AI Drafter 
TaxTMI 
TaxTMI 
2024 (3) TMI 372
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....ontribution to PF and ESIC of Rs. 5,51,657/- u/s 36(1) (va) of the Act? 3. Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) has erred in making addition of Rs. 55,91,349/- on account of difference in receipt between "Form 26AS" and "Profit and Loss account"? 4. Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) has erred in making disallowance of Rs. 1,31,527/- for interest on payment of TDS u/s 40(a)(ii) of the Act? 5. Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) has erred in making disallowance of Rs. 17,790/- for penalty expenses? 6. Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) has erred in making addition of Rs. 1,68,54,746/- on account of unsecured loan u/s 68 of the Act? 7. Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) has erred in making addition of Rs. 32,95,776/- u/s. 269SS of the Act? 8. Whether on the facts and in circumstances of the case and in law, Ld. CIT(A) has erred in making disallowance of Rs. 75,07,072/- for employees benefit expenses? 9. Whether on the ....
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....r the prescribed date under law for issuance of notice u/s 143(2) of the Act. That, therefore, the assessment framed was not sustainable and liable to be quashed. In this regard, he placed reliance on the decision of the Hon'ble jurisdictional High Court in the case of Kunal Structure (India) (P.) Ltd. Vs. DCIT, [2020] 113 taxmann.com 577 (Gujarat). Copy of the order was placed before us. 6. The ld. DR, however, contended that the assessee had cured the defect beyond the period prescribed u/s 139(9) of the Act dealing with defective returns. That, therefore, the decision of the Hon'ble High Court is of no assistance to the assessee. He further relied on the decision of the Hon'ble Supreme Court in the case of Deputy Commissioner of Income-tax (Exemption) Vs. Kalinga Institute of Industrial Technology, [2023] 151 taxamnn.com 434 (SC), for the proposition that where the assessee had not challenged the defect in the notice and participated in the proceedings, he thereafter subsequently was debarred from challenging jurisdiction of the Assessing Officer in terms of Section 124 of the Act. Copy of the order was placed before us. To this, the ld. Counsel for the assessee countered ....
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....loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.]" 10. The contention of the Ld. Counsel for the assessee is that notice u/s 143(2) of the Act is to be issued within the time prescribed from the date of filing return of income. Therefore, as per law the notice u/s 143(2) of the Act in the present case ought to have been issued by 30.09.2018. That in the present case the limitation for issuance of notice has been taken from the date of defect in the return being cured by the assessee, which as per the Ld. Counsel for the assessee is of no relevance for the same. That in the facts of the present case, the notice having been issued on 22.09.2019 is clearly beyond time prescribed as per law. That jurisdiction assumed to fram....
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.... the expiry of the time, but before the assessment is made, the Assessing Officer can condone the delay and treat the return as valid return - which means in clear terms and very clear language that the assessee can cure/remove defects upto to the framing of the assessment. This clearly implies that the Assessing Officer can proceed with the assessment without waiting for the removal of defects, which as per law can be removed upto or before the assessment is made. 14. This is further clarified from the fact that the defects which can be cured are in relation to non-filing of documents corroborating the return of income filed by the assessee like computation of income , proof of tax deducted at source , financial statements audited/ unaudited, personal accounts and such other financial data of assesses. These are not such grave defects to invalidate the return of income on the occurrence of such defects, but are curable and hence opportunity is given to the assessee to cure the same and only when it remains uncured despite opportunity given that the return is treated as invalid. This is evident from the Explanation to Section 139(9) of the Act which lists the defects which can b....
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.... accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section; (f) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year." 15. It is abundantly clear therefore that as per law there is no bar in proceeding with assessment where returns are found defective and therefore the limitation for issuing notice u/s 143(2) of the Act for assuming jurisdiction to frame assessment will logically run from the year in which return is filed and not when the defect is removed by the assessee. 16. Even the Hon'ble jurisdictional ....
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....that therefore, arises for consideration is as to which of the above two dates can be said to be the date on which the petitioner filed its return on income. 9. In this regard, it may be germane to refer to the provisions of section 139 of the Act, which to the extent the same is relevant for the present purpose, reads as under: "139. Return of income - (1) Every person,- (a) being a company or a firm; or (b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: ** ** ** Explanation 2.- In this sub-section, "due date" means,- (a) where the assessee other than an assessee referred to in clause (aa)] is (i) a company; (ii) a person (other than a company)....
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...., on an application made in this behalf, the Assessing Officer may, in his discretion, allow, and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return:" 10. A study of the provisions of section 139 of the Act shows that under subsection (1) thereof, an assessee is required to file return on or before the due date. As to which is the due date for filing of return has been provided under Explanation 2 to sub-section (1) of section 139 of the Act. Sub-section (3) of section 139 contemplates filing of a return of income by any person who has sustained a loss in any previous year as provided thereunder, and further provides that all the provisions of the Act shall apply as if it were a return filed under subsection (1). Therefore, a return filed under sub-section (3) of section 139 of the Act is treated as a return under sub-section (1) thereof. Sub-section (5) of section 139 of the Act pro....
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....eturn. Unlike sub-section (5) of section 139 of the Act which requires an assessee to file a revised return of income in case of any omission or wrong statement in the return of income filed under sub-section (1) thereof, subsection (9) of section 139 of the Act, does not require an assessee to file a fresh return of income, but requires the assessee to remove the defects in the original return of income filed by him within the time provided therein. Once the defects in the original return of income are removed, such return would be processed further under the Act. In case such defects are not removed within the time allowed, such return of income would be treated as an invalid return. 13. In view of what is discussed hereinabove, the contention that the return under sub-section (9) of section 139 of the Act was filed by the petitioner on 07.07.2017, and that it was this return which was selected for scrutiny under the CASS system in August 2018 and not the defective return filed on 10.09.2016, does not merit acceptance. While the impugned notice under sub-section (2) of section 143 of the Act does say that the return filed by the petitioner on 07.07.2017 has been selected....
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....he notice under sub-section (9) of section 139 of the Act does is to call upon the petitioner to remove the defects pointed out therein. Therefore, mere reference to the expression "corrected income" in the notice under sub-section (9) of section 139 of the Act does not mean that a fresh return of income has been filed under that sub-section. Thus, under sub-section (9) of section 139 of the Act, it is only the original return which gets corrected and no new return is filed. In other words, the original return which was defective when it was filed is rectified upon removal of the defects under subsection (9) of section 139 of the Act and becomes a valid return. Thus, as held by the Bombay High Court in the decisions cited by the learned counsel for the petitioner as referred to hereinabove, the action of removal of the defects would relate back to the filing of the original return of income and accordingly, it is the date of filing of the original return which has been considered for the purpose of computing the period of limitation under sub-section (2) of section 143 of the Act and not the date on which the defects actually came to be removed. 17. Reference may also be m....
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....his sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished." 19. On a plain reading of sub-section (2) of section 143 of the Act, it is apparent that the Assessing Officer or the prescribed income-tax authority must issue a notice under that sub-section only in those cases where a return has been made under section 139 or in response to a notice issued under section 142(1), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, but such notice must be served within a period of six months from the end of the financial year in which such return is furnished. Thus, if, after furnishing a return of income, the assessee does not receive a notice under subsection (2) of section 143 of the Act within the period referred to in the subsection, the assessee is entitled to presume that the return has become final and no scrutiny proceedings are to be started in respect of that return. It is only after the issuance of notice under sub-section (2) of section 143 of the Act th....
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....'ble Apex Court in the case of the Kalinga Institute of Industrial Technology (supra) has been rightly distinguished by the ld. Counsel for the assessee as pertaining to have challenged the jurisdiction of the Assessing Officers in terms of provisions of Section 124 of the Act and has nothing to do with the limitation prescribed under the Act for issuance of jurisdictional notice u/s 143(2) of the Act. The said decision we hold therefore, is of no assistance to the Revenue. As for the argument of the ld. DR that the assessee had not cured the defect within the period prescribed u/s 139(9) of the Act and therefore the original return was to be treated as invalid and limitation for issuing notice u/s 143(2) of the Act be determined from the date of removal of defect, we find, is a self-defeating argument. Going by this argument, if the original return is to be treated invalid since the defect was not cured in time, then considering the fact that no other return was filed by the assessee, we fail to understand how notice for framing assessment, u/s 143(2) of the Act, could be issued in the absence of any valid return of income. 19. Even otherwise as per the proviso to the section 1....