2023 (9) TMI 331 - HC - Income Tax

Court rules name change recognized, directs processing of original return.

Religare Advisors Limited (Formerly Known As Religare Wealth Management Limited) Versus Assistant Commissioner Of Income Tax, Circle 19 (1), Delhi & Ors.

The court ruled in favor of the petitioner, holding that the treatment of their return as invalid was unjustified. Despite the name change from Religare ... Invalid return - petitioner had applied for change of name - although the PAN remained the same, the change in name was recognized by the concerned authority and despite this position a notice was issued u/s 139(9) labelling the petitioner’s return as defective - as submitted petitioner could have approached the Central Board of Direct Taxes (CBDT), for an extension of time to file a revised return, by taking recourse to Section 119(2)(b) - HELD THAT:- We are of the view that this course of action does not align with the provisions of the Act. The fact that there has been a change in the name of the petitioner is not in dispute; in fact, on the date when the return was filed, i.e., 15.10.2018, the petitioner was described as RWML. Accordingly, the impugned order and communications are set aside. The respondents/revenue are directed to process the return filed on 15.10.2018 concerning the aforementioned AY, and pass necessary consequential orders. ISSUES PRESENTED AND CONSIDERED 1. Whether a return filed under Section 139 of the Income Tax Act, 1961 is a 'defective return' under Section 139(9) solely because the assessee's name, as shown in the return, differs from a later-updated name in PAN records where the name change was effected after filing but within statutory/regulatory processes (ROC approval and PAN update applications). 2. Whether the Assessing Officer/CPC/other revenue offices can treat a return as defective, demand filing of a revised return, or refuse acceptance on the ground that the name in the return does not match the then-later PAN data, absent any of the defects specified in the Explanation to Section 139(9). 3. Whether recourse to Section 119(2)(b) (CBDT power to condone delay/extend time to file revised return) is the appropriate or necessary remedy in circumstances where a return filed on time and in the taxpayer's name at the time of filing is treated as 'defective' on account of a subsequent name-change recognition. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework governing 'defective return' under Section 139(9) Legal framework: Section 139(9) empowers the Assessing Officer to intimate to the assessee any defect in the return and to grant an opportunity to rectify. The Explanation to Section 139(9) defines attributes of a 'proper return'; absence of those attributes renders a return defective. Precedent Treatment: The judgment does not rely upon or distinguish prior judicial precedents; the Court's approach is based on statutory text and the record. Interpretation and reasoning: The Court examined whether the returned document filed on 15.10.2018 had the attributes of a proper return as per the Explanation to Section 139(9). The Court noted that on the date of filing the return the assessee's name was correctly shown as per corporate records then in force (ROC approval for change of name occurred subsequently on 20.12.2018 and PAN change process was initiated). The Court reasoned that a subsequent or post-filing change in name recognised in PAN records does not retrospectively render a previously validly filed return defective unless it lacked the statutory attributes set out in the Explanation. Ratio vs. Obiter: Ratio - A return validly filed under the name correctly borne by the assessee at the time of filing cannot be declared defective under Section 139(9) merely because the name is later changed or later reflected differently in PAN database. Obiter - Observations on administrative practice of updating PAN records and inter-office communications. Conclusions: The Court concluded that the return filed on 15.10.2018 was a proper return and could not be categorised as defective solely because of the subsequent recognition of a changed name in PAN or other databases. Issue 2 - Validity of revenue communications treating the return as defective and directing filing of revised return Legal framework: Section 139(9) contemplates identification of specified defects and opportunity to cure; communications and orders must align with statutory mandate. Section 143(2) notices and subsequent processing must be consistent with the accepted return. Precedent Treatment: No precedents applied; analysis is statutory and factual. Interpretation and reasoning: The Court scrutinised the sequence of communications - notice under Section 139(9) dated 14.02.2019, the assessee's reply dated 21.02.2019 explaining name-change facts, and subsequent communications from AO/CPC/Systems rejecting the response on the ground that PAN name should match the return. The Court found these communications inconsistent with Section 139(9) because they treated an otherwise proper return as defective without reference to the attributes in the Explanation. The Court further observed that a subsequent Section 143(2) notice issued in the new name demonstrated internal recognition of the name-change and undermined the premise that the original return was invalid. Ratio vs. Obiter: Ratio - Revenue's unilateral characterization of a timely and properly-filed return as 'defective' for the reason of name-mismatch (when name at time of filing was correct) is not consonant with Section 139(9); such communications/orders can be set aside. Obiter - Administrative recommendations for coherency between CPC/AO and PAN databases. Conclusions: The impugned order and communications treating the return as defective were set aside. The Court directed the revenue to process the return filed on 15.10.2018 and pass consequential orders, thereby restoring the status of the return as valid for AY 2018-19. Issue 3 - Appropriateness of invoking Section 119(2)(b) for relief by filing a revised return Legal framework: Section 119(2)(b) empowers the Board to condone delay or extend time for filing where appropriate; it is an administrative power for exceptional relief. Precedent Treatment: No precedents applied or distinguished. Interpretation and reasoning: The revenue suggested that the assessee could have sought CBDT's intervention under Section 119(2)(b) to extend time for filing a revised return. The Court found that directing the assessee to pursue Section 119(2)(b) was inconsonant with the statutory position because the return in question was valid and did not require revision. Reliance on Section 119(2)(b) to cure an alleged defect which, in the Court's view, did not exist, would be an unnecessary and inappropriate remedy. Ratio vs. Obiter: Obiter - The Court's remark that seeking relief under Section 119(2)(b) was not the correct course in these circumstances; the primary obligation is to interpret Section 139(9) correctly rather than relegate the assessee to administrative condonation. Conclusions: The Court rejected the proposition that the proper response to the revenue's treatment was seeking extension under Section 119(2)(b); instead, the correct remedy was judicially to declare the return non-defective and order processing. Relief and consequential direction Legal framework & reasoning: Having held that the return was a proper return and impugned communications/orders were inconsistent with Section 139(9), the Court exercised its supervisory jurisdiction to set aside the impugned order/communications and directed the revenue to process the return filed on 15.10.2018 for AY 2018-19 and pass necessary consequential orders. Ratio vs. Obiter: Ratio - Directing revenue to process a return held to be proper is the operative relief; such direction follows from the statutory interpretation of Section 139(9) as applied to the facts. Obiter - Comments on internal inconsistencies in revenue communications and administrative practice. Conclusions: The writ petition was disposed of by setting aside the impugned communications and ordering processing of the contested return; parties to act on the digitally signed order.