NIHIL NARANBHAI DESAI,MUMBAI vs. INCOME TAX OFFICER WD 32(2) (40, MUMBAI

As mentioned above as the assessee has not shown gross professional receipt under the head profession in the relevant column of its ITR-3, CPC Bangalore u/s 139(9) sent two communications to remove this defect within 15 days vide dated 27-04-2018 and 15-05-2018. However, none of these notices were complied with due to the reason that the assessee house was under redevelopment and consequently ITR filed by the assessee declared invalid on 31- 01-2019.

Through, this return assessee was claiming a refund of Rs. 52,550/-. As the return has been treated as invalid, the same can't be processed and consequently refund claim of the assessee were also denied. Against this action of CPC assessee approached the Ld. CIT (A) (NFAC, Delhi). 5. Against this appeal of assessee before Ld. CIT (A), again assessee didn't get any relief vide their order Dated 23-06-2021 u/s 250 of the income tax act 1961. Being aggrieved with this order of Ld. CIT (A) assessee preferred this appeal before ITAT. We have gone through all the documents available on record before us i.e. TTR-3, notices of CPC u/s 139(9) order of CPC declaring assessee return as invalid and order of Ld.CIT (A). 6. In our observation assessee promptly filed the return of income well in time u/s 139(1) and try to comply with the relevant provisions of the act for example he declared income from commission only after by maintaining relevant books of accounts as the same is not falling u/s 44 ADA and took due benefit of sec 44ADA only on professional receipts. We also observed that assessee followed all the relevant columns of ITR-3 and filled all the relevant columns of ITR but in advertently forgot to mention professional receipt under the relevant head and also not complied with the notices issued u/s 139(9) as mentioned supra.

We have gone through the relevant provisions of Sec. 139(9) and most importantly Sec. 292B inserted with effect from the AY 2008-09. For sake of better vision we are reproducing herein below both the sections as under: Sec. 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 rectifier 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. Explanation - for the purposes of this subsection, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in: (aa)...... (b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return (bb) the return is accompanied by the report of the audit referred to in section 44AB, or where the report has been furnished prior to the furnishing of the return by a copy of such report together with proof of furnishing the report:]

It is clear from the language of the provisions of section 292B that its aim is to prevent any return of income, assessment, notice or other proceedings being treated as invalid merely by reason of any mistake, defect or omission in such return of income, assessment notice, other proceedings which are in substance and effect in conformity with or according to the intent and purpose of the Act. The question of application of section 292B cannot be prejudged by finding that return; notice etc. is not as per the requirement of the statute and is/are invalid. This way the very purpose of the section to prevent declaration of return, notice, etc. as invalid is defeated. The finding that the return or notice, etc., is invalid or to what extent it is invalid is unnecessary and counterproductive. Invalid is quite a strong word and 'mistake, defect or omission' in the return, notice, etc. are governed and must take colour from the later part of the section requiring to consider whether such return, etc, 'is in substance and in effect in conformity with or according to the intent and purpose of the Act. In other words, it is to be seen whether such return or notice is in substance and in effect in conformity with or in accordance with the intent and purpose of the Act and not the invalidity of the return e.g., if it is shown that return of income, notice, etc. have the same or substantially the same effect as would return, notice etc. without mistake, defect or omission would have, such return, notice etc. must be given effect to and cannot be treated as invalid. If in substance and in effect, the intent and purpose of the enactment has been served, the action (return, notice, etc.) cannot be held to be invalid, Substance over form theory is the underlining philosophy of section 292B. If in substance and in effect return, notice or assessment is in conformity with or according to intent and purpose of the Act, the mistake, defect or omission is to be ignored. It is no doubt true, that purpose of the Act is to get information on income, compute income (including loss), find tax thereon and recover the same from the assessee. This purpose is achieved through charging machinery and other miscellaneous provisions. In the given case it is necessary to see the purpose of a specific provision. The obvious purpose is to get all information from the assessee in the prescribed form and within the prescribed time so that such claim of refund of the assessee is scrutinized, if permissible under the law. Whether above purpose was satisfied in substance and in effect in instant case was the pertinent question. If significance of words 'substance' and 'effect' is kept in mind there was no justification to treat the return as invalid. The revenue had not pointed out any information needed but not given in return submitted by the assessee except a minor mistake of not filing information about professional receipt. The minor errors pointed out by the revenue during the course of processing were not significant as those could not affect materially the computation of the income/loss in any case. Therefore, it was to be held return in substance and in effect was in conformity with or according to the intent and purpose of the Act. No doubt there was a mistake in not furnishing relevant information in relevant column however, said mistake, otherwise rendering the returns invalid, was fully taken care of by the provisions of section 292B. In view of aforesaid, it was to be held that assessee, did comply in substance and in effect with the intent and purpose of the Act. All the relevant and correct information in the prescribed time was given so that assessment could be made after proper scrutiny. No doubt there was a defect and a bona fide mistake. But said defect was not material in the light of provisions of section 292B. When total information needed by the revenue in the returns was fully furnished; the returns in substance and in effect confirmed to the requirement of the provisions of section 292B. It was nobody's case that any prejudice was caused to the revenue because of the above defect and mistake. It was merely a technical mistake that assessee has not furnished a particular information in relevant column. The Assessing Officer, in holding that the return was not filed by the assessee, had not given effect to the provisions of section 292B. It is well-settled that 'the conduct of the subject must be borne in mind while examining a complaint of non- observance of procedural rules'. In such a situation, it was not correct to hold that returns filed earlier were invalid, ineffective and of no legal consequences. Therefore, the revenue authorities took a very narrow view of statutory provisions of section 292B and thus defeated the very purpose of the provision. It could only advance injustice on account of a technical default. Whereas provision of section 292B aims to prevent such injustice.

In view of the above CPC, Bangalore is directed to give one more opportunity to the assessee to complete the incomplete information furnished by him and then process the return for claim of refund.

In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 26th day of December, 2022.