Audit report requirement depends on actual business income; factual verification needed before denying rectification and refund relief.

ITAT Ahmedabad held that the validity of the return and denial of rectification or refund-related relief could not be decided without first verifying whether the assessee had any business or professional income. The assessee's plea was that income arose only from capital gains and other sources, so no audit report was required; the Tribunal found that this core factual claim had not been examined by the lower authorities. It further noted that a bona fide mistake in the return should not defeat substantive relief if the underlying claim is otherwise correct. The matter was set aside and restored to the jurisdictional Assessing Officer for fresh verification, with consequential relief to follow if the claim is accepted.

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Issues: Whether the return could be treated as invalid for want of an audit report when the assessee claimed to have no income from business or profession and whether the matter required factual verification before denying rectification and refund-related relief.

Analysis: The assessee's consistent case was that it had earned income only from capital gains and other sources and, therefore, was not required to furnish an audit report. The lower authorities did not examine this core factual plea and instead shifted responsibility between the CPC and the jurisdictional Assessing Officer. The Tribunal held that the authorities were required to verify whether any business or professional income actually existed and, on that basis, determine whether an audit report was mandatory. The Tribunal also noted that a bona fide mistake in the return should not, by itself, prevent appropriate relief if the substantive claim is found correct.

Conclusion: The order of the CIT(A) was set aside and the matter was restored to the jurisdictional Assessing Officer for fresh examination of the assessee's claim, with consequential relief to follow if the claim is found correct.

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