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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF OCTOBER, 2021
PRESENT
THE HON’BLE MRS.JUSTICE S.SUJATHA
AND
THE HON’BLE MR. JUSTICE E.S.INDIRESH
I.T.A.No.273/2018
BETWEEN :
THE PR. COMMISSIONER OF INCOME-TAX CIT (A), 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(3), PRESENT ADDRESS, CIRCLE-2(1)(2), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095.
...APPELLANTS
(BY SRI ARAVIND.K.V., ADV.)
AND : M/S. ELECTRONICS AND CONTROLS POWER SYSTEMS PVT LTD., SPL-B, 168, 3RD CROSS, 1ST STAGE, PEENYA INDL. ESTATE, BENGALURU-560 058. PAN: AAACE 3200F.
…RESPONDENT
(BY SMT JINITA CHATERJEE, ADV. FOR SRI S.PARTHASARATHI, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 03/11/2017 PASSED IN ITA No.914/BANG/2016, FOR THE ASSESSMENT YEAR 2008-2009, PRAYING THIS HON'BLE
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COURT TO 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA No.914/BANG/2016 DATED 03/11/2017 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), BENGALURU. 3. TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
This appeal is filed by the Revenue under Section 260A of the Income Tax Act, 1961 [‘Act’ for short] challenging the order of the Income Tax Appellate Tribunal “A” Bench, Bengaluru [‘Tribunal’ for short] in ITA No.914/Bang/2016 relating to the assessment year 2008-09.
This appeal was admitted by this Court to consider the following substantial question of law:
“Whether on the facts and circumstances of the case, the Tribunal is right in law in allowing the appeal of the assessee by holding that though ITR-V was
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filed belated but on 31.03.2009, the return of income was filed well before the due date of filing of return of income under Section 139[1] of the Act and mere delay in submitting the ITR-V does not make the return invalid for denying carry forward of losses in future years?”
The assessee – company has e-filed the return of income for the assessment year under consideration on 30.09.2008 and has filed the ITR-V Form on 31.03.2009. The case of the assessee was selected for scrutiny and assessment order under Section 143[3] of the Act was passed by the Assessing Officer on 21.12.2010 placing reliance on the CBDT Notification No.SO 1281[E] dated 27.07.2007 denying the carry forward loss of Rs.11,00,25,707/- as not eligible since the assessee has failed to comply with the aforesaid Notification.
Aggrieved by the same, assessee preferred appeal before the Commissioner of Income Tax [Appeals]
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unsuccessfully. On further appeal filed by the assessee before the Tribunal, the same came to be allowed setting aside the order of the Commissioner of Income Tax [Appeals] directing the Assessing Officer to allow the carry forward of losses to future years. Being aggrieved, the Revenue has preferred this appeal.
Learned counsel Sri.K.V.Aravind appearing for the Revenue inviting the attention of this Court to Clauses [2] and [3] of the Notification dated 27.07.2007, submitted that it was mandatory for the assessee to submit ITR-V within the prescribed period i.e., fifteen days from the issue of provisional receipt for the electronic data received by the e-Return Administrator. Though the e-return of income was filed on 30.09.2008, ITR-V was filed on 31.03.2009, as such, the date of filing of the return has to be construed as 31.03.2009. Having regard to this aspect, the Assessing Officer has rightly denied the claim of the assessee to carry forward of
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losses under Section 80 of the Act. Reference was made to Sections 80, 139[1], 139[3] and Section 139[9] of the Act to contend that the return has to be filed in terms of Section 139[3] and provisions of 139[9] are not applicable to the facts of the present case.
Learned counsel appearing for the assessee justifying the impugned order, placing reliance on the judgments of the Hon’ble High Court of Bombay in the case of Crawford Bayley & Co. V/s. Union of India & Others [(2012) 0204 TAXMAN 0598] as well as the Circular No.13/2016 dated 09.05.2016 and the Circular No.3/2020 dated 13.07.2020 issued by the Government of India, Ministry of Finance, Department of Revenue [CBDT], agued that the period of limitation for filing the ITR-V Form was extended from time to time up to 2016 (Circular No.13/2016) relating to the assessment years 2009-10 to 2014-15 and by Circular No.3/2020 relating to the assessment years
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2015-16 to 2019-2020. In view of the CBDT Circulars issued relaxing the time of fifteen days for filing the ITR-V Form at CPC pursuant to filing of the E-return of income, the assessee-respondent herein cannot be treated in a discriminatory manner. The Tribunal has examined the matter in the light of the judgment of the Hon’ble High Court of Bombay and considered the non- issuance of the defective notice under Section 139[9] of the Act also, thereby proceeded to set aside the order of the Commissioner of Income Tax [Appeals] to consider the claim of carry forward of losses as sought by the assessee-respondent. Accordingly, seeks to answer the substantial question of law in favour of the assessee and against the Revenue.
We have given our thoughtful consideration to the rival submissions made by the learned counsel for the parties and perused the material on record.
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Section 80 of the Act deals with the submission of return for losses. In terms of the said provision, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of Sub-section [3] of Section 139 shall be carried forward. Section 139 deals with the return of income. Section 139[1] reads thus:
“139. (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.”
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Section 139[3] of the Act reads thus:
“(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 sub-section (1) of section 72, or sub-section (2) of section 73, or sub-section (2) of section 73A or sub-section (1) or sub-section (3) of section 74, or sub- section (3) of section 74A, he may furnish, within the time allowed under sub-section (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 sub- section (1).”
The comprehensive reading of Section 80 and Section 139[3] of the Act read with Notification dated 27.07.2007 issued by the CBDT would make it clear that the e-Return i.e., electronically transmitted
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return furnished under the Scheme has to be supported by a duly verified Form ITR-V by the eligible person which is required to be furnished under Section 139 of the Act for the assessment year 2007-08 or any subsequent assessment years to a e-Return Intermediary who shall digitize the data of such return and transmit the same electronically to a server designated for this purpose by the e-Return Administrator on or before the due date. It is not in dispute that the e-filed return of income was submitted by the respondent-assessee on 30.09.2008 i.e., well within the due date of filing of the return under Section 139[1] read with Explanation-2 thereof. Sub-clause[2] of Clause-3 of the Notification dated 27.07.2007 contemplates that the eligible person shall submit the duly verified Form ITR-V to the Assessing Officer not later than fifteen days from the issue of the provisional receipt for the electronic data received by the e-Return Administrator and the date on which such receipt is
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issued shall be deemed to be the date of filing of the return. Placing reliance on this Clause, the Assessing Officer has come to the conclusion that the date of filing of the return as 31.03.2009 i.e., the date of filing of the ITR-V return by the assessee. Based on this Sub- Clause[2] of the Notification dated 27.07.2007, the assessment proceedings under Section 143[3] of the Act were concluded denying the claim of the assessee for carry forward of losses with reference to Section 139[3]. It is not in dispute that the CBDT having considered the earlier system of e-Filing in tax returns which were to be filed electronically without a digital signature, the taxpayer has to take print out of ITR-V Form and send it to Centralized Processing Centre [CPC], Bengaluru within 120 days of transmitting the data electronically relating to the assessment years 2009-10 to 2014-15 and such assessments which are pending due to non- filing of ITR-V Form, has issued the Circular No.13/2016. In paragraph No.2 of the said Circular, it
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is stated that in spite of granting relaxation of time for submitting ITR-V Form on various occasions, it has been noticed that a large number of such electronically filed returns still remain pending with the Income-tax Department for want of receipt of a valid ITR-V Form at CPC, Bengaluru from the taxpayers concerned. In order to regularize the returns which have either become non-est or have remain pending due to non-filing/non- receipt of respective ITR-V Form, the CBDT in exercise of powers under Section 119 of the Act has extended the period for submission of ITR-V Form for verification and such verification process has to be completed by 31.08.2016 and the taxpayers has been allowed to send a duly signed physical copy of ITR-V to CPC, Bengaluru through speed post. Thus, the CBDT has relaxed the time frame for issuing the intimation as provided in second proviso to Sub-section [1] of Section 143 of the Act and directed that such returns shall be processed by 30.11.2016. Similarly, CBDT Circular No.3/2020
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dated 13.07.2020 extends the period for submission of ITR-V returns by 30.09.2020.
It is true that this Circular No.13/2016 relates to the assessment years 2009-10 to 2014-15 and Circular No.3/2020 relates to the assessment years 2015-16 to 2019-20 wherein it refers to filing of tax returns electronically without digital signature and ITR- V Form to be send to the CPC, Bengaluru whereas for the assessment year under consideration i.e., 2008-09, duly verified ITR-V Form was required to be sent by the eligible person to the Assessing Officer. No discrimination could be made between the asessees, if such ITR-V Form are required to be submitted by the Assessing Officer or before the CPC in relaxing the time prescribed in sub-paragraph[2] of the paragraph 3 of the Notification dated 27.07.2007. The view of the Department is hyper-technical for the reason that the e-filed return data indeed was transmitted on the date
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of such return filed electronically to the server designated by the e-Return Administrator which necessarily contains the data of the claim made by the assessee for carry forward of losses. ITR-V is verification Form which would be construed as Annexure of statement to be made to the e-filed return of income. Time relaxation is permitted by the CBDT for verification of such returns either by sending a duly signed physical copy of ITR-V to CPC, Bengaluru through speed post. Merely for the reason that ITR-V Forms are required to be sent to Assessing Officer, the relaxation extended for the subsequent Assessment Years cannot be denied. In our considered view, the delay caused in submitting the ITR-V does not make the return submitted on 30.09.2008 [e-filed return] invalid for denying the carry forward of losses in future years.
The Hon’ble High Court of Bombay in the case of Crawford Bayley & Co., supra, while
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considering the issue of non-receipt of Form ITR-V by the Department, though the department has made the provision of electronic filing of returns, Form ITR-V containing the due verification was required to be remitted by an ordinary post, held that treating e-return filed by the assessee well within the period of limitation cannot be treated as a invalid return and the same has serious consequences. Reference has been made to sub- Section [9] of 139 wherein adequate provisions for the Assessing Officer has been made to furnish in the first instance a notice granting a period of fifteen days to rectify the defect in the return, a provision made for extension of the period within which the defects are to be rectified has also been considered. It has been observed thus: “8. Though the Income Tax Department made a provision for electronic filing of returns, it appears that the ITR-V Form containing the due verification of the return of the assessee was required to be
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remitted only by ordinary post. The instructions which were furnished to assessees, a copy of which has been placed on record, specifically stipulate that the ITR-V form should not be sent either by registered post or by speed post or courier. The assessee has furnished adequate material before the Court in support of its contention that having filed the return electronically, it had also submitted the ITR-V form by ordinary post.”
Though the contention of the assessee in the said proceedings was that ITR-V was submitted by ordinary post well within the period prescribed under the Scheme, that would not make any major distinction if such ITR-V Form is submitted belatedly under the Scheme since the data available in the e-filed return of income is not disputed by the Department inasmuch as the claim of carry forward of losses claimed by the assessee for future years. The significance of filing an e- filed return cannot be effaced and the claim of the assessee cannot be denied on hyper-technicalities.
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Moreover, system of e-filing of tax returns was in the initial stages for the assessment year in question and if the delay in filing the ITR-V, if is relaxable for the subsequent assessment years, the same cannot be restricted in stricto sense for the initial years of the Scheme.
Having regard to these aspects, we find no perversity or illegality in the finding of the Tribunal. Accordingly, we answer the substantial question of law in favour of the assessee and against the Revenue.
Appeal stands dismissed.
Sd/- JUDGE
Sd/- JUDGE
NC.