2018 (5) TMI 1699 - HC - Income Tax

Defective return - filing of belated return to seek refund - Whether the return is invalid in terms of Section 139(9) - application u/s 119(2)(b) filed to condone the delay in filing the returns rejected by the third respondent without providing an opportunity of hearing to the petitioner - Held that - The returns filed by the assessee was wrongly declared by the Income tax Department as invalid return u/s 139(9) - since the time having been lapsed for scrutinizing the returns, this Court deems it proper to direct respondent No.2 to scrutinize the returns and if the petitioner is entitled to a refund - thus respondent No.2 shall scrutinize the returns filed by the petitioner relating to the AY 2011-2012 within a period of eight weeks from the date of receipt of certified copy of this order and pass appropriate orders

Summary

Issues:
Challenge to communication declaring return as defective, exceeding 100% shares, seeking refund. Rejection of application under Section-119(2)(b) without hearing. Scrutiny of returns and refund entitlement.

Analysis:

The petitioner challenged communications declaring the return as defective and exceeding 100% shares, seeking a refund. The petitioner contended that the return filed was valid and explained that it showed correct shares aggregating 100%. The grievance arose when the Income Tax Department declared the return as invalid under Section-139(9) of the Income Tax Act, advising the petitioner to file a corrected return by a specified date.

The petitioner acted upon the advice and filed an application under Section-119(2)(b) to condone the delay in filing the returns. However, the Principal Commissioner of Income Tax rejected the application without providing an opportunity of hearing to the petitioner. This led the petitioner to approach the Court seeking relief.

During the proceedings, it was argued by the respondents that the return filed did show correct shares aggregating 100%. The rejection of the application under Section-119(2)(b) was based on the condition prescribed under Circular-9 of 2015, as the return was filed within the stipulated time. The respondents agreed to scrutinize the returns subject to the petitioner waiving objections regarding the limitation for notice under Section-143(2) and consequential assessment if tax liability is found.

After hearing both parties and examining the material on record, the Court found that the returns filed by the petitioner were wrongly declared invalid by the Income Tax Department. The rejection of the application without a hearing was deemed improper. The Court directed the Department to scrutinize the returns and pass appropriate orders, including any entitlement to a refund, within a specified period.

The petitioner undertook not to raise objections on the limitation aspect if assessment proceedings were required to be completed. Consequently, the Court disposed of the writ petition by quashing the challenged communications and ordering the Department to scrutinize the returns within a specified timeframe and pass appropriate orders accordingly.