Allowed

Travel Designer India Pvt. Ltd. v. Deputy Commissioner of Income Tax

Gujarat HC24 Oct 2019SCA/15564/2018

Case brief

AI extract

What is this about?

Challenge to a notice under section 143(2) of the Income Tax Act, 1961 on the ground that it was issued beyond the prescribed limitation. The court held that removal of defects under section 139(9) relates back to the filing of the original return, so limitation ran from the original return date, and quashed the notice as time-barred.

What did the court decide?

Petition allowed; impugned notice dated 11.08.2018 under section 143(2) of the Income Tax Act, 1961 and all proceedings pursuant thereto quashed and set aside; rule made absolute with no order as to c

Travel Designer India Pvt. Ltd. Vs Deputy Commissioner of Income… — Income Tax | Gujarat HC (2019)

¶1

C/SCA/15564/2018 JUDGMENT

¶2

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

¶3

R/SPECIAL CIVIL APPLICATION NO. 15564 of 2018

¶4

FOR APPROVAL AND SIGNATURE:

¶5

HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN

¶6

==========================================================

¶7

1 Whether Reporters of Local Papers may be allowed to see the judgment ?

¶8

2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?

¶9

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

¶10

==========================================================

¶11

TRAVEL DESIGNER INDIA PVT LTD

¶12

Versus

¶13

DEPUTY COMMISSIONER OF INCOME TAX,

¶14

==========================================================

¶15

Appearance: DARSHAN R PATEL(8486) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 1

¶16

==========================================================

¶17

CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI

¶18

and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN

¶19

Date : 24/10/2019

¶20

ORAL JUDGMENT

¶21

(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)

¶22

1.By this petition under articles 226 and 227
of the Constitution of India, the petitioner has

¶23

Page 1 of 28

¶24

C/SCA/15564/2018 JUDGMENT

¶25

challenged the notice dated 11.08.2018 issued
under sub-section (2) of section 143 of the
Income Tax Act, 1961 (hereinafter referred to as
“the Act”) and the proceedings initiated pursuant
thereto.

¶26

2.The petitioner is a company registered under
the Companies Act, 2013. For the assessment year
2016-17, the petitioner had filed its return of
income under section 139(1) of the Act on
29.11.2016. Thereafter, the petitioner received
an intimation of defective return under section
139(9) of the Act on 25.01.2017. The petitioner
filed its reply to the notice under section
139(9) of the Act on 02.02.2017. However, the
petitioner received an intimation regarding non-
acceptance of response of defective return on
10.07.2017, wherein the petitioner was asked to
correct the defects within a period of fifteen
days from the receipt of said notice. The
petitioner filed its reply to the non-acceptance
of response of defective return through e-portal
on 19.07.2017.

¶27

3.Subsequently, the return was processed under
sub-section (1) of section 143 of the Act on
25.08.2017, wherein the date of original return
is referred to as 29.11.2016. Thereafter, the
impugned notice under sub-section (2) of section

¶28

Page 2 of 28

¶29

C/SCA/15564/2018 JUDGMENT

¶30

143 of the Act came to be issued to the
petitioner on 11.08.2018, which has given rise to
the present petition.

¶31

4.Mr. Darshan Patel, learned advocate for the
petitioner, assailed the impugned notice under
section 143(2) of the Act by submitting that the
notice is barred by limitation as the same has
been issued beyond the permissible time limit, as
provided under section 143(2) of the Act. It was
pointed out that in this case, the original
return under sub-section (1) of section 139 of
the Act was filed on 29.11.2016 and that
thereafter, the petitioner was called upon to
remove the defects under sub-section (9) of
section 139 of the Act, which ultimately came to
be removed on 19.07.2017. It was submitted that
considering the date of filing of the original
return, viz., 29.11.2016, a notice under sub-
section (2) of section 143 of the Act, could have
been issued on or before 30.09.2017; however, the
impugned notice has been issued on 11.08.2018,
which is clearly beyond the period of limitation.

¶32

4.1The learned advocate further pointed out that
the intimation issued under section 143(1) of the
Act after the defect in the return of income was
removed, acknowledges the date of filing of the
return to be 29.11.2016. It was submitted that

¶33

Page 3 of 28

¶34

C/SCA/15564/2018 JUDGMENT

¶35

the provisions contained in section 139(9) of the
Act make a distinction between a defective return
and an invalid return and that a defective return
is not ipso facto to be regarded as an invalid
return and that it is only when a return contains
any specified defects and the Assessing Officer,
in his discretion, intimates the defects to the
assessee and the assessee fails to rectify the
same within the specified time, that the
Assessing Officer may treat the return to be
invalid. Therefore, it is only if the defect is
not removed within the time period allowed or
within the extended time period that the return
can be treated as an invalid return. It was
submitted that therefore, it is the date of
filing of the original return under section
139(1) of the Act which is required to be
reckoned for the purpose of calculating the time
limit for issuance of notice under section 143(2)
of the Act.

¶36

4.2It was further submitted that the return
filed in response to the notice under section
139(9) of the Act is not a fresh return, but is
in continuation of the original return rectifying
the specified defects, as per the notice issued
under section 139(9) of the Act. It was submitted
that when the provisions of section 139(9) of the
Act provide an opportunity to the assessee to

¶37

Page 4 of 28

¶38

C/SCA/15564/2018 JUDGMENT

¶39

remove any defect/s in the original return filed
and if the assessee removes the defect/s within
the time period allowed under section 139 of the
Act, then the same should be treated as a valid
return duly filed with effect from the date of
filing of the original return.

¶40

4.3Mr. Patel next submitted that in the present
case it is only because the petitioner has duly
rectified the defects within the time allowed
under section 139(9) of the Act, that in the
intimation under section 143(1) of the Act, the
return has been treated as a valid return under
section 139(1) of the Act with effect from
29.11.2016. It was further submitted that the
notice under section 139(9) of the Act
categorically states that an opportunity has been
given to the assessee only to remove the
specified defects in the original return as
mentioned in the notice itself and that the
assessee has not been allowed to make any further
modifications while furnishing the return under
section 139(9) of the Act except to remove the
specified defects identified and mentioned in the
notice itself. Therefore, the return filed to
remove the defects under section 139(9) of the
Act would be a corrected return and would relate
back to the date of filing of the original
return.

¶41

Page 5 of 28

¶42

C/SCA/15564/2018 JUDGMENT

¶43

4.4It was further submitted that it is a well
settled proposition of law that the notice under
section 143(2) of the Act is a statutory notice
and has to be mandatorily issued as per law for
assuming jurisdiction for assessment by the
Assessing Officer and that in the absence of a
notice under section 143(2) of the Act being
issued within the prescribed time limit, the
entire assessment proceedings would be rendered
without jurisdiction. It was submitted that the
controversy involved in the present case is no
longer res integra as various High Courts have
taken a view that the date of removal of defects
would relate back to the date of filing of the
original return.

¶44

4.5 In support of such submission, the learned advocate for the petitioner has placed reliance upon the decision of the Bombay High Court in the case of Prime Securities Ltd. v. Varinder Mehta, Assistant Commissioner of Income-tax (Inv.), Circle 1(1) , [2009] 182 Taxman 221 (Bombay) , wherein the court has held that even if the defect in the original return came to be cured under section 139(9) of the Act on 15.10.1992, the same would relate back to 31.12.1991, which is the date of original filing of the return.

¶45

Page 6 of 28

¶46

C/SCA/15564/2018 JUDGMENT

¶47

4.6 Reliance was also placed upon an unreported decision of the Bombay High Court in the case of Atul Projects India Private Limited v. Union of India and another rendered on 24.01.2019 in Writ Petition No.3501 of 2018, wherein the court placed reliance upon its earlier decision in the case of Prime Securities Limited (supra) and held that the date of filing of return would be the date on which it was originally presented and not on the date on which the defects were removed.

¶48

4.7 Reference was made to the decision of the Delhi High Court in case of Bharat Nidhi Ltd. v. Commissioner of Income-tax , [2007] 165 Taxman 314 (Delhi) , wherein the court has held that upon the defects being removed, the return would relate back to the original filing date.

¶49

4.8It was, accordingly, urged that the impugned
notice, being barred by limitation, deserves to
be quashed and set aside and the petition
deserves to be allowed in the terms of the
reliefs prayed for.

¶50

5.Opposing the petition, Mrs. Mauna Bhatt,
learned senior standing counsel for the
respondent, submitted that the return filed by
the petitioner for assessment year 2016-17 under
section 139(9) of the Act on 19.07.2017 was

¶51

Page 7 of 28

¶52

C/SCA/15564/2018 JUDGMENT

¶53

selected for scrutiny under the CASS system in
August 2018. Therefore, the notice under section
143(2) of the Act, which was issued on
11.08.2018, was well within the period of
limitation. It was submitted that the original
return of income under section 139(1) of the Act
was filed on 29.11.2016, but it was a defective
return and intimation about the defective return
was communicated to the petitioner on 25.01.2017
and the petitioner was asked to remove the
defects within fifteen days of receipt of the
intimation. On 02.02.2017, the petitioner filed
return under sub-section (9) of section 139 of
the Act electronically and while this return was
being processed, the petitioner suo motu filed
another return on income under sub-section (9) of
section 139 on 19.07.2017. It was submitted thus
that after making corrections and removing the
defects, the return under section 139(9) of the
Act was ultimately filed by the petitioner on
19.07.2017, whereafter it was selected for
scrutiny. Thus, it was the corrected return and
not the defective return filed on 29.11.2016
which was selected for scrutiny. It was submitted
that the return filed under section 139(1) of the
Act on 29.11.2016 was a defective return and a
return with defects is not a valid return under

¶54

the Act. Therefore, the date of filing of the
defective return cannot be taken into

¶55

Page 8 of 28

¶56

C/SCA/15564/2018 JUDGMENT

¶57

consideration for the purpose of computing the
limitation for issuance of notice under section
143(2) of the Act. According to the learned
senior standing counsel, once the defects have
been removed within the prescribed time limit, a
fresh return has to be filed under section 139(9)
of the Act, which is considered to be a valid
return. Accordingly when the time limit for
issuance of notice under section 143(2) of the
Act was available till the expiry of six months
from the end of the financial year in which the
return is furnished, it would mean that the time
limit has to be considered from the date when a
valid return has been filed and if the return is
filed with some defects, then it cannot be
treated as a return of income. Thus, as and when
such defects are removed, such return becomes a
valid return under section 139 of the Act and the
date of limitation for issuance of notice under
section 143(2) of the Act will be determined on
the basis of the date when such return of income
is treated to be a valid income.

¶58

5.1The attention of the court was invited to the
provisions of section 143 of the Act to point out
that sub-section (2) thereof refers to a return
furnished under section 139 or in response to a
notice under section 142(1) of the Act. It was
submitted that section 143(2) of the Act does not

¶59

Page 9 of 28

¶60

C/SCA/15564/2018 JUDGMENT

¶61

state that such return is required to be
furnished under section 139(1) of the Act and
hence, the period of limitation does not have to
be computed from the date on which the return is
filed under section 139(1) of the Act. It was
submitted that in the facts of the present case,
it is only on the date when the corrected return
came to be filed under section 139(9) of the Act
that the return could be considered to be valid
and hence, in terms of section 143(2) of the Act,

¶62

the period of limitation would have to be
calculated from the date when such corrected
return was filed under section 139(9) of the Act.

¶63

5.2 In support of her submissions, the learned senior standing counsel placed reliance upon a decision of this Court in case of Principal Commissioner of Income-tax-1 v. Babubhai Ramanbhai Patel , [2017] 249 Taxman 470 (Gujarat) , wherein the court has held that in terms, subsection (5) of section 139 allows the assessee to revise the return filed under sub-section (1) or sub-section (4) as long as the time frame provided therein is adhered to and the requirement of revised return has arisen on discovery of any omission or a wrong statement in the return originally filed. The court held that assessment can be completed only on the basis of the correct and completed return. The earlier

¶64

Page 10 of 28

¶65

C/SCA/15564/2018 JUDGMENT

¶66

return, after a revised return has been filed,
cannot form the basis of assessment although it
may be used to indicate the conduct of the
assessee. There is a clear distinction between a
revised return and a correction of return. Once a
revised return is filed, the original return must
be taken to have been withdrawn and substituted
by a fresh return for the purpose of assessment.

¶67

5.3 The learned senior standing counsel submitted
that considering the defects enumerated in the
Explanation, it is not possible to make an
assessment unless such defects are removed.

¶68

5.4 Reliance was placed also upon the decision of this court in the case of Hytaisun Magnetics Ltd. v. Joint Commissioner of Income-tax , [2018] 95 taxmann.com 248 (Gujarat) wherein the court held thus :

¶69

“Section 139 of the Act pertains to return of income. Sub-section (9) of section 139 provides that where the Assessing Officer considers that the return of income filed by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period, on an application made in this behalf, the Assessing Officer may grant; if such defect is not rectified within such period or extended period, then notwithstanding

¶70

Page 11 of 28

¶71

C/SCA/15564/2018 JUDGMENT

¶72

anything contained in any other provision of the Act, the return shall be treated as an invalid return. Proviso to sub-section (9) of section 139 provides that where the assessee rectifies the defect after the expiry of initial period or the extended period, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return. Explanation to subsection (9) provides that for the purposes of the said sub-section, return of income shall be regarded as defective unless all the conditions are fulfilled as contained in clauses (a) to (f).”

¶73

5.5 Reliance was also placed upon the decision of the Punjab and Haryana High Court in the case of Madan Roller Flour Mills v. Commissioner of Income-tax , 2008 (301) ITR 1 .

¶74

5.6 Reference was made to the decision of the Madras High Court in the case of Commissioner of Income-tax v. Anaimugan Transports (P.) Ltd. , [1995] 129 CTR 51 (Madras) , wherein the court has held that it will be a mistake to accept for all purposes, the return as one filed by the assessee under sub-section (1) of section 139 of the Act as the starting point of limitation for the completion of assessment as a return, which is not complete in all respects and that as regards the return furnished by the assessee, doubts exist whether a return filed under sub-section (4)(a) of section 139 may be the relevant return

¶75

Page 12 of 28

¶76

C/SCA/15564/2018 JUDGMENT

¶77

and in case any omission in the return furnished
is discovered by the assessee and a revised
return is filed, the same may be the relevant
return. The court held that in section 153, in
this behalf, a mention of section 143 clearly
reckons a return on which assessment is made and
a demand notice is issued under clause (a) of
sub-section (2) of section 143 of the Act. A
return for this purpose is a return under section
139(1), section 139(4) as well as section 139(5)
of the Act. An assessment in terms of section
143, it is obvious, is an assessment on the basis
of the return in one case under clause (a) of
sub-section (1) of section 143 and in another
case, under sub-section (3) of section 143 of the
Act. In the case of best judgment assessment,
where there is no return filed by the assessee
and where the assessee has not responded to any
enquiry before the assessment under section 142
of the Act, the period of limitation for
assessment will reckon only in terms of the
default of the assessee, which is contemplated
under section 144 of the Act.

¶78

5.7It was submitted that therefore, for the
purpose of computing the limitation for issuance
of notice under section 143(2) of the Act, the
return filed by the petitioner in response to the
notice under section 139(9) of the Act should be

¶79

Page 13 of 28

¶80

C/SCA/15564/2018 JUDGMENT

¶81

treated to be akin to a revised return. It was,
accordingly, urged that the petitioner having
filed the correct return in response to the
notice under section 139(9) of the Act on
19.07.2017, the impugned notice dated 11.08.2018
is well within the period of limitation
prescribed under section 143(2) of the Act and
that the petition, being devoid of merits,
deserves to be dismissed.

¶82

6.In the backdrop of the facts and contentions
noted hereinabove, the sole question that arises
for consideration in this case is as to whether
the impugned notice under sub-section (2) of
section 143 of the Act has been filed within the
period of limitation provided thereunder.

¶83

7.In this case, the original return of income
under sub-section (1) of section 139 of the Act
came to be filed on 29.11.2016. Intimation under
sub-section (9) of section 139 of the Act came to
be issued on 25.01.2017, calling upon the
petitioner to remove the defects enumerated
therein. The petitioner rectified such defects on
02.02.2017 within a period of fifteen days from
the date of such intimation. However, thereafter,
on 10.07.2017, the petitioner received an
intimation regarding non-acceptance of response
to defective return notice communication. The

¶84

Page 14 of 28

¶85

C/SCA/15564/2018 JUDGMENT

¶86

petitioner filed its response to the above notice
of non-acceptance of response to defective return
notice communication on 19.07.2017. Thereafter,
the petitioner received intimation under sub-
section (1) of section 143 of the Act wherein the
date of the return was shown to be 29.11.2016.
Subsequently, the impugned notice under sub-
section (2) of section 143 of the Act came to be
issued on 11.08.2018.

¶87

8.In the present case, there is some dispute
with regard to the date of removal of defects in
terms of the intimation under sub-section (9) of
section 139 of the Act. While the petitioner
contends that the defects were removed on
02.02.2017, it appears to be the case of the
respondent that the petitioner had suo motu filed
another return under sub-section (9) of section
139 of the Act on 19.07.2017, which according to
him is required to be considered to be the date
of filing of the return of income. Since nothing
much turns upon the date of actual removal of the
defects, the date of removal of defects is
referred to as 19.07.2017.

¶88

9.Undisputedly, if the date of the original
return under sub-section (1) of section 139 of
the Act, viz.29.11.2016 is required to be taken
into consideration for the purpose of computing

¶89

Page 15 of 28

¶90

C/SCA/15564/2018 JUDGMENT

¶91

the limitation under section 143(2) of the Act,
the impugned notice would be barred by
limitation. However, if the date on which the
defects in the original return came to be removed
under section 139(9) of the Act viz., 19.07.2017
is to be taken into consideration for the purpose
of computing the period of limitation, the
impugned notice can be said to have been issued
will within the period of limitation. The
question 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.

¶92

10.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:

¶93

“ 139. Return of income -

¶94

(1) Every person,-

¶95

(a) being a company or a firm; or

¶96

(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,

¶97

shall, on or before the due date, furnish a

¶98

Page 16 of 28

¶99

C/SCA/15564/2018 JUDGMENT

¶100

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:

¶101

xxxxxxx

¶102

Explanation 2.- In this sub-section, “due date” means,-

¶103

(a) where the assessee other than an assessee referred to in clause (aa)] is

¶104

(i) a company;

¶105

(ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or

¶106

(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,

¶107

the 30th day of September of the assessment year;

¶108

(aa) in the case of an assessee who is required to furnish a report referred to in section 92-E, the 30th day of November of the assessment year;

¶109

(b) in the case of a person other than a company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year;

¶110

(c) in the case of any other assessee, the 31st day of July of the assessment year;

¶111

Page 17 of 28

¶112

C/SCA/15564/2018 JUDGMENT

¶113

Xxxxx

¶114

(3) If any person, who has sustained a loss in any previous year under the head “Profits and gains of business or profession” or under the head “Capital gains” and claims that the loss or any part thereof should be carried forward under sub-section (1) of Section 72, or sub-section (2) of Section 73 or sub-section (2) of section 73-A, or subsection (1) or sub-section (3) of section 74 or sub-section (3) of section 74-A, he may furnish, within the time allowed under subsection (1) a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1).

¶115

(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

¶116

(5) If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

¶117

Xxxxx

¶118

(9) Where the Assessing Officer considers

¶119

Page 18 of 28

¶120

C/SCA/15564/2018 JUDGMENT

¶121

that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, 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:”

¶122

11.A study of the provisions of section 139 of
the Act shows that under sub-section (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 sub-section (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 provides that if a person

¶123

Page 19 of 28

¶124

C/SCA/15564/2018 JUDGMENT

¶125

who has filed a return under sub-section (1) or
in pursuance of a notice under sub-section (1) of
section 142, discovers any omission or wrong
statement in such return, he can furnish a
revised return within the time provided therein.
Thus, sub-section (1) of section 139 of the Act
contemplates filing of a return of income, sub-
section (3) also contemplates filing of a return
of income to which all the provisions of the Act
apply as if it were a return filed under sub-
section (1) and sub-section (5) provides for
filing of a revised return where there is any
omission or wrong statement in the original
return of income filed under sub-section (1).
Therefore, all these sub-sections clearly
envisage filing of a return.

¶126

12.Sub-section (9) of section 139 of the Act is
attracted when the Assessing Officer considers
the return of income filed by the assessee to be
defective. If the Assessing Officer considers the
return of income to be defective, he is required
to intimate such defect to the assessee and give
him an opportunity to rectify such defect within
a period of fifteen days from the date of such
intimation or within such further time, which the
Assessing Officer in his discretion allows on an
application made by the assessee in this behalf.
If the defects are not removed within fifteen

¶127

Page 20 of 28

¶128

C/SCA/15564/2018 JUDGMENT

¶129

days or within such further period granted by the
Assessing Officer, then notwithstanding anything
contained in any other provision of the Act, the
return shall be treated as an invalid return and
the provisions of the Act would apply as if the
assessee has failed to furnish his return. Thus,
if the defects are removed within fifteen days or
within the further time granted by the Assessing
Officer, the very same return would be considered
to be valid.

¶130

13.If one looks at the language employed in sub-
sections (1), (3) and (5) of section 139 of the
Act, a common thread in all the sub-sections is
that the assessee is required to file a return of
income under those sub-sections. However, from
the language employed in sub-section (9) of
section 139 of the Act, the same does not require
any return to be filed by the assessee. All that
the sub-section says is that the assessee is
required to be given an opportunity to rectify
the defect in the return filed by him within the
time provided; failing which such return would be
treated as an invalid return. 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, sub-section (9) of section 139 of the

¶131

Page 21 of 28

¶132

C/SCA/15564/2018 JUDGMENT

¶133

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.

¶134

14.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 19.07.2017, 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 29.11.2016, 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
19.07.2017 has been selected for scrutiny, in the
opinion of this court, the reference to the
return as the return filed on 19.07.2017 is
incorrect, inasmuch as sub-section (9) of section
139 of the Act, does not contemplate filing of a
return of income. As noticed hereinabove, it is
the original return filed by the assessee which
gets rectified upon the removal of the defects

¶135

Page 22 of 28

¶136

C/SCA/15564/2018 JUDGMENT

¶137

contained therein.

¶138

15.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 sub-section (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 to 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.

¶139

16. Reference may also be made to the decision of this court in case of Principal Commissioner of Income-tax-1 v. Babubhai Ramanbhai Patel (supra), on which reliance has been placed by the learned senior standing counsel for the respondents, wherein this court has placed reliance upon a decision of the Allahabad High Court in case of Dhampur Sugar Mills v. CIT, [1973] 90 ITR 236 ,

¶140

Page 23 of 28

¶141

C/SCA/15564/2018 JUDGMENT

¶142

wherein it has been held that there is a clear
distinction between revised return and a
correction of return. Once a revised return is
filed, the original return must be taken to have
been withdrawn and substituted by a fresh return
for the purpose of assessment. Thus, when a
revised return is filed under section 139(5) of
the Act, the original return gets substituted and
it is the revised return which is to be
considered as a return for the purpose of
assessment. However, the court has clearly drawn
a distinction between a revised return and a
correction of return. Adverting to the facts of
the present case, this case relates to correction
of the return of income originally filed and not
a revised return. Had it been a case of filing of
a revised return of income, the original return
of income would have stood substituted by the
revised return, but when it comes to correction
of a return of income, it is only the original
return of income which gets corrected.

¶143

17.Since the impugned notice has been issued
under sub-section (2) of section 143 of the Act,
reference may be made to the said sub-section,
which reads as under:

¶144

“143.Assessment.- (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section

¶145

Page 24 of 28

¶146

C/SCA/15564/2018 JUDGMENT

¶147

142, such return shall be processed in the following manner, namely:xxxxxxx

¶148

(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed incometax authority, as the case may be, if, 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, 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:

¶149

Provided that no notice under this subsection 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. ”

¶150

18.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

¶151

Page 25 of 28

¶152

C/SCA/15564/2018 JUDGMENT

¶153

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 sub-section (2) of section 143 of
the Act within the period referred to in the sub-
section, 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
that the Assessing Officer can proceed further
under sub-section (3) thereof to make an
assessment order. Therefore, the notice under
section 143(2) of the Act is a statutory notice,
upon issuance of which, the Assessing Officer
assumes jurisdiction to frame the scrutiny
assessment under sub-section (3) of section 143
of the Act. Consequently, if such notice is not
issued within the period specified in sub-section
(2) of section 143 of the Act viz. before the
expiry of six months from the end of the
financial year in which the return is furnished,
it is not permissible for the Assessing Officer
to proceed further with the assessment.

¶154

19.In the facts of the present case, as
discussed earlier, the petitioner filed its

¶155

Page 26 of 28

¶156

C/SCA/15564/2018 JUDGMENT

¶157

return of income under sub-section (1) of section
139 of the Act on 29.11.2016. Since the return
was defective, the petitioner was called upon to
remove such defects, which came to be removed on
19.07.2017, that is, within the time allowed by
the Assessing Officer. Therefore, upon such
defects being removed, the return would relate
back to the date of filing of the original
return, that is, 29.11.2016 and consequently, the
limitation for issuance of notice under sub-
section (2) of section 143 of the Act would be
30.09.2017, viz. six months from the end of the
financial year in which the return under sub-
section (1) of section 139 came to be filed. In
the present case, it is an admitted position that
the impugned notice under sub-section (2) of
section 143 of the Act has been issued on
11.08.2018, which is much beyond the period of
limitation for issuance of such notice as
envisaged under that sub-section. The impugned
notice, therefore, is clearly barred by
limitation and cannot be sustained.

¶158

20.For the foregoing reasons, the petition
succeeds and is, accordingly, allowed. The
impugned notice dated 11.08.2018 issued under
sub-section (2) of section 143 of the Act and all
proceedings taken pursuant thereto are hereby
quashed and set aside. Rule is made absolute

¶159

Page 27 of 28

¶160

C/SCA/15564/2018 JUDGMENT

¶161