2025 (9) TMI 654 - AT - Income Tax

Belated return with incorrect particulars and no u/s 140B payment is defective; taxpayer protected from consultant errors

Nararshabh Sharma Versus Assessing Officer, Ward-7 (3), Pune.

ITAT PUNE held that a belated return filed with incorrect particulars and without payment u/s.140B was defective and could not be revised after the due ... Tribunal (ITAT) invoking Article 265 of the Constitution of India which states that no tax shall be levied or collected except by authority of law - Validity of income tax return which was filed belated with incorrect particulars - payment of tax as required u/s. 140B was not made and return was defective return as per clause (ca) of explanation to section 139(9) - assessee, who is running the business of advertising and servicing contracts, is regularly filing his income tax returns HELD THAT:- Return has been filed on 07/09/2023 after due date and the same could not be revised. Now, the situation is that the assessee in spite of knowing that incorrect income and incorrect claim of TDS has been filed in the income tax return by the tax consultant, but there is no mechanism for revising it. Due to the provisions of the income tax Act which do not provide any mechanism to revise the return after a particular time period, this situation has arisen. Now, on one hand, department cannot treat the return as invalid because it has been filed validly by the assessee and there being wrong claim of TDS made in the return, and on the other hand, the assessee is facing hardship due to mistake advertently or inadvertently committed by the tax consultant. The assessee has also filed a police complaint on 15/01/2025 which indicates that the assessee has been subjected to face the alleged tax liability due to punching of wrong figures and details in the income tax return by the tax consultant. Take note of the Article 265 of the Constitution of India which states that no tax shall be levied or collected except by authority of law. This fundamental principle ensures that taxes can only be imposed and collected if there is a specific law enacted by the appropriate legislative authority allowing such actions. The article sees that taxation is not arbitrary and is backed by legislation passed by either Parliament or state legislatures, depending on the subject matter. The article serves as a check against unauthorized taxation reinforcing the principle that all fiscal impositions must have legal backing. In the light of the Article 265 of the Indian Constitution, as note that in the instant case, the contentions of the assessee are correct and the income of the assessee is not the income as stated in the income tax return and the assessee is been heavily burdened for the extra tax liability on the income not earned by him. Merely because there is no mechanism to revise such return, the assessee should not be penalized. Matter needs to be restored to the learned Jurisdictional Assessing Officer (JAO), who shall either provide a window to the assessee to file correct return of income or in alternative provide opportunity to the assessee to file the correct computation of income along with relevant details and documents. ISSUES PRESENTED AND CONSIDERED 1. Whether a return filed under section 139(8A) after the due date but not revised can be declared invalid under clause (ca) of the Explanation to section 139(9) on the ground that the assessee did not make the payment required under section 140B and therefore the return is defective. 2. Whether the Assessing Officer (AO) / Jurisdictional Assessing Officer (JAO) is obliged to condone or validate a delayed or defective return under section 139(9) and, if not, what remedial steps are permissible when an erroneous return (wrong income and incorrect TDS claim) has been filed and cannot be revised under the statutory time limits. 3. Whether, in the absence of a statutory mechanism to revise a belated or defective return, the principles of Article 265 of the Constitution (no tax without authority of law) and the equities of the situation permit the Tribunal to direct the AO/JAO to permit filing of corrected computation or provide a 'window' for corrective action and to conduct de novo assessment on corrected figures. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of late return and applicability of clause (ca) of Explanation to section 139(9) Legal framework: Section 139(8A) permits filing of a return after the due date under specified conditions; Explanation to section 139(9) renders returns defective if they are accompanied by certain defects (clause (ca) relevant where statutorily required payment under another provision is not made). Section 140B prescribes payment of tax in certain contexts. Section 143(1)(a) deals with processing the return. Section 154 allows rectification of mistakes apparent from record within prescribed limits. Precedent treatment: No specific precedent was cited or relied upon by the Tribunal in the judgment; the Court considered statutory language and administrative practice (CPC processing and AO's power to condone delay under 139(9)). Interpretation and reasoning: The Tribunal noted that the return filed was post-due-date and could not be revised under statutory limits; the return contained materially incorrect figures (substantial overstatement of income in some heads, large incorrect TDS credit claim inconsistent with Form 26AS). The Tribunal observed that the AO/CPC's processing of such return does not automatically render the return unlawful; section 139(9) empowers the AO to condone delay and treat a return as valid even after the permitted time but before completion of assessment. The Tribunal, however, recognized that the return as filed by the tax consultant did not represent the true income of the assessee and that the assessee had furnished correct computations separately. Ratio vs. Obiter: Ratio - A return filed after due date and containing incorrect figures is not automatically rendered invalid where statutory provisions (section 139(9)) vest AO with power to condone and treat returns as valid; the correctness of income must be examined by the AO/JAO. Obiter - Discussion noting that clause (ca) of Explanation to section 139(9) could render a return defective where statutory payments are not made, but the Tribunal did not hold the return invalid solely on that ground in the operative order. Conclusions: The Tribunal did not declare the return invalid solely on the basis of non-compliance with section 140B or clause (ca) of Explanation to section 139(9). Instead, it recognized the AO's power under section 139(9) and directed remedial administrative action (restoration for de novo assessment) rather than immediate invalidation of the return. Issue 2 - Obligation and powers of AO/JAO to cure defects, condone delay, and assess correct income where return contains erroneous figures and cannot be revised Legal framework: Section 139(9) confers power on the AO to condone certain defects and treat returns as valid before completion of assessment; section 143(1)(a) allows processing of returns by CPC; section 154 allows rectification of mistakes apparent from record within its time-limits; Article 265 ensures taxation must have legal authority. Precedent treatment: None specifically cited; the Tribunal relied on statutory interpretation and administrative practice to determine appropriate remedial course. Interpretation and reasoning: The Tribunal recognized competing outcomes if the return were treated mechanically: (a) Department could treat processed return as valid and assess tax on incorrect figures; (b) assessee cannot revise the return beyond statutory time-limits and would thus suffer undue tax liability for income not earned. The Tribunal emphasized that statutory powers under section 139(9) allow AO to condone or validate returns and that AO/JAO can examine corrected computations and supporting documents submitted by the assessee. Given the assessee's submission of corrected computations and documentary support, and a police complaint alleging misconduct by the tax consultant, the Tribunal concluded that administrative measures must be taken to prevent unjust taxation inconsistent with Article 265. Ratio vs. Obiter: Ratio - Where a return filed after the due date contains incorrect material particulars that cannot be revised within statutory time, the AO/JAO may be directed to allow corrective measures (permit submission of correct computation and supporting documents or provide a window to file correct return) and to conduct assessment de novo after examination and necessary investigation. Obiter - Observations on general hardships caused by the absence of a revision mechanism and on the role of a police complaint in the facts of the case. Conclusions: The Tribunal directed restoration of the matter to the JAO for de novo assessment, with explicit directions to either provide a window to file a correct return or accept the corrected computation along with relevant documents, carry out necessary investigation, and assess income correctly. This approach was adopted to reconcile statutory limitations on revision with the requirement that tax be levied only by authority of law and to prevent penalization of the assessee for a consultant's errors. Issue 3 - Constitutional principle (Article 265) and equitable relief where statutory procedure leaves no revision route Legal framework: Article 265 of the Constitution: 'No tax shall be levied or collected except by authority of law.' This principle requires that taxation be grounded in statutory authority and not be arbitrary. Precedent treatment: No judicial authorities cited; the Tribunal applied Article 265 as guiding constitutional principle to prevent unjust taxation that lacks statutory basis in the specific factual matrix. Interpretation and reasoning: The Tribunal treated Article 265 as a check against allowing the assessee to be taxed on incorrectly stated income in a processed return when the true income is supported by contemporaneous documents and the statutory scheme provides no post-deadline revision mechanism. The Tribunal considered it inequitable and constitutionally problematic to permit collection of tax on income not earned merely because the return as filed could not be revised and had been processed, particularly where the error arose from the tax consultant and the assessee had lodged a police complaint. Ratio vs. Obiter: Ratio - Constitutional principle (Article 265) supports directing administrative remedial measures (acceptance of corrected computation or permitting corrective filing and conducting de novo assessment) to ensure taxation occurs only on properly established income. Obiter - Broader comments on systemic lacunae in the statute regarding post-due-date revision windows. Conclusions: The Tribunal invoked Article 265 to justify restoration for de novo assessment and directed the JAO to facilitate correction of the record and assess correct income; this relief was treated as necessary to prevent taxation without lawful basis and to redress the assessee's hardship resulting from the consultant's error. Operational Direction and Disposition Legal framework and reasoning: Balancing statutory provisions and constitutional principle, the Tribunal concluded that the appropriate remedy was restoration to the file of the JAO for de novo assessment. The JAO is to either allow a window to file a correct return or accept the corrected computation with supporting documents, investigate as necessary, and assess the correct income. Ratio: The Tribunal's order establishing that, in cases where a late/unrevisable return contains materially incorrect particulars and the assessee furnishes correct computations/documentary evidence, the Tribunal may direct the AO/JAO to permit corrective filing or accept corrected computations and proceed to de novo assessment is a binding outcome of this decision for the facts considered. Conclusion: Appeal allowed for statistical purposes; matter restored to JAO to give effect to directions (window for correct return or acceptance of corrected computation, investigation, and de novo assessment) to ensure tax is levied only on correctly determined income consistent with Article 265.