Assessment proceeding was vitiated by not taking cognisance of a valid revised return by which original return stood obliterated.
In a recent judgment, Hon’ble Tripura High Court has held that once the assessee has a right to file a revised return, and such a revised return was filed within time, the Assessing Officer has no choice, but to act on the revised return only because the original return stood obliterated.
ABCAUS Case Law Citation:
4724 (2025) (08) abcaus.in HC
In the instant case, the appellant assessee had challenged the order passed by the Income Tax Appellate Tribunal reversing the findings of CIT(A) that assessment proceedings were vitiated by not taking cognisance of a valid revised return filed by the appellant.
The appellant was a State Electricity Corporation Limited engaged in the business of sale and distribution of electricity within the State.
For the relevant assessment year, the appellant had filed its return of income tax disclosing total income computed at a loss. The return of the appellant was taken up for scrutiny under the Computer Assisted Scrutiny Scheme (CASS) and accordingly notice under Section 143(2) of the Act was issued and the details were furnished by the appellant.
During the pendency of the said proceeding, the appellant filed a revised return based on an audit objection by the CAG. The said revised return was within the time limit prescribed under Income Tax Act.
The assessment was completed by the Assessing Officer (AO) by making a disallowance under Sections 40(a)(ia), 68 and 37 of the Act.
The CIT(A) allowed the appeal of the assessee observing that the Assessing Officer did not speak anything about filing of the revised return; though a revised return was filed u/s 139(5) of the Act after the issuance of the notice under Section 143(2) of the Act, and since the revised return was filed within time, the original return did not survive and got substituted by the revised return; and it was not open for the Assessing Officer to advert to the original return. The CIT(A) held that since the revised return came to be filed because of comments given by the CAG, there was sufficient bona fide reason for filing of the revised return. It was also noted that in the report of the Assessing Officer, it was stated that there was no violation of provision of law while filing the revised return.
The CIT(A) placed reliance on the decisions of the High Court of Punjab and Harayana, High Court of Karnataka and High Court of Gujarat. He held that the Assessing Officer had to issue notice under Section 143(2) on the revised return, and since the Assessment Order was totally silent about the revised return it cannot be sustained and was annulled.
The Tribunal erroneously noted the wrong date of the filing of the revised return and held that this was not known to the Assessing Officer as the return had been filed at the receipt counter and it was impossible for the Assessing Officer to take cognizance of such a fact in such a short period of time.
The Tribunal therefore, held that it was only an irregularity and not an illegality, and it could have been cured by the First Appellate Authority by calling a remand report from the Assessing Officer after redetermination of the income on the basis of the revised return, but the Assessment Order cannot be declared as null and void.
As a result, the Tribunal set aside the order of the CIT (Appeals) and restored the matter to the file of the Assessing Officer, and directed him to redetermine the taxable income of the assessee after taking the details from the revised return of income.
The Hon’ble High Court admitted the appeal on the substantial question of law as to whether, on the facts and in the circumstances of the case, the learned Tribunal was justified and correct in law in holding that non-issuance and/or non-service of notice under Section 143(2) in respect of a valid return furnished under Section 139(5) during the continuance of a scrutiny assessment proceeding under Section 143(3) was a mere irregularity and not an illegality, and therefore, in not annulling the assessment order under Section 143(3)?
The Hon’ble High Court observed that the revised return was filed within the time prescribed by section 139(5) of the Act and once the revised return is filed, it is well settled that the original return stands obliterated as rightly held by the CIT (Appeals) placing reliance on the judgments. The Assessing Officer can only take into account the revised return for the purpose of making assessment, and he cannot act upon the original return which stood obliterated.
Further the Hon’ble High Court observed that in the order passed by the Income Tax Appellate Tribunal, there was a clear error in noting that the revised return was filed just a day prior to the passing of the assessment order.
The Hon’ble High Court opined that the view of the Tribunal that the step taken at the end by the assessee would frustrate the whole assessment machinery was clearly perverse because once the assessee has a right to file a revised return, and such a revised return was filed within time, the Assessing Officer has no choice, but to act on the revised return only because the original return stood obliterated. Once the statute permits the filing of the revised return by giving such a right to the assessee, the Income Tax Department cannot question the wisdom of the Parliament in providing such a right to the assessee, and the Tribunal cannot hold that filing of the revised return would frustrate the assessment machinery.
The Hon’ble High Court also opined that the view of the Tribunal that it was only an irregularity and not an illegality, was also unsustainable having regard to the judgment of the Hon’ble Supreme Court.
The Hon’ble High Court held the Assessing Officer committed a clear illegality by ignoring the revised return, and the Tribunal got misled by noting the date of filing of the revised return incorrectly, and came to the perverse conclusion that it would only be an irregularity, and not an illegality.
Accordingly, the Hon’ble High Court modified the order of the ITAT providing that the order of the CIT (Appeals) was modified, and the matter was remitted to the Assessing Officer to re-determine the taxable income of the assessee after taking the details from the revised return of income.
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