2009 (1) TMI 59 - HC - Income Tax

Defect in return validity - return does not even bear assessee s signatures and had not even been verified by her - Section 292B of the 1961 Act, do not authorize the Assessing Officer to ignore a defect of a substantive nature impugned return was an absolutely invalid return as it had a glaring inherent defect which could not be cured inspite of the deeming effect of Section 292B tribunal is justified in setting aside assessment made on such return

Summary

Issues:
1. Assessment procedure under the Income Tax Act, 1961.
2. Validity of a defective return under Section 139(9) of the 1961 Act.
3. Interpretation of Section 292B of the 1961 Act in relation to defective returns.

Assessment Procedure under the Income Tax Act, 1961:
The judgment discusses the assessment procedure under the Income Tax Act, 1961, specifically focusing on Chapter XIV and Section 139(9) of the Act. Section 139(9) outlines the procedure to be followed when the Assessing Officer considers a return of income furnished by the assessee as defective. The section provides an opportunity for the assessee to rectify the defect within a specified period. Failure to rectify the defect within the given period leads to the return being treated as invalid, and the provisions of the Act apply as if no return was filed. The judgment emphasizes that an assessment cannot be made on an invalid return, as highlighted in Section 139(9).

Validity of a Defective Return under Section 139(9) of the 1961 Act:
The court delves into the concept of a defective return under Section 139(9) of the 1961 Act. It is emphasized that the Assessing Officer must give the assessee an opportunity to rectify the defect in the return. In the case under consideration, the return was not signed or verified by the assessee as required by Section 140 of the Act. Consequently, the Income Tax Appellate Tribunal set aside the assessment due to this non-compliance with the statutory requirements. The judgment underscores that an Assessing Officer cannot proceed with an assessment based on an invalid return, as evident from the provisions of the Act.

Interpretation of Section 292B of the 1961 Act in Relation to Defective Returns:
The judgment analyzes the applicability of Section 292B of the 1961 Act concerning defective returns. Section 292B states that no return of income shall be invalid merely due to any mistake, defect, or omission if it aligns with the intent and purpose of the Act. The appellant argued that defects in returns should be overlooked, citing Section 292B. However, the court opined that Section 292B does not authorize the Assessing Officer to ignore substantive defects. The court highlighted that a return must be in conformity with the Act's intent and purpose to be considered valid. In this case, the return lacked essential signatures and verification, rendering it invalid despite the deeming effect of Section 292B. Consequently, the court dismissed the appeal, emphasizing that the return in question was fundamentally flawed and could not be deemed valid under the Act.

In conclusion, the judgment provides a detailed analysis of the assessment procedure, the validity of defective returns under Section 139(9) of the Income Tax Act, 1961, and the interpretation of Section 292B in relation to defective returns. It underscores the importance of compliance with statutory requirements and the inability to proceed with assessments based on invalid returns.