TaxTMI 
TaxTMI 
2021 (11) TMI 503
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....ed refund of Rs. 1,34,42,875. The return was processed by the Centralized Processing Centre (CPC), Bengaluru, which highlighted difference between the income shown in the return at Rs. 474.37 crore and as shown in Form No. 26AS at Rs. 4,78,61,86,673. A notice dated 15.11.2017 issued under Explanation (a) to section 139(9) took cognizance of such a defect in the return of income. The assessee responded to the same on 4.12.2017 through e-portal elaborating the reasons for difference in the two amounts by maintaining that correct income was reported in the return of income. The DCIT (CPC), Bengaluru rejected the assessee‟s contention and declared the return to be invalid by means of the order u/s 139(9) of the Act. The appeal against such an order before the ld. CIT(A) came to be dismissed at the threshold on the ground that the order u/s 139(9) of the Act was not appealable under section 246A of the Act. This has brought the assessee to the Tribunal. 3. We have heard both the sides and scanned through the relevant material on record. The ultimate effect of the proceedings is that the refund amounting to Rs. 1.34 crore due to the assessee as per the return of income got eclip....
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....t is made available to that bank through a telegraphic transfer. Pages 2 to 14 of the paper book contain invoice-wise conversion of the income of the assessee from USDs into INRs. The assessee claims that it converted income accruing in foreign currency into Indian rupees on the basis of SBI TT Buying rate on the date of credit to its account or the date of payment, whichever is earlier but the Indian entities converted the foreign currency into Indian rupees at a rate different from the SBI TT Buying rate. 5. The second reason for difference in the figures given by the assessee is `Reimbursements‟. The Indian entity paid some amount to the assessee and deducted tax thereon. The claim of the assessee is that the receipt is in the nature of reimbursement and hence not chargeable to tax. If the amount is really in the nature of reimbursement, then tax deducted at source on such an amount would call for refund without the corresponding inclusion of the amount in the total income. 6. The third reason given by the assessee is the reversal of some entries. For example, the assessee raised invoice of 100 USD on the Indian entity, which deducted tax at source on 100 USD. Howeve....
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....ither in writing or in electronic mode". The second proviso further states that the "response received from the assessee, if any, shall be considered before making any adjustment....". The effect of these two provisos to sub-clause (vi) of section 143(1)(a) is that the AO, at the stage of processing the return u/s 143(1), is required to increase the total income computed by the assessee in its return with the differential higher income as appearing in Form 26AS etc. However, this can be done only after giving prior intimation to the assessee about such proposed adjustment and that too, after considering the response of the assessee, if given thereto. Thus, it is overt that if the explanation furnished by the assessee is found to be satisfactory, then the AO cannot carry out any such adjustment at the time of processing the return u/s 143(1) of the Act. 9. The AO in the extant case has invoked Explanation (a) to section 139(9) of the Act on account of mismatch of the figures of income as returned and as per Form 26AS. Section 139(9) provides in the opening part that: `a return of income shall be regarded as defective unless the following conditions fulfilled‟. Then there ar....
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....mencing on or after 1st day of April, 2018". A conjoint reading of the third proviso with the main sub-clause (vi) of section 143(1) along with the first two provisos amply demonstrates that the Legislature required the AO to make such an adjustment only for the A.Y. 2017-18. The Memorandum explaining the provisions of Finance Bill, 2018 justified the insertion of the third proviso, having the effect of omission of clause (vi) from the scope of prima facie adjustments during the processing of return of income, by stating that: `With a view to restrict the scope of adjustments, it is proposed to insert a new proviso to the said clause to provide that no adjustment under sub-clause (vi) of the said clause shall be made in respect of any return furnished on or after the assessment year commencing on the first day of April, 2018.‟ A careful circumspection of the provision along with Memorandum makes it explicitly clear that the Parliament wanted to restrict the scope of adjustments and thus excluded the cases of such a mismatch from its ambit. The effect of the third proviso is that such a genuine mismatch will be resolved by taking recourse to assessment u/s 143(3) of the Act by....
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....ings in a vicious circle resulting in an impasse. In the second possible situation, the AO, knowing pretty well that the assessee has income chargeable to tax and the earlier return has been declared by him as never filed, should have issued notice u/s 142(1)(i) requiring the assessee to file a return of income. This would have resulted in the assessee filing its return and then the AO determining correct total income of the assessee as per law after making assessment u/s 143(3) of the Act. However, in the instant case, the AO did not issue any notice u/s 142(1)(i) and pushed the proceedings to a dead end, leaving the assessee without any apparent legal recourse. Left with no option, the assessee preferred an appeal before the ld. CIT(A) against the order u/s 139(9) of the Act, which has been dismissed as not maintainable on the ground that an order u/s 139(9) is not covered by the list of appealable orders given in section 246A of the Act. 13. Bearing in mind the pitiable condition of the assessee descending in a quagmire, having been created by the DCIT (CPC), Bengaluru, the assessee cannot be left remediless. It goes without saying that every piece of legislation ultimately a....