's refusal is dated 3 November 2023 while the judgment is dated 9 May 2025, so the petition stood for some eighteen months after the order it challenged. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition succeeded and was allowed; the Board's order dated 3 November 2023 rejecting the s.119(2)(b) application for Assessment Years 2018-19 and 2019-20 was quashed and set aside, the delay in filing the returns for those years was condoned, and the respondent authority was directed to complete the assessment of the petitioner company in accordance with law (para 11); rule was made absolute with no order as to costs (para 12). The Court held that the petitioner company came into the picture as regards management and control only after approval of the resolution plan, that on finding the audit not carried out and the returns not filed it acted immediately, that the plan itself provided for carry forward and set off of brought-forward losses as on the effective date so that the petitioner has the right to carry forward losses and an authority refusing to allow it would disregard a plan binding on it, and that with no lapse on the petitioner's part the purpose of the plan would be frustrated and genuine hardship caused if the delay were not condoned (para 10).
TaxSphere, “Technovaa Plastic Industries Private Limited v Central Board of Direct Taxes”, https://taxnotice.vittsphere.com/caselaw/case/technovaa-plastic-119-2b-condonation-so-a-company-out-of-cirp-can-keep-its-losses/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
My closely held company changed hands and the Assessing Officer has knocked out the brought-forward loss under section 79. The section has been rewritten more than once — which text governs my assessment year?
My AY 2020-21 return was 72 days late because of Covid and the short-term capital loss was refused. Four years on I want to set that loss off against this year's gains. Can I argue the delay in the current year's appeal?
I filed this year's return late under section 139(4). The Assessing Officer has now refused to carry forward a capital loss and unabsorbed depreciation that both came from the earlier year, whose return was on time. Can he do that?
My LLP was not required to be audited, but the partners had the accounts audited anyway. The CPC treated the return as belated and refused the carry forward of the business loss. Was the return late?
