Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE K
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 19.01.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2016-17.
Brief facts of the case are as follows:
Assessee, an individual, filed the return of income for Assessment Year 2016-17 on 25.09.2016 declaring total income of Rs.2,89,820/-. The assessment was selected for scrutiny and notice under section 143(2) of the Act was issued on 20.08.2018. The assessment under section 143(3) of the Act was completed vide order dated 20.12.2018 by making an addition of Rs.3,50,000/- as unexplained investment under section 69C of the Act. The AO disbelieved the agricultural income claimed by the assessee in the return of income to the extent of Rs.3,50,00/- and made the aforesaid addition.
Aggrieved, the assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, since there was no compliance to the various notices issued, the CIT(A) confirmed the addition made on merits amounting to Rs.3,50,000/-.
Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal. Assessee has raised various grounds (26 grounds) on the issue on merits. However, during the course of hearing, the learned AR argued a legal issue viz., notice under section 143(2) of the Act issued on 20.08.2018 is beyond the time and consequent scrutiny assessment completed under section 143(3) of the Act is bad in law. In the context of this legal issue, the learned AR narrated the sequence of events as follows:
i) Date of filing of the original return under section 139(1) of the Act - on 29.06.2016 ii) Date of defect notice issued by the AO under section 139(9) of the Act on 20.04.2017 (due date of compliance of the same was on 31.03.2018). iii) Due date of compliance to the defect notice – 13.06.2017. iv) Date of processing the return under section 143(1) of the Act – 22.06.2017 v) Date within which the notice under section 143(2) of the Act is to be issued is on or before 30.09.2017. vi) Date on which the notice under section 143(2) of the Act was issued was 20.08.2018.
The learned AR submitted that since the original return was filed on 29.06.2016 for Assessment Year 2016-17, the AO ought to have issued notice under section 143(2) of the Act on or before 30.09.2017 (i.e., within 6 months from the end of the Financial Year in which the return has been filed under section 139(1) of the Act). The learned AR further submitted that the defect notice issued by the AO under section 139(9) of the Act and curing of the same would obviously relate back to the date of filing of the original return. Hence, it was contended that the notice issued under section 143(2) of the Act is barred by limitation. In this context, the learned AR relied on the judgment of the Hon’ble Gujarat High Court in the case of Kunal Structure (India) Pvt Ltd Vs. DCIT reported in 422 ITR 482. The learned AR submitted that the SLP filed against the judgment of the Hon’ble Gujarat High Court was dismissed by the Hon’ble Apex Court reported in [2021] TMI 622. The learned AR also relied on the judgment of the Hon’ble Bombay High Court in the case of Prime Securities Vs. ACIT reported in 317 ITR 27.
The learned Standing Counsel, on the other hand, submitted that the assessee has complied with the defect notice issued by the AO under section 139(9) of the Act by filing the return of income on 13.06.2017. Hence, the date of issuance of notice under section 143(2) of the Act on 20.08.2018 is valid and within the time prescribed. The learned Standing Counsel sought to distinguish the Hon’ble Gujarat High Court’s judgment by submitting that all returns filed even if it is pursuant to the defect notice under section 139(9) of the Act is an independent return filed and will not relate back to the date of filing of original return (i.e., 29.06.2016 in this case). In other words, it was contended by learned Standing Counsel that if the assessee’s return filed on 13.06.2017 in response to the defect notice issued under section 139(9) of the Act by the AO is reckoned, the time limit for issuance of notice under section 143(2) of the Act would be on or before 30.09.2018 and the notice having been issued on 20.08.2018 was well within time limit prescribed.
I have heard the rival submissions and perused the material on record. Admittedly, the original return under section 139(1) of the Act was filed by the assessee on 29.06.2016. If original return filed on 29.06.2016 is reckoned, notice under section 143(2) of the Act is to be issued on or before 30.09.2017. On the other hand, if assessee’s compliance by filing the return on 30.06.2017 in response to the defect notice issued under section 139(9) of the Act is to be reckoned, notice under section 143(2) of the Act can be issued on or before 30.09.2018. I am of the view that when assessee files a return in response to a defect notice issued under section 139(9) of the Act, the original return filed by the assessee will get rectified upon removal of defect contained therein and will relate back to the date of filing the original return i.e., 29.06.2016. On identical facts, the Hon’ble Gujarat High Court in the case of Kunal Structure (India) Pvt Ltd v. DCIT (supra), had held as under:
“13. While the impugned notice under sub-section (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 sub- section (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.”
The SLP filed before the Hon’ble Apex Court against judgment of the Hon’ble Gujarat High Court was dismissed (supra). The Hon’ble Bombay High Court has also taken a similar view by holding that when defect is cured in response to the notice issued under section 139(9) of the Act, the same would relate back to the date of original filing of the return. The relevant finding of the Hon’ble Bombay High Court in the case of Prime Securities Vs. ACIT (supra) reads as follows:
“11. ………. ………. It is true that the return was invalid as originally filed because of a defect in the person signing the returns. But by virtue of Section 139(9) that defect could be cured and was infact cured. Though the defect was cured on 15.10.92 it would relate back to 31.12.1991 the date of original filing of the return. Once the return is valid and in conformity with the intended purpose of the act, in our opinion, therefore, on this count also, the petition will have to be allowed.”
Further, the intimation dated 22.06.2017 under section 143(1) of the Act has been issued against the original return filed (vide acknowledgement No.801485090130617). Therefore, it vouches for the fact that the return filed responding to the defect notice issued under section 139(9) of the Act has merged with the original return filed. Since the corrected return filed pursuant to the notice issued by AO under section 139(1) of the Act has merged and related back to the original return filed (namely on 29.06.2016), notice under section 143(2) of the Act has to be issued on or before 30.09.2017. Whereas, in the instant case, the notice has been issued on 20.08.2018 i.e., beyond the time limit stipulated. Hence, the notice is void-ab-initio. As a result, the Assessment Order passed under section 143(3) of the Act is not sustainable and is hereby quashed. Since I have decided the legal issue in favour of the assessee, the issue raised on merits viz., addition of Rs.3,50,000/- is not adjudicated and is left open. It is ordered accordingly.
In the result, appeal filed by the assessee is partly allowed.
Pronounced in the open court on the date mentioned on the caption page.