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Income Tax Appellate Tribunal, KOLKATA BENCH “SMC”, KOLKATA
Before: SHRI SONJOY SARMA & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal by the assessee is arising out of the order of CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide Order No. ITBA/NFAC/S/250/2021-22/1040758647(1) dated 15.03.2022 against the assessment order passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Grounds taken by the assessee are as under:
“1) For that on the facts and circumstances of the case, Ld. CIT (Appeals) was grossly erred in confirming the intimation issued U/s 143(1) when the return of income filled was held as invalid return u/s 139(9) of the Act. 2) For that on the facts and circumstances of the case, Ld. CIT (Appeals) was erred in not holding that once a return is held as invalid return U/s 139(9), such return filled became non-est as if no return is filled and processing of same U/s 143(1) is liable to be cancelled, annulled and held to be void ab-initio. 3) For that on the facts and circumstances of the case, Ld. CIT (Appeals) was wrong in holding the processing of return of income
2 Durgapur Passengers Carriers Association A.Y. 2014-15 U/s 143(1) as valid when prior to such processing an order U/s 139(9) was passed holding return as invalid resulting into as if no return is filled. 4) For that on the facts and circumstances of the case order of Ld. CIT (Appeals) is unjustified, unwarranted to the facts of the case and untenable in laws in upholding the processing of return of income having been held as invalid U/s 139(9). 5) Even otherwise, on the facts and circumstances of the case, the appellant is a mutual Association and no tax liability be arise on the same. 6) We may add, alter, amend or withdraw any grounds of appeal on or before the date of hearing.”
2. We note that there is a delay of 165 days in filing the present appeal for which petition for condonation of delay along with the affidavit is placed on record. The impugned order of ld. CIT(A) is dated 15.03.2022 received by the assessee on 19.03.2022. The appeal was due to be filed on or before 18.05.2022 and it has been filed on 31.10.2022. Considering the decision of Hon’ble Supreme Court in the case of suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022, delay of 12 days out of 165 days is attributable to the Pandemic Covid-19, for the balance 153 days, we find that in the affidavit, assessee has explained the reasons resulting into this delay which is on account medical exigencies. Considering the explanation given by the assessee placed on record, we condone the delay and admit the appeal for adjudication.
Brief facts of the case are that assessee is an association of bus and mini bus passenger carriers at Durgapur (West Bengal) and had filed its return of income on 31.03.2016 reporting a total income of Rs. 14,134/-. In the return filed by the assessee, it had shown total receipt of Rs. 16,00,787/- against which a deduction of Rs. 15,86,653/- was claimed as amount applied to charitable or religious purposes in India during the year. Return of the assessee was processed by Centralized
3 Durgapur Passengers Carriers Association A.Y. 2014-15 Processing Centre (CPC) of the Income Tax Department, Bangalore. During the course of processing, CPC found that the return of the assessee is defective, pointing the defect as “The income of Assessee exceeds 2 lacs and Audit Flag is NO”. CPC issued a notice u/s 139(9) of the Act dated 20.04.2016 which was served on the assessee on 26.04.2016 on its registered e-mail, affording the opportunity to the assessee to rectify the defects within 15 days from the receipt of the said notice. Since there was no compliance by the assessee, a reminder notice was sent on 31.05.2016. Despite these opportunities, assessee did not rectify the defect notified in the return of income. Accordingly, an order u/s 139(9) of the Act was passed on 09.03.2017 vide communication reference no. CPC/1415/G5/1600111455, treating the said return as invalid return.
3.1. Scanned copy of this order is reproduced as below:
Dear Sir/Madam, Order u/s 139(9) of THE INCOME-TAX ACT, 1961 TREATING THE RETURN AS INVALID RETURN The assessee had filed a return of income for assessment year 2014-15 vide acknowledgement no. 149386451310316 dated 31.03.2016 (Acknowledgement Number and date are obtained from the ITR). The said return was found to contain the below mentioned defects. Sl No. Error Code Error Description 1 57 The income of the assessee exceeds 2 lacs and Audit Flag is NO Accordingly a notice u/s 139(9) of the Income-tax Act, 1961 was issued to the assessee vide CPC/1415/G5/1600111455 dated 20.04.2016 and the same was served on the assessee on 26-Apr-16 vide email (dpcassociation2014@gmail.com) and opportunities were afforded to the assessee to rectify the defects within fifteen days of the receipt of the said notice. As there was no compliance to the notice u/s 139(9) within the time allowed further opportunities were afforded to the assessee to rectify the defects as per the following: Sl No. Reminder Date Reminder Communication Reference No 1 31.05.2016 CPC/1415/G5/1600111455 Inspite of being afforded adequate opportunities, the assessee has not rectified all the aforementioned defects noticed in the return of income. Accordingly, as per provision of section 139(9) of the Income Tax Act, 1961, the return of income for AY 2014-15
4 Durgapur Passengers Carriers Association A.Y. 2014-15 filed by the assessee on 31.03.2016 vide Acknowledgement Number 149386451310316 is treated as invalid return. Nirmala, Deputy Commissioner of Income Tax, CPC Bangalore
Thereafter, CPC processed the invalid return u/s 143(1) of the Act vide intimation dated 25.03.2017 with communication reference no. CPC/14-15/A7/1650216569. In the return so processed by CPC, the deduction claimed by the assessee of Rs. 15,86,653/- was not allowed and the total income was assessed at Rs. 16,00,790/-, thereby raising a demand of Rs. 7,80,030/-.
Aggrieved, assessee went in appeal before the ld. CIT(A) who dismissed the appeal of the assessee.
Aggrieved, assessee is in appeal before the Tribunal.
The main argument of the assessee is that once that return is held as invalid u/s 139(9) of the Act, their remains no return to be processed u/s 143(1) of the Act. Ld. counsel for the assessee stressed on the fact that CPC has passed an order u/s 139(9) of the Act on 09.03.2017 and once the said order is passed, there exists no return which could have been processed u/s 143(1). He drew attention to the provisions of section 139(9) of the Act as well as section 143(1) and submitted that even section 143(1) provides that there has to be a return available which has been filed u/s 139(9) or in response to notice u/s 142(1) of the Act. Thus, when the return has been held to be invalid, there exists no return u/s 139 which could have been processed u/s 143(1). Accordingly, the intimation issued u/s 143(1) dated 25.03.2017 by processing an invalid return is improper, invalid, void ab initio and therefore, is liable to be quashed
5 Durgapur Passengers Carriers Association A.Y. 2014-15 7. Per contra, ld. Sr. DR placed reliance on the order of ld. CIT(A) and submitted that Department has the benefit of information available to it which could be made use of.
We have heard the rival contentions and gone through the material placed on record. Before adverting on the issue, we refer to the provisions of section 139(9) and 143(1) of the Act for a better gainful understanding. These sections are reproduced as under:
A “Section 139(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: Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the [Assessing] Officer may condone the delay and treat the return as a valid return. 8.1. Section 143(1): From the perusal of the above section, it is noted that once the return of income is treated as invalid, it results into situation as if assessee has failed to furnish the return and the provisions of this Act shall apply accordingly.
B Section 143(1): Where a return has been made u/s 139 or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:-”……. 8.2. From the above, we note that the processing of a return is to be made in respect of a return filed u/s 139 or in response to notice u/s 142(1).
6 Durgapur Passengers Carriers Association A.Y. 2014-15 8.3. Further, we note that there is a Central Processing of Returns Scheme, 2011, issued by CBDT vide notification no. SO16(E) dated 04.01.2012 which specifies the scheme for processing of return of income. Rule 6 of this scheme deals with invalid or defective return, the same is reproduced as under:
“6. Invalid or defective return. (i) The Commissioner may declare- (a) a return invalid for non-compliance of procedure for using any software not validated and approved by the Director General. (b) a return defective under sub-section (9) of section 139 of the Act on account of incomplete or inconsistent information in the return or in the schedules or for any other reason. (ii) In case of a defective return, the Centre shall intimate this to the person through email or by placing a suitable communication on the e-filing website. (iii) A person may comply with the notice regarding defective return by uploading the rectified return within the period of time mentioned in the notice. (iv) The Commissioner may, in order to avoid hardship to the person, condone the delay in uploading of rectified return. 3 (v) In case no response is received from the person in reply to the notice of defective return, the Commissioner may declare a return as not having been uploaded at all or process the return on the basis of information available.”
8.4. Further, Rule 8 of the same scheme provides for processing of return Clause (i) of Rule 8 reads as “The centre shall process valid return of income in the following manner, namely:-“ 8.5. In Rule 8 as stated above, it is categorically mentioned that processing of return is of a “valid” return of income which is in contradiction to Clause (v) of Rule 6 wherein the Commissioner may
In the present case before us, an order u/s 139(9) dated 09.03.2017 is on record by which return of income filed by the assessee has been treated as invalid return. Despite treating the return as invalid return, it has been processed by CPC, u/s 143(1)(a) of the Act by disallowing the claim of the assessee. We have also noted that there is a pre-requisite of return to be available u/s 139 or 142(1) for issuance of an intimation u/s 143(1) of the Act. Since the return has been held to be invalid by CPC, there exists no return u/s 139 which could have been processed u/s 143(1). Accordingly, in our considered view, the processing done by CPC of an invalid return is improper and not in accordance with the provisions of the Act and Rule 8 of the aforesaid scheme.
Considering the above facts on record and the provisions of the Act as well as aforesaid scheme, we are of the considered view that ld. CIT(A) is wrong in holding the processing of return of income u/s 143(1) as valid when prior to such processing, an order u/s 139(9) was passed treating the return as invalid resulting into situation as if no return has been filed. Accordingly, grounds taken by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21.04.2023.