Revised return under section 139(5) cannot revise belated return filed under section 139(4), assessment order vacated

The ITAT Pune held that a revised return filed under section 139(5) to revise a belated return originally filed under section 139(4) was invalid for A.Y. 2015-16. The pre-substituted section 139(5) only permitted revision of returns filed under section 139(1), not section 139(4). Since the case was selected for Limited Scrutiny under CASS based on the invalid revised return claiming section 54F exemption, and the notice under section 143(2) was issued with reference to this invalid return, the entire assessment order was illegal. The ITAT vacated the assessment order and allowed the assessee's appeal.

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Issues involved: Appeal against order passed by CIT(A) in relation to assessment year 2015-16 regarding exemption u/s. 54F and selling expenses.

Issue 1: Validity of assessment based on revised return

The assessee filed a belated original return followed by a revised return declaring higher income and claiming exemption u/s. 54F. The AO completed the assessment based on the revised return. The contention was raised that since the revised return was based on the belated original return, which was invalid for revision, the assessment should not have been done on the basis of the revised return.

Details: The original return was belated and filed under section 139(4) of the Income-tax Act. The revised return was filed after the expiry of the time limit for revising belated returns. The AO acknowledged the invalidity of the revised return in the assessment order. The assessment was done based on the revised return, which was not a valid one, leading to the appeal before the Tribunal.

Issue 2: Jurisdictional validity of assessment under section 143(2)

The assessment was initiated under limited scrutiny for the deduction claimed under capital gains. The notice u/s. 143(2) referred to the revised return filed by the assessee, which was based on the belated original return. The question arose whether the assessment was conducted on the original or revised return, impacting the legality of the assessment order.

Details: The notice u/s. 143(2) specifically mentioned the revised return and the issue of deduction claimed under capital gains. The revised return did not conform to the provisions for revision of belated returns before the relevant amendment. As the assessment was conducted based on the invalid revised return, the Tribunal held that the assessment order was illegal and vacated it, emphasizing the necessity of jurisdictional validity for assessment under section 143(2).

Conclusion: The Tribunal allowed the appeal, emphasizing the importance of conducting assessments based on valid returns and jurisdictional provisions. The assessment order was vacated due to the reliance on an invalid revised return, highlighting the need for adherence to statutory provisions in assessment proceedings.

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