Gujrat High Court in the case of Kunal Structure (India) Private Limited Vs. DCIT in R/Special Civil Application No. 13924 of 2018 has decided that the time limit to issue a Notice u/s 142(1) shall be reckoned from the date of filing of Original Return and not from the date when the defects are rectified in the defective return u/s 139(9).
In many cases, the income tax department had issued many notices under section 143(2) to many assessees pertaining to the assessment year 2016-17 (the relevant financial year 2015-16) in the mid-August-September 2018 even though the returns were filed within the time limit specified in section 139(1).which was 30.09.2016.
The time limit to issue the notice under section 143(2) for the AY 2016-17 was 30.09.2017. Despite this, the notices were issued belatedly in 2018. These were the cases where the returns were marked as defective by the CPC and the assessee was given the statutory time to rectify the defect. In many cases finally, the rectification of defects was accepted much after September 2017.
CPC misinterpreted the law and linked the time limit to issue the notice under section 143(2) with the date of acceptance of the final rectified defective return. Hence, CPC was issuing the notices prior to 30.09.2018 and wrongly referring the date of accepting the rectified defective return as the date of filing of return in the notices. As a result, many time-barred notices were issued by the income tax department.
It should be noted that the notices were issued in August-September 2018 whereas the time limit to complete the assessment proceedings under section 143(3) pursuance to notice issued under section 143(2) for AY 2016-17 was 31.12.2018.
Read the case details.
Case Title
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Kunal Structure (India) Private Limited Vs. DCIT-
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Court
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Gujrat High Court
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Appeal No./Citation
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R/Special Civil Application No. 13924 of 2018 / (2020) 422 ITR 482 (Guj.) (HC) (2020) 422 ITR 482 / 269 taxman 440 (Guj)
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Section covered
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139(1), 139(9), 143(2)
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Order Result
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Appeal allowed. Decided in favour of assessee.
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Date of judgment
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24.10.2019
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Facts of the case:
The assessee is a resident company and files its return of income u/s 139(1) for the Assessment Year 2016-17 on 10.09.2016 (the due date was 30.09.2016).
Subsequently, the return was processed under section 143(1) on 12.08.2017, wherein the date of filing of original return is mentioned as 10.09.2016. Thereafter, a notice under section 143(2) was issued on 09.08.2018. In the notice issued u/s 143(2), the date of filing of return was mentioned as 07.07.2017 and hence the same is selected for scrutiny assessment.
Issues:
Whether a notice issued under section 143(2) on the basis of the date of accepting the defective return under section 139(9) and not on the basis of the timely filed original return under section 139(1) is valid?
Arguments of the assessee:
The learned Advocate for the petitioner argued that the notice issued under section 143(2) is barred by limitation as the same was issued beyond the permissible time limit, as provided under section 143(2) of the Act.
In this case, the original return under section 139(1) was filed on 10.09.2016 and that thereafter, the assessee was called upon to remove the defects under section 139(9), which was ultimately removed on 07.07.2017.
It was submitted that considering the date of filing of the original return, viz., 10.09.2016, a notice under section 143(2), could have been issued on or before 30.09.2017, however, the impugned notice was issued on 09.08.2018, which is beyond the period of limitation.
It was further submitted that the return filed in response to the notice under section 139(9) of the Act is not a fresh return, but is in continuation of the original return rectifying the specified defects, as per the notice issued under section 139(9) of the Act.
It was submitted that when the provisions of section 139(9) of the Act provide an opportunity to the assessee to remove any defect/s in the original return filed and if the assessee removes the defect/s within the time period allowed under section 139 of the Act, then the same should be treated as a valid return duly filed with effect from the date of filing of the original return.
Bombay High Court decision in the case of Prime Securities Ltd. v. Varinder Mehta, Assistant Commissioner of Incometax (Inv.), Circle 1(1), [2009] 182 Taxman 221 (Bombay)
Bombay High Court decision in the case of Atul Projects India Private Limited v. Union of India and another rendered on 24.01.2019 in Writ Petition No.3501 of 2018
Delhi High Court decision in case of Bharat Nidhi Ltd. v. Commissioner of Incometax, [2007] 165 Taxman 314 (Delhi)
Arguments of the department:
Ld. D/R contended that the original return of income under section 139(1) of the Act was filed on 10.09.2016, but it was a defective return. After making corrections and removing the defects, the return under section 139(9) of the Act was filed by the petitioner on 07.07.2017, after which it was selected for scrutiny.
The return filed under section 139(1) of the Act on 10.09.2016 was a defective return and a return with defects is not a valid return under the Act. Therefore, the date of filing of the defective return cannot be taken into consideration for the purpose of computing the limitation for issuance of notice under section 143(2).
Once the defects have been removed within the prescribed time limit, a fresh return has to be filed under section 139(9) of the Act, which is considered to be a valid return.
Accordingly, when the time limit for issuance of notice under section 143(2) of the Act was available till the expiry of six months from the end of the financial year in which the return is furnished, it would mean that the time limit has to be considered from the date when a valid return has been filed and if the return is filed with some defects, then it cannot be treated as a return of income.
Thus, as and when such defects are removed, such return becomes a valid return under section 139 of the Act and the date of limitation for issuance of notice under section 143(2) of the Act will be determined on the basis of the date when such return of income is treated to be a valid return.
Cases referred by D/R:
Gujrat High Court decision in the case of Principal Commissioner of Incometax1 v. Babubhai Ramanbhai Patel, [2017] 249 Taxman 470 (Gujarat)
Gujrat High Court decision in the case of Hytaisun Magnetics Ltd. v. Joint Commissioner of Incometax, [2018] 95 taxmann.com 248 (Gujarat)
Punjab and Haryana High Court decision in the case of Madan Roller Flour Mills v. Commissioner of Incometax, 2008 (301) ITR 1
Madras High Court decision in the case of Commissioner of Incometax v. Anaimugan Transports (P.) Ltd., [1995] 129 CTR 51 (Madras)
The Decision:
The court has analyzed the provisions of section 139(1)/(5)/(9) of the Act and observed that there exists a common thread in all the subsections which states that the assessee is required to file a return of income under those subsections.
However, from the language employed in sub-section (9) of section 139 of the Act, the same does not require any return to be filed by the assessee.
All that the section says is that the assessee is required to be given an opportunity to rectify the defect in the return filed by him within the time provided; failing which such return would be treated as an invalid return.
Unlike section 139(5) of the Act which requires an assessee to file a revised return of income in case of any omission or wrong statement in the return of income filed under section 139(1), section 139(9) does not require an assessee to file a fresh return of income but requires the assessee to remove the defects in the original return of income filed by him within the time provided therein.
In the present case, the petitioner has not filed a revised return under section 139(5) but has merely removed the defects in the original return, which is termed as a corrected return in the notice under section 139(9).
Hence, the notice under section 143(2) dated 09.08.2018 is clearly barred by limitation and cannot be sustained. Finally, the Court has ordered that the impugned notice dated 09.08.2018 issued under subsection (2) of section 143 of the Act and all proceedings taken pursuant thereto are hereby quashed and set aside.
Analysis:
The court has to decide if the date of the original return under sub-section (1) of section 139 of the Act, viz.10.09.2016 is required to be taken into consideration for the purpose of computing the limitation under section 143(2) of the Act, the impugned notice would be barred by limitation.
However, if the date on which the defects in the original return came to be removed under section 139(9) of the Act viz., 07.07.2017 is to be taken into consideration for the purpose of computing the period of limitation, the impugned notice can be said to have been issued will within the period of limitation.
The question that, therefore, arises for consideration is as to which of the above two dates can be said to be the date on which the petitioner filed its return on income.
Section 143(2) does not provide any extension to the time limit to issue the notice thereunder in case of a defective return. Rather, the Act provides for an opportunity to be given to the assessee by the assessing officer to remove any defects during the course of the assessment. This clearly establishes the fact that notice for scrutiny assessment can be given for a defective return also.
Update:
SLP filed by the department against this judgment of the Gujarat High Court has been dismissed by the Supreme Court. [2021] 123 taxmann.com 392 (SC)[20-11-2020]
Full text of the judgment:
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 13924 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
KUNAL STRUCTURE (INDIA) PRIVATE LIMITED
Versus
DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(2)
Appearance:
DARSHAN R PATEL(8486) for the Petitioner(s) No. 1
MRS MAUNA M BHATT(174) for the Respondent(s) No. 1
CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date: 24/10/2019
ORAL JUDGMENT
(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. By this petition under articles 226 and 227 of the Constitution of India, the petitioner has challenged the notice dated 09.08.2018 issued under section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and the proceedings initiated pursuant thereto.
2. The petitioner is a company registered under the Companies Act, 2013. For assessment year 201617, the petitioner had filed its return of income under section 139(1) of the Act on 10.09.2016. Thereafter, the petitioner received an intimation of defective return under section 139(9) of the Act on 17.06.2017. The petitioner received a reminder on 05.07.2017 granting him an extension of fifteen days to comply with the notice issued under section 139(9) of the Act and accordingly, the time limit for removal of the defects under section 139(9) of the Act stood extended till 20.07.2017. The petitioner removed the defects on 07.07.2017 within the time granted.
3. Subsequently, the return was processed under subsection (1) of section 143 of the Act on 12.08.2017, wherein the date of original return is shown to be 10.09.2016. Thereafter, the impugned notice under section 143(2) of the Act came to be issued on 09.08.2018, informing the petitioner that the return of income filed by it for assessment year 201617 on 07.07.2017 has been selected for scrutiny calling upon the petitioner to produce any evidence on which it may rely in support of its return of income, which has given rise to the present petition.
4. Mr. Darshan Patel, learned advocate for the petitioner, assailed the impugned notice under section 143(2) of the Act by submitting that the notice is barred by limitation as the same has been issued beyond the permissible time limit, as provided under section 143(2) of the Act. It was pointed out that in this case, the original return under subsection (1) of section 139 of the Act was filed on 10.09.2016 and that thereafter, the petitioner was called upon to remove the defects under subsection (9) of section 139 of the Act, which ultimately came to be removed on 07.07.2017. It was submitted that considering the date of filing of the original return, viz., 10.09.2016, a notice under subsection (2) of section 143 of the Act, could have been issued on or before 30.09.2017, however, the impugned notice has been issued on 09.08.2018, which is beyond the period of limitation.
4.1 The learned advocate further pointed out that the intimation issued under section 143(1) of the Act after the defect in the return of income was removed, acknowledges the date of filing of the return to be 10.09.2016. It was submitted that the provisions contained in section 139(9) of the Act make a distinction between a defective return and an invalid return and that a defective return is not ipso facto to be regarded as an invalid return and that it is only when a return contains any specified defects and the Assessing Officer, in his discretion, intimates the defects to the assessee and the assessee fails to rectify the same within the specified time, that the Assessing Officer may treat the return to be invalid. Therefore, it is only if the defect is not removed within the time period allowed or within the extended time period that the return can be treated as an invalid return. It was submitted that therefore, it is the date of filing of the original return under section 139(1) of the Act which is required to be reckoned for the purpose of calculating the time limit for issuance of notice under section 143(2) of the Act.
4.2 It was further submitted that the return filed in response to the notice under section 139(9) of the Act is not a fresh return, but is in continuation of the original return rectifying the specified defects, as per the notice issued under section 139(9) of the Act. It was submitted that when the provisions of section 139(9) of the Act provide an opportunity to the assessee to remove any defect/s in the original return filed and if the assessee removes the defect/s within the time period allowed under section 139 of the Act, then the same should be treated as a valid return duly filed with effect from the date of filing of the original return.
4.3 Mr. Patel next submitted that in the present case it is only because the petitioner has duly rectified the defects within the time allowed under section 139(9) of the Act, that in the intimation under section 143(1) of the Act, the return has been treated as a valid return under section 139(1) of the Act with effect from 10.09.2016. It was further submitted that the notice under section 139(9) of the Act categorically states that an opportunity has been given to the assessee only to remove the specified defects in the original return as mentioned in the notice itself and that the assessee has not been allowed to make any further modifications while furnishing the return under section 139(9) of the Act except to remove the specified defects identified and mentioned in the notice itself. Therefore, the return filed to remove the defects under section 139(9) of the Act would be a corrected return and would relate back to the date of filing of the original return.
4.4 It was further submitted that it is a well settled proposition of law that the notice under section 143(2) of the Act is a statutory notice and has to be mandatorily issued as per law for assuming jurisdiction for assessment by the Assessing Officer and that in the absence of a notice under section 143(2) of the Act being issued within the prescribed time limit, the entire assessment proceedings would be rendered without jurisdiction. It was submitted that the controversy involved in the present case is no longer res integra as various High Courts have taken a view that the date of removal of defects would relate back to the date of filing of the original return.
4.5 In support of such submission, the learned advocate for the petitioner has placed reliance upon the decision of the Bombay High Court in the case of Prime Securities Ltd. v. Varinder Mehta, Assistant Commissioner of Incometax (Inv.), Circle 1(1), [2009] 182 Taxman 221 (Bombay), wherein the court has held that even if the defect in the original return came to be cured under section 139(9) of the Act on 15.10.1992, the same would relate back to 31.12.1991, which is the date of original filing of the return.
4.6 Reliance was also placed upon an unreported decision of the Bombay High Court in the case of Atul Projects India Private Limited v. Union of India and another rendered on 24.01.2019 in Writ Petition No.3501 of 2018, wherein the court placed reliance upon its earlier decision in the case of Prime Securities Limited (supra) and held that the date of filing of return would be the date on which it was originally presented and not on the date on which the defects were removed.
4.7 Reference was made to the decision of the Delhi High Court in case of Bharat Nidhi Ltd. v. Commissioner of Incometax, [2007] 165 Taxman 314 (Delhi), wherein the court has held that upon the defects being removed, the return would relate back to the original filing date.
4.8 It was, accordingly, urged that the impugned notice, being barred by limitation, deserves to be quashed and set aside and the petition deserves to be allowed in the terms of the reliefs prayed for.
5. Opposing the petition, Mrs. Mauna Bhatt, learned senior standing counsel for the respondent, submitted that the return filed by the petitioner for assessment year 201617 under section 139(9) of the Act on 07.07.2017 was selected for scrutiny under the CASS system in August 2018. Therefore, the notice under section 143(2) of the Act, which was issued on 09.08.2018, was well within the period of limitation. It was submitted that the original return of income under section 139(1) of the Act was filed on 10.09.2016, but it was a defective return and intimation about the defective return was communicated to the petitioner on 17.06.2017 and the petitioner was asked to remove the defects within fifteen days of receipt of the intimation. A reminder was again sent to the petitioner on 05.07.2018, granting extension of fifteen days to comply with the notice under section 139(9) of the Act. It was submitted that after making corrections and removing the defects, the return under section 139(9) of the Act was filed by the petitioner on 07.07.2017, whereafter it was selected for scrutiny. Thus, it was the corrected return and not the defective return filed on 10.09.2016 which was selected for scrutiny. It was submitted that the return filed under section 139(1) of the Act on 10.09.2016 was a defective return and a return with defects is not a valid return under the Act. Therefore, the date of filing of the defective return cannot be taken into consideration for the purpose of computing the limitation for issuance of notice under section 143(2) of the Act. According to the learned senior standing counsel, once the defects have been removed within the prescribed time limit, a fresh return has to be filed under section 139(9) of the Act, which is considered to be a valid return.
Accordingly when the time limit for issuance of notice under section 143(2) of the Act was available till the expiry of six months from the end of the financial year in which the return is furnished, it would mean that the time limit has to be considered from the date when a valid return has been filed and if the return is filed with some defects, then it cannot be treated as a return of income. Thus, as and when such defects are removed, such return becomes a valid return under section 139 of the Act and the date of limitation for issuance of notice under section 143(2) of the Act will be determined on the basis of the date when such return of income is treated to be a valid income.
5.1 The attention of the court was invited to the provisions of section 143 of the Act to point out that subsection (2) thereof refers to a return furnished under section 139 or in response to a
notice under section 142(1) of the Act. It was submitted that section 143(2) of the Act does not state that such return is required to be furnished under section 139(1) of the Act and hence, the period of limitation does not have to be computed from the date on which the return is filed under section 139(1) of the Act. It was submitted that in the facts of the present case, it is only on the date when the corrected return came to be filed under section 139(9) of the Act that the return could be considered to be valid and hence, in terms of section 143(2) of the Act, the period of limitation would have to be calculated from the date when such corrected return was filed under section 139(9) of the Act.
5.2 In support of her submissions, the learned senior standing counsel placed reliance upon a decision of this Court in case of Principal Commissioner of Income-tax-1 v. Babubhai Ramanbhai Patel, [2017] 249 Taxman 470 (Gujarat), wherein the court has held that in terms, subsection (5) of section 139 allows the assessee to revise the return filed under subsection (1) or subsection (4) as long as the time frame provided therein is adhered to and the requirement of revised return has arisen on discovery of any omission or a wrong statement in the return originally filed. The court held that assessment can be completed only on the basis of the correct and completed return. The earlier return, after a revised return has been filed, cannot form the basis of assessment although it may be used to indicate the conduct of the assessee. There is a clear distinction between a revised return and a correction of return. Once a revised return is filed, the original return must be taken to have been withdrawn and substituted by a fresh return for the purpose of assessment.
5.3 The learned senior standing counsel submitted that considering the defects enumerated in the Explanation, it is not possible to make an assessment unless such defects are removed.
5.4 Reliance was placed also upon the decision of this court in the case of Hytaisun Magnetics Ltd. v. Joint Commissioner of Incometax, [2018] 95 taxmann.com 248 (Gujarat) wherein the court held thus:
“Section 139 of the Act pertains to return of income. Subsection (9) of section 139 provides that where the Assessing Officer considers that the return of income filed by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period, on an application made in this behalf, the Assessing Officer may grant; if such defect is not rectified within such period or extended period, then notwithstanding anything contained in any other provision of the Act, the return shall be treated as an invalid return. Proviso to subsection (9) of section 139 provides that where the assessee rectifies the defect after the expiry of initial period or the extended period, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return. Explanation to subsection (9) provides that for the purposes of the said subsection, return of income shall be regarded as defective unless all the conditions are fulfilled as contained in clauses (a) to (f).”
5.5 Reliance was also placed upon the decision of the Punjab and Haryana High Court in the case of Madan Roller Flour Mills v. Commissioner of Incometax, 2008 (301) ITR 1.
5.6 Reference was made to the decision of the Madras High Court in the case of Commissioner of Incometax v. Anaimugan Transports (P.) Ltd., [1995] 129 CTR 51 (Madras), wherein the court has held that it will be a mistake to accept for all purposes, the return as one filed by the assessee under subsection (1) of section 139 of the Act as the starting point of limitation for the completion of assessment as a return, which is not complete in all respects and that as regards the return furnished by the assessee, doubts exist whether a return filed under subsection (4)(a) of section 139 may be the relevant return and in case any omission in the return furnished is discovered by the assessee and a revised return is filed, the same may be the relevant return. The court held that in section 153, in this behalf, a mention of section 143 clearly reckons a return on which assessment is made and a demand notice is issued under clause (a) of subsection (2) of section 143 of the Act. A return for this purpose is a return under section 139(1), section 139(4) as well as section 139(5) of the Act. An assessment in terms of section 143, it is obvious, is an assessment on the basis of the return in one case under clause (a) of subsection (1) of section 143 and in another case, under subsection (3) of section 143 of the Act. In the case of best judgment assessment, where there is no return filed by the assessee and where the assessee has not responded to any enquiry before the assessment under section 142 of the Act, the period of limitation for assessment will reckon only in terms of the default of the assessee, which is contemplated under section 144 of the Act.
5.7 It was submitted that therefore, for the purpose of computing the limitation for issuance of notice under section 143(2) of the Act, the return filed by the petitioner in response to the notice under section 139(9) of the Act should be treated to be akin to a revised return. It was, accordingly, urged that the petitioner having filed the correct return in response to the notice under section 139(9) of the Act on 07.07.2017, the impugned notice dated 09.08.2018 is well within the period of limitation prescribed under section 143(2) of the Act and that the petition, being devoid of merits, deserves to be dismissed.
6. In the backdrop of the facts and contentions noted hereinabove, the sole question that arises for consideration in this case is as to whether the impugned notice under subsection (2) of section 143 of the Act has been filed within the period of limitation provided thereunder.
7. In this case, the original return of income under subsection (1) of section 139 of the Act came to be filed on 10.09.2016. Intimation under subsection (9) of section 139 of the Act came to be issued on 17.06.2017, calling upon the petitioner to remove the defects enumerated therein. Thereafter, on 05.07.2017, a reminder was given and the time to comply with the notice under section 139(9) of the Act was extended for fifteen days, that is, up to 20.07.2017. The petitioner rectified such defects on 07.07.2017, that is, within the time allowed by the Assessing Officer. The impugned notice under subsection (2) of section 143of the Act has been issued on 09.08.2018.
8. Undisputedly, if the date of the original return under subsection (1) of section 139 of the Act, viz.10.09.2016 is required to be taken into consideration for the purpose of computing the limitation under section 143(2) of the Act, the impugned notice would be barred by limitation. However, if the date on which the defects in the original return came to be removed under section 139(9) of the Act viz., 07.07.2017 is to be taken into consideration for the purpose of computing the period of limitation, the impugned notice can be said to have been issued will within the period of limitation. The question that therefore, arises for consideration is as to which of the above two dates can be said to be the date on which the petitioner filed its return on income.
9. In this regard, it may be germane to refer to the provisions of section 139 of the Act, which to the extent the same is relevant for the present purpose, reads as under:
“139. Return of income
(1) Every person,
(a) being a company or a firm; or
(b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income tax,
shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed:
xxxxxxx
Explanation 2. In this subsection, “due date” means,
(a) where the assessee other than an assessee referred to in clause (aa)] is
(i) a company;
(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or
(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,
the 30th day of September of the assessment year;
(aa) in the case of an assessee who is required to furnish a report referred to in section 92E, the 30th day of November of the assessment year;
(b) in the case of a person other than a company, referred to in the first proviso to this subsection, the 31st day of October of the assessment year;
(c) in the case of any other assessee, the 31st day of July of the assessment year;
Xxxxx
(3) If any person, who has sustained a loss in any previous year under the head “Profits and gains of business or profession” or under the head “Capital gains” and claims that the loss or any part thereof should be carried forward under subsection (1) of Section 72, or subsection (2) of Section 73 or subsection (2) of section 73A, or subsection (1) or subsection (3) of section 74 or subsection (3) of section 74A, he may furnish, within the time allowed under subsection (1) a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under subsection (1).
(4) Any person who has not furnished a return within the time allowed to him under subsection (1), may furnish the return for any previous year at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
(5) If any person, having furnished a return under subsection (1) or subsection (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
Xxxxx
(9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow, and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return:”
10. A study of the provisions of section 139 of the Act shows that under subsection (1) thereof, an assessee is required to file return on or before the due date. As to which is the due date for filing of return has been provided under
Explanation 2 to subsection (1) of section 139 of the Act. Subsection (3) of section 139 contemplates filing of a return of income by any person who has sustained a loss in any previous year as provided thereunder, and further provides that all the provisions of the Act shall apply as if it were a return filed under subsection (1). Therefore, a return filed under subsection (3) of section 139 of the Act is treated as a return under subsection (1) thereof. Subsection (5) of section 139 of the Act provides that if a person who has filed a return under subsection (1) or in pursuance of a notice under subsection (1) of section 142, discovers any omission or wrong statement in such return, he can furnish a revised return within the time provided therein. Thus, subsection (1) of section 139 of the Act contemplates filing of a return of income, subsection (3) also contemplates filing of a return of income to which all the provisions of the Act apply as if it were a return filed under subsection (1) and subsection (5) provides for filing of a revised return where there is any omission or wrong statement in the original return of income filed under subsection (1). Therefore, all these subsections clearly envisage filing of a return.
11. Subsection (9) of section 139 of the Act is attracted when the Assessing Officer considers the return on income filed by the assessee to be defective. If the Assessing Officer considers the return of income to be defective, he is required to intimate such defect to the assessee and give him an opportunity to rectify such defect within a period of fifteen days from the date of such intimation or within such further time, which the Assessing Officer in his discretion allows on an application made by the assessee in this behalf. If the defects are not removed within fifteen days or within such further period granted by the Assessing Officer, then notwithstanding anything contained in any other provision of the Act, the return shall be treated as an invalid return and the provisions of the Act would apply as if the assessee has failed to furnish his return. Thus, if the defects are removed within fifteen days or within the further time granted by the Assessing Officer, the very same return would be considered to be valid.
12. If one looks at the language employed in subsections (1), (3) and (5) of section 139 of the Act, a common thread in all the subsections is that the assessee is required to file a return of income under those subsections. However, from the language employed in subsection (9) of section 139 of the Act, the same does not require any return to be filed by the assessee. All that the section says is that the assessee is required to be given an opportunity to rectify the defect in the return filed by him within the time provided; failing which such return would be treated as an invalid return. Unlike subsection (5) of section 139 of the Act which requires an assessee to file a revised return of income in case of any omission or wrong statement in the return of income filed under subsection (1) thereof, subsection (9) of section 139 of the Act, does not require an assessee to file a fresh return of income, but requires the assessee to remove the defects in the original return of income filed by him within the time provided therein. Once the defects in the original return of income are removed, such return would be processed further under the Act. In case such defects are not removed within the time allowed, such return of income would be treated as an invalid return.
13. In view of what is discussed hereinabove, the contention that the return under subsection (9) of section 139 of the Act was filed by the petitioner on 07.07.2017, and that it was this return which was selected for scrutiny under the CASS system in August 2018 and not the defective return filed on 10.09.2016, does not merit acceptance. While the impugned notice under subsection (2) of section 143 of the Act does say that the return filed by the petitioner on 07.07.2017 has been selected for scrutiny, in the opinion of this court, the reference to the return as the return filed on 07.07.2017 is incorrect, inasmuch as subsection (9) of section 139 of the Act, does not contemplate filing of a return of income. As noticed hereinabove, it is the original return filed by the assessee which gets rectified upon the removal of the defects contained therein.
14. At this juncture, it may be germane to refer to the notice issued under subsection (9) of section 139 of the Act, the relevant part whereof has been extracted in the objection raised by the petitioner to the notice under section 143(2) of the Act. In the said notice, the petitioner has been told to inter alia note the following:
“1. Please ensure no other information is changed apart from those errors listed below in PartA, in case of any other changes in data, the return of income filed by you is liable to be treated as an invalid return.
2.While correcting the above mentioned defects, if any changes are being made, leading to change of income and/or taxation under other heads of income, you should file a revised return (and not a corrected return) as per the provisions of Income Tax Act, 1961.
3.…
4.…
5.…
6.…
7. If the above requirement is not complied within fifteen days of receipt of this notice, the return of income filed by you is liable to be treated as an invalid return.”
15. Thus, the petitioner has been called upon to ensure that no information in the original return is changed apart from the errors pointed out. The petitioner is also told that if while correcting the defects, any changes are made, leading to change of income and/or taxation under other heads of income, he should file a revised return and not a corrected return as per the provisions of the Act. In other words, if the petitioner wants to make any changes in the return of income, he is required to file a revised return under section 139(5) of the Act. In the present case, the petitioner has not filed revised return under subsection (5) of section 139of the Act, but has merely removed the defects in the original return, which is termed as a corrected return in the notice under subsection (9) of section 139 of the Act.
16. It may be noted that there is no concept of corrected return of income under the Act. Therefore, in effect and substance, what the notice under subsection (9) of section 139 of the Act does is to call upon the petitioner to remove the defects pointed out therein. Therefore, mere reference to the expression “corrected income”in the notice under subsection (9) of section 139 of the Act does not mean that a fresh return of income has been filed under that subsection. Thus, under subsection (9) of section 139 of the Act, it is only the original return which gets corrected and no new return is filed. In other words, the original return which was defective when it was filed is rectified upon removal of the defects under subsection (9) of section 139 of the Act and becomes a valid return. Thus, as held by the Bombay High Court in the decisions cited by the learned counsel for the petitioner as referred to hereinabove, the action of removal of the defects would relate back to the filing of the original return of income and accordingly, it is the date of filing of the original return which has been considered for the purpose of computing the period of limitation under subsection (2) of section 143 of the Act and not the date on which the defects actually came to be removed.
17. Reference may also be made to the decision of this court in case of Principal Commissioner of Incometax1 v. Babubhai Ramanbhai Patel (supra), on which reliance has been placed by the learned senior standing counsel for the respondents, wherein this court has placed reliance upon a decision of the Allahabad High Court in case of Dhampur Sugar Mills v. CIT, [1973] 90 ITR 236, wherein it has been held that there is a clear distinction between revised return and a correction of return. Once a revised return is filed, the original return must be taken to have been withdrawn and substituted by a fresh return for the purpose of assessment. Thus, when a revised return is filed under section 139(5) of the Act, the original return gets substituted and it is the revised return which is to be considered as a return for the purpose of assessment. However, the court has clearly drawn a distinction between a revised return and a correction of return. Adverting to the facts of the present case, this case relates to correction of the return of income originally filed and not a revised return. Had it been a case of filing of a revised return of income, the original return of income would have stood substituted by the revised return, but when it comes to correction of a return of income, it is only the original return of income which gets corrected.
18. Since the impugned notice has been issued under subsection (2) of section 143 of the Act, reference may be made to the said subsection, which reads as under:
“143.Assessment. (1) Where a return has been made under section 139, or in response to a notice under subsection (1) of section 142, such return shall be processed in the following manner, namely:
xxxxxxx
(2) Where a return has been furnished under section 139, or in response to a notice under subsection (1) of section 142, the Assessing Officer or the prescribed incometax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:
Provided that no notice under this subsection shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.”
19. On a plain reading of subsection (2) of section 143 of the Act, it is apparent that the Assessing Officer or the prescribed incometax authority must issue a notice under that subsection only in those cases where a return has been made under section 139 or in response to a notice issued under section 142(1), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, but such notice must be served within a period of six months from the end of the financial year in which such return is furnished. Thus, if, after furnishing a return of income, the assessee does not receive a notice under subsection (2) of section 143 of the Act within the period referred to in the subsection, the assessee is entitled to presume that the return has become final and no scrutiny proceedings are to be started in respect of that return. It is only after the issuance of notice under subsection (2) of section 143 of the Act that the Assessing Officer can proceed further under subsection (3) thereof to make an assessment order. Therefore, the notice under section 143(2) of the Act is a statutory notice, upon issuance of which, the Assessing Officer assumes jurisdiction to frame the scrutiny assessment under subsection (3) of section 143 of the Act. Consequently, if such notice is not issued within the period specified in subsection (2) of section 143 of the Act viz. before the expiry of six months from the end of the financial year in which the return is furnished, it is not permissible for the Assessing Officer to proceed further with the assessment.
20. In the facts of the present case, as discussed earlier, the petitioner filed its return of income under subsection (1) of section 139 of the Act on 10.09.2016. Since the return was defective, the petitioner was called upon to remove such defects, which came to be removed on 07.07.2017, that is, within the time allowed by the Assessing Officer. Therefore, upon such defects being removed, the return would relate back to the date of filing of the original return, that is, 10.09.2016 and consequently, the limitation for issuance of notice under subsection (2) of section 143 of the Act would be 30.09.2017, viz. six months from the end of the financial year in which the return under subsection (1) of section 139 came to be filed. In the present case, it is an admitted position that the impugned notice under subsection (2) of section 143 of the Act has been issued on 09.08.2018, which is much beyond the period of limitation for issuance of such notice as envisaged under that subsection. The impugned notice, therefore, is clearly barred by limitation and cannot be sustained. 21. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated 09.08.2018 issued under subsection (2) of section 143 of the Act and all proceedings taken pursuant thereto are hereby quashed and set aside. Rule is made absolute accordingly, with no order as to costs.
(HARSHA DEVANI, J)
(SANGEETA K. VISHEN,J)
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