2002 (10) TMI 7 - HC - Income Tax

Invalid return - Notice issued u/s 139(9), intimating the petitioner, the defect in the return and called upon the petitioner to rectify the defect by submitting the statutory audit report under section 44AB by July 7, 1995. The petitioner on June 6, 1995, prayed that it was not possible for the petitioner to submit the audit report for want of appointment of auditors by the Comptroller and Auditor General of India. It was requested that some more time be allowed in view of the provisions contained in section 139(9) for submitting the audit report. The Deputy Commissioner of Income-tax refused to grant further time treated the return as invalid petitioner s revision submitted u/s 264 before the CIT which was also dismissed - Held that that the circumstances of the case have to be taken into consideration by the Assessing Officer while making the assessment and deciding on the validity of a return Order refusing to extend the time is bad in law - Thus, the order passed by the CIT is liable to be quashed. The Assessing Officer is directed to consider the application and hear the petitioner

Summary

Issues Involved:
1. Validity of the return filed under section 139(9) of the Income-tax Act, 1961.
2. Justification for the refusal to extend the time for filing the audit report under section 44AB.
3. Applicability of section 139(4) and section 139(9) in the context of filing and rectifying defective returns.
4. Authority and discretion of the Assessing Officer in condoning delays and treating returns as valid.

Detailed Analysis:

1. Validity of the Return Filed Under Section 139(9):

The petitioner, a government company, filed its return for the assessment year 1994-95 on November 30, 1994, declaring a loss on an estimated basis due to the pending statutory audit. The Deputy Commissioner of Income-tax issued a notice under section 139(9) on June 15, 1995, identifying defects in the return and requiring the submission of the statutory audit report by July 7, 1995. The petitioner requested an extension, citing the delay in the appointment of auditors by the Comptroller and Auditor General of India. The Deputy Commissioner refused the extension and treated the return as invalid.

2. Justification for the Refusal to Extend the Time for Filing the Audit Report:

The petitioner argued that the delay in submitting the audit report was beyond its control, as the auditors were appointed on January 31, 1995, and completed the audit on March 2, 1996. The audit report was finalized on May 9, 1996, and submitted to the Deputy Commissioner on November 14, 1996. The petitioner contended that the Deputy Commissioner should have extended the time for removing the defect in the return. The Commissioner of Income-tax dismissed the revision petition, stating that the return should have been filed within the prescribed time, and the defect could not be removed after March 31, 1995.

3. Applicability of Section 139(4) and Section 139(9):

Section 139(4) allows for the filing of a return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Section 139(9) provides that if a return is defective, the Assessing Officer may allow the assessee 15 days to rectify the defect, with a possible extension. If the defect is not rectified within this period, the return is treated as invalid. However, the proviso to section 139(9) allows the Assessing Officer to condone the delay and treat the return as valid if the defect is rectified before the assessment is made.

4. Authority and Discretion of the Assessing Officer:

The court observed that the Assessing Officer has the discretion to extend the period for rectifying defects and to condone delays under the proviso to section 139(9). In this case, the statutory audit was completed, and the report was submitted before the assessment was completed. Therefore, the Assessing Officer should have considered the application for condonation of delay and treated the return as valid.

Conclusion:

The court quashed the order P 10 passed by the Commissioner of Income-tax and directed the Assessing Officer to consider the application P 9 as an application for condonation of delay for rectification of defects under the proviso to section 139(9). The Assessing Officer was instructed to hear the petitioner afresh and pass an appropriate order. The writ petition was allowed, and costs were awarded to the parties.