VIPUL PURSHOTTAMDAS THAKKAR,VADODARA vs. THE DY.CIT, CENTRAL CIRCLE-2, VADODARA

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 07.08.2023 passed for A.Y. 2012-13.

The brief facts of the case are that the assessee initially filed the original return of income on September 28, 2012, declaring a total income of Rs. 1,44,03,930/-. This return was processed under section 143(1) of the Act, and the assessee received a credit for prepaid taxes amounting to Rs. 36,31,131/- with a refund of Rs. 7,067/-. Following a search action on the assessee, a notice was issued to the assessee under section 153A of the Act on August 12, 2013, to file a return for the assessment year 2012-13 within 45 days. Although the notice was served on August 19, 2013, the assessee failed to file the return within the prescribed time, and instead filed a manual return on Vipul Purshottamdas Thakkar vs. DCIT Asst.Year –2012-13 - 2– October 10, 2013, which was the same as the original return filed earlier. This return of income, was admittedly filed beyond the due date of filing of return of income. Subsequently, the assessee filed a revised return under section 139(5) on March 30, 2014, claiming a deduction under section 54B amounting to Rs. 55,24,000/-. However, when the AO finalized the assessment under section 143(3) r.w.s. 153A on March 17, 2015, he considered the income as per the return filed under section 153A instead of the revised return that had been filed later. The assessee then filed a rectification application on May 2, 2016, before the Deputy Commissioner of Income Tax, Vadodara, pointing out that the income as per the revised return had not been considered by the AO. In response, the DCIT accepted the assessee’s contention and passed a rectification order under section 154 on May 6, 2016, allowing the deduction under section 54B. Subsequently, due to a change in the officer in charge, the new AO reviewed the records and found that the assessee had filed the return in response to the notice under section 153A after the prescribed 45-day period. The AO was of the view that since the return under section 153A was filed belatedly, it replaced the original return filed under section 139(1), and as per the Income Tax Act, no revised return could be filed under section 153A once the proceedings under that section had commenced. The AO further was of the view that the rectification order passed earlier, which allowed the deduction under section 54B, was invalid because it was based on a return that was filed beyond the prescribed time limit, making it a belated return.

The assessee filed an appeal against the action of the Assessing Officer, against this order under section 154 of Act, reversing the claim Vipul Purshottamdas Thakkar vs. DCIT Asst.Year –2012-13 - 3– made by the assessee for deduction under section 54B of Rs.54,24,000/- . During the appeallate proceedings before Ld. CIT(Appeals), the assessee contended that the previous AO had no issues with the claim made under section 54B and had allowed the deduction based on the revised return. The assessee submitted that since the original return had been filed on time, the assessee was entitled to revise it until March 31, 2014, and therefore, the revised return was filed within the permissible period. The assessee relied on various case laws to support this claim. Ld. CIT(Appeals), however, disagreed with the assessee's arguments. Ld. CIT(Appeals) noted that the assessee had filed the return under section 153A belatedly, and this return replaced the original return filed under section 139(1). Ld. CIT(Appeals) pointed out that the return filed under section 153A was belated and therefore could not be revised. The rectification application, which allowed the deduction under section 54B of the Act, was based on a return that was not valid, as it had been filed after the due date. The issue of allowing the deduction under section 54B was considered by the Ld. CIT(A) as a debatable issue and therefore, not a mistake apparent from the record, and thus could not be rectified under section 154. Ld. CIT(Appeals) further held that the AO the revised return while finalizing the assessment under section 143(3) r.w.s. 153A. The rectification order passed by the DCIT was found to be void, as it was based on a debatable issue that could not be corrected through a rectification order under section 154 of the Act. The assessee's reliance on case laws was also found to be unhelpful due to the material differences in the facts of the cases cited. In the result, the action of the AO in passing the rectification order under section 154 on November 10, 2016, was upheld by Ld.

The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). The assessee has raised the following Grounds of Appeal:

Without prejudice to above ground, on the facts and in the circumstances of your appellant’s case and in law, the Honorable CIT-Appeals-11, Ahmedabad has erred in confirming the addition of Rs. 54,24,000/- made by the ld. AO u/s 54B, by disallowing appellant’s claim made vide filing revised return 139(5).

Without prejudice to above ground, on the facts and in the circumstances of your appellant’s case and in law, the Honorable CIT _Appeals-11, Ahmedabad has erred in passing order u/s 250, without taking into account claim made before him for the first time by the appellant.”

Before us, the Counsel for the assessee submitted that the claim, which was initially omitted in the original return, was made validly by filing a revised return before the completion of the assessment. The Counsel for the assessee argued that even if the claim had been made directly during the assessment proceedings, it should have been considered. Numerous judicial decisions support the assessee's contention that claims made before the completion of the assessment, even if they were not included in the original return, are allowable. The assessee also highlighted that the earlier AO had accepted the claim made in the revised return, and had only made a statistical error by considering the income as per the original return instead of the revised one. This error was rectified promptly by the earlier AO. The new AO, however, complicated the matter by focusing on the technicality of the Vipul Purshottamdas Thakkar vs. DCIT Asst.Year –2012-13 - 5– validity of the revised return filed under section 153A, thereby denying the assessee the benefit of the claim. Moreover, the Counsel for the assessee CIT-A overlooked the fact that the claim was made before the completion of the assessment, was factually allowable, and was accepted by the earlier AO. The assessee contends that the rectification done by the earlier AO was not based on a debatable issue but was simply a correction of a statistical mistake. The Counsel for the assessee also pointed out that the it is well-settled law that an assessee can make a fresh claim before the first appellate authority, even if the claim was not made during the assessment proceedings. In this case, the assessee had already made the claim under section 54B by filing the revised return, and it was accepted during the assessment. The assessee had prayed to the CIT(A) to allow this genuine deduction, but the CIT(A) failed to address this in the appellate order. The assessee submitted that the CIT(A) should have considered the merits of the claim and verified it, even if it was debatable. The Counsel for the assessee submitted that the CIT(A) had the authority and responsibility to assess the claim on its merits, and his failure to do so rendered the order defective.

In response, the Ld. DR placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order. The Ld. DR submitted that admittedly, the return which was filed by the assessee was beyond the due prescribed 45 day period and therefore, it is well settled law that a belated return cannot be revised under the Income Tax Act. Secondly, the Ld. DR submitted that there is no limit on the number of times an order can be rectified u/s 154 of the Act, if the same suffers from a mistake apparent from record. Accordingly, the Ld. DR that there is no

We have heard the rival contentions and perused the material on record.

On going through the facts of the case, we observe that it is an admitted fact that the assessee had filed belated return in response to notice under Section 153A of the Act. Therefore, the return filed under section 153A of the Act has replaced the original return of income filed under section 139(1) of the Act. The law, as it stood at the relevant time provided that a belated return, though valid, could not be revised in terms of section 139(5) of the Act. Before us, the Counsel for the assessee has placed reliance on the case of Janak K. Kansara v. DCIT 116 TTJ 415 (Ahmedabad – ITAT), wherein it was held that in a block return which is filed beyond time-limit of 45 days prescribed in notice but before completion of assessment is a valid return and same cannot be ignored by Assessing Officer. However, the issue before us is not whether the returned filed beyond the time period of 45 days is a valid return or not, but the issue for consideration is whether the said belated return, even though valid, could be revised under section 139(5) of the Act. In the instant facts, we observe that the assessee had revised original return of income under section 139(1) of the Act on 28.09.2012, in which the assessee had not claimed deduction under section 54B of the Act. Thereafter, in consequence to search action, the assessee filed belated return of income under section 153A of the Act on 10.10.2013, declaring total income of Rs. 1,44,03,930/-, in which again the assessee had not claimed deduction under section 54B of the Vipul Purshottamdas Thakkar vs. DCIT Asst.Year –2012-13 - 7– Act. Thereafter, the assessee filed revised return of income on 30.03.2014 in which exemption under section 54B of the Act was claimed for the first time. The law, as it stood at the relevant time clearly provided that the return of income if filed belatedly could not be revised under section 139(5) of the Act. Therefore, the issue for consideration before us is not whether the return of income filed by the assessee under section 153A of the Act, on 10.10.2013 is a valid return or not, since, even if, it is accepted the same to be a valid return of income, the assessee had not claimed exemption under section 54B of the Act in the said return. The issue for consideration before us is whether the revised return of income filed by the assessee on 30.03.2014, revising the belated return dated 10.10.2013 can be said to be a valid return of income under section 139(5) of the Act. We are of the considered view that since the belated return, (even if deemed to be valid) cannot be revised under section 139(5) of the Act then the assessee also cannot claim benefit of section 54B of the Act, in the said, revised return of income which is not a valid return of income in the eyes of law. It would be useful to reproduce the relevant extracts of the 154 order dated 10.11.2026 for ready reference:

In appeal, the Ld. CIT(A) also dismissed the appeal of the assessee on this limited point with the following observations:

In view of the above facts and the plain language of the Statute, as it stood at the relevant time, which did not permit the assessee to revise a belated return of income, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.

In the result, the appeal of the assessee is dismissed. This Order pronounced in Open Court on 17/12/2024