When the error in the initial return is corrected in accordance with Section 139(9), the return is valid as of the filing date
Fact and issue of the case
This appeal of the assessee for the assessment year 2017-18 is directed against the order dated 08.12.2021 passed by the ld. Commissioner of Income-tax, Appeals, NFAC, Delhi [hereinafter referred to as ‘the ‘ld. CIT(A)’]. The assessee has raised the following grounds of appeal:
That the order passed u/s 250 of the ld. CIT(Appeals) confirming the additions and disallowances made by learned assessing officer is contrary to the law and facts of the case.
That the ld. CIT(Appeals) erred in law as well as in facts of the case by confirming the addition made by the ld. AO who treated the increase in share capital and premium amounting to Rs. 1,60,00,000/- as undisclosed income u/s 68 of the I.T. Act.
That the appellant craves leave to add/or amend any ground of this appeal.”
Brief facts of the case are that the ld. AO framed the assessment order u/s 143(3) vide order dated 14.12.2019 for the A.Y. 2017-18 of the Act. The assessee in its return of income disclosing total income of Rs. Nil and book profit of Rs. 5,54,72,136/-. In the order passed u/s 143(3) of the Act, the ld. AO assessed the income of the assessee at Rs. 16,43,788/- after making an additions/disallowances on account of u/s 36(1)(va) r.w.s. 2(24)(x) of Rs. 13,04,162/- and disallowance by way of penalty or fine for violation of any law of Rs. 3,39,626/-.
Aggrieved by the above order, assessee preferred an appeal before the ld. CIT(A) where the appeal of the assessee was dismissed by the sustaining the order of ld. AO.
Feeling aggrieved by the above order, assessee is in appeal before the Tribunal raising multiple grounds of appeals. First we take up ground no. 1 which is general in nature need not required to be adjudicated. The 2nd ground of appeal relating to disallowance made u/s 36(1)(va) of the Act in respect of delay in deposit of Employees’ Contribution of Provident Fund and Employees State Insurance (PF & ESI) totaling to Rs.13,04,162/-.
Observation of the court
On the other hand, ld. DR supported the decision rendered by the authorities below. We after hearing the rival submission of the parties and perusal of the material available on record, we find that the original return of assessee was filed defective and the defect removed u/s 139(9) of the Act. Therefore, the return filed u/s 139(1) becomes a valid return from the date when it was originally filed. The Hon’ble Bombay High Court in the case of Atul Projects India Pvt. Ltd. vs Union of India and another reported in (2020) 422 ITR 478 (Bom) where it was held that “it is true that the return was invalid as originally filed because of a defect in the person signing the return. But by virtue of section 139(9) that the defect could be cured and was in fact cured. Though the defect was cured on October 15, 1992 it would relate back to December 31, 1991, the date of original filing of the return.”
In the instant case, the assessee’s return of income filed as Nil after adjustment of brought forward loss of Rs. 2,55,37,104/-for A.Y. 2015-16. During the course of assessment, assessing office made an addition under various heads of Rs. 16,43,788/-. Since the assessee had carry forward business loss of Rs. 5,61,50,519/- for the A.Y. 2015-16 which the assessee requested the assessing officer to adjust against the assessee’s income as as during the year, assessee had not suffered any loss carry forward for which claimed by the assessee. Therefore, the disallowance of carry forward business loss on earlier years was wholly unjustified and against prescribed provisions of law. In the present case, the claim of the assessee was disallowed by the ld. AO and sustaining the same by the ld. CIT(A) stating that the original return was filed on 31.10.2017 which was revised on 23.02.2018 as defective by CPC and finally revised return u/s 139(5) was filed on 10.07.2018 which is beyond due date and it is establish norm that as per Income Tax Act carry forward losses are permitted when the return was filed in time and in the case of assessee return has been filed late. Therefore, the ld. AO was within the right matrix to disallow carry forward loss in the case of assessee.
However, we find that this view taken by the authorities below is not correct since the assessee submitted original return defective and defect was removed u/s 139(9) of the Act, the return filed u/s 139(1) becomes valid return from the date when it was originally filed. Therefore, the view taken by the authorities below is not sustainable and we after following the decision of the Hon’ble Bombay High Court in the case of Atul Projects India Pvt. Ltd. (supra). We are inclined to allow the ground taken by the assessee and direct the AO to allow set off the business income of Rs. 16,43,788/- with carry forwarded business loss of Rs. 5,61,50,519/- for A.Y. 2015-16 by the assessee. Accordingly, the appeal of the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 25.08.2023.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from hereDalmia-Laminators-Ltd.-Vs-ACIT-ITAT-Kolkata2