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Assessment made on the basis of defective return is an invalid assessment – ITAT

Assessment made on the basis of defective return is an invalid assessment – ITAT

September 1, 2025 Income Tax, ITAT No Comments

Assessment made on the basis of a defective return filed by the assessee is invalid assessment – ITAT

In a recent judgment, ITAT Bangalore has held that a defective return filed by the assessee is non-est and no assessment / reassessment can be made in the invalid/defective return where full tax liability was not paid on or before filing the return of income.

ABCAUS Case Law Citation:
4729 (2025) (09) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in dismissing the appeal of the assessee.

The assessee was engaged in the business of transportation and uses own vehicles as well as hired vehicles for his business. The original return of income was processed under section 143(1) of the Act. 

Later, a survey was conducted in the premises of the assessee and the case was selected for scrutiny and notice under section 143(2) of the Act was issued to the assessee.  Subsequently, other statutory notices were issued to the assessee to examine the original return filed by the assessee. 

Later a notice under section 148 of the Act was issued in response to the which, assessee filed a return manually, declared more income. However, the assessee did not pay the net tax which he was liable to pay as per tax liability in the revised manual return and net tax liability after payment of advance tax, tds and self assessment tax stood payable in the relevant column of the ITR.

During the course of reassessment proceedings, the documents were called for which were submitted.  The AO, after verification of the books of accounts, accepted the income declared in the revised return and completed assessment.

Before the Tribunal, the assessee submitted that the AO did not issue notice under section 143(2) of the Act for taking decision after filing return of income in pursuance of notice u/s 148 of the Act.  Therefore, the assessment made by the AO was beyond the jurisdiction of the AO and void ab initio in the eyes of law.

It was also submitted that since the assessee had not paid the tax on or before filing the revised return under section 148 of the Act, the revised return itself was a defective return which cannot be considered as a valid return for making the assessment and the income declared in the defective return should not be considered for determining the assessed income of the assessee. 

It was contended that the return filed by the assessee was defective and the AO ought to have issued defective notice as per the provision of section 139(9) of the Act read with explanation aa omitted by the Finance Act 2016 w.e.f. 01.04.2017 which states that return shall be considered as defective unless the tax together with interest, if any payable in accordance with the provisions of section 140A, has been paid on or before the due date of furnishing of the return.

Thus, it was contended that income declared in the revised return filed manually cannot be considered as part of the income.  In support of his argument, the assessee relied on the judgment of Hon’ble High Court He further submitted that after filing of defective return, there was no notice issued by the jurisdictional AO to cure the defect.

The Tribunal observed that on going by the provision of section 139(9) of the Act, the return was a defective return.  However, the AO did not issue any defective notice to the assessee to cure the defect within the specified time. If the assessee files any return which is defective, the AO ought to have been issued notice under section 139(9) of the Act to cure the defect.

The Tribunal expressed concurrence with the submissions of the assessee in the light of the provisions referred that the assessee had filed defective return beyond the time provided of 30 days in the notice issued u/s 148 of the Act and not following the provision of section 140A of the Act.  The explanation aa of section 139(9) very much applicable to the assessee and return was defective which was to be treated as invalid return. Therefore, the assessment made on the basis of the return filed by the assessee is incorrect assessment. 

In view of the above view and following the judgment of the Hon’ble High Court, the Tribunal held that the defective return filed by the assessee was non-est and no assessment / reassessment can be made in the invalid/defective return. Therefore, the income assessed by the AO was not correct.

In the result, appeal filed by the assessee was allowed.

Download Full Judgment Click Here >>

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