2019 (11) TMI 150 - HC - Income Tax

Return filed electronically does not permit the petitioner to make his claim to set off of his profits of this year from the carried forward losses of the previous year in terms of Section 72 - HELD THAT - The claim sought to be urged by the petitioner viz. Set off of business profits of this year offered to tax under the head capital gain being set off against carried forward loss is prima facie supported by the decisions of the Tribunal in the case of M.K. CREATIONS, C/O- SHANKARLAL JAIN ASSOCIATES 2017 (6) TMI 821 - ITAT MUMBAI AND M/S SMART SENSORS AND TRANSDUCERS LTD. 2019 (4) TMI 1159 - ITAT MUMBAI . It is also not disputed before us by the Revenue that the return of income in electronic form is self populted i.e. on filling in some entries, the other entries in the return are indicated by the system itself. Thus, the petitioner is unable to make a claim which according to him, he is entitled to in law. In case, the petitioner is compelled to file in the prescribed electronic form, it could be declared by the Assessing Officer as defective (if all entries are not filled) or raise a demand for tax on the basis of the declared income under Section 143(1) of the Act or if the assessment is taken to scrutiny under Section 143(3) of the Act, then the petitioner will not be entitled to raise a claim of set off under Section 72 of the Act during the assessment proceedings. The purpose and object of e-filing of return to have simplicity and uniformity in procedure. However, the above object cannot in its implementation result in an assessee not being entitled to make a claim of set off which he feels he is entitled to in accordance with the provisions of the Act. The allowability or dis-allowability of the claim is a subject matter to be considered by the Assessing Officer. However, the procedure of filing the return of income cannot bar an assessee from making a claim under the Act which he feels he is entitled to. In the absence of the petitioner filing its return of income on or before 31st October, 2019, the petitioner is likely to face penal consequences. We also in the present facts are of the view that awaiting the order of the Assessing Officer under Section 139(9) of the Act, declaring the return as defective, will not help as the issue would continue to remain even if a fresh return is filed. The issue raised is a fundamental issue, which needs to be addressed by the CBDT. It is in these aforesaid unusual circumstances, that we have not adopted the course of directing the petitioner to first demand justice from the Authority concerned before moving this Court in its writ jurisdiction. This view of ours is also supported by the fact that Mr. Walve, learned Counsel appearing for the Revenue on instructions states that the Assessing Officer who is present in Court states that in his experience he has not come across a case like this where the return which are prescribed under Section 139D of the Act r/w Rule 12 of the Rules do not take into account the situation where the assessee s claim cannot be considered. Moreover, from the facts as noted above, this situation (like the present) may not be restricted only to this petitioner but could generally arise in other cases also. Therefore, it would be appropriate that the petitioner make a representation on the above issue to the CBDT, who would then consider it in the context of facts involved in the present case and issue necessary guidelines for the benefit of the entire body of the assessees, if the petitioner is right in his claim that the prescribed return of income to be filed electronically provides prohibits an assessee from making its claim. In the meantime, the petitioner without prejudice to his rights and contentions would file the return of income in electronic form on the system before the last date. Besides, also file his return of income for the subject assessment year in paper form with the Assessing Officer before the last date. This return of income in paper form would be accepted by the Assessing Officer without prejudice to the Revenue s contention that such a return cannot be filed.

Summary

Issues:
1. Whether the petitioner can file a paper return of income for Assessment Year 2019-20 under Section 139(1) of the Income Tax Act, 1961?
2. Whether the prescribed electronic return of income allows the petitioner to claim set off under Section 72 of the Act?
3. Whether the Assessing Officer can accept a paper return of income when the Act and Rules mandate electronic filing?

Analysis:
Issue 1:
The petitioner sought direction to file a paper return due to the urgency of the last date for filing the return of income. The petitioner argued that the prescribed electronic return does not allow for claiming set off under Section 72 of the Act, causing an obligation to pay excess tax. The petitioner's claim was supported by the decisions of the Tribunal. The Revenue contended that the Act and Rules do not permit filing a paper return. The court acknowledged the necessity of e-filing for simplicity but recognized the gap in the prescribed form. The court directed the petitioner to file both electronic and paper returns before the deadline, awaiting CBDT's decision on the representation.

Issue 2:
The petitioner faced challenges in reflecting the set off under Section 72 in the electronic return, leading to potential tax implications. The court noted that the prescribed electronic form was self-populated, limiting the petitioner's ability to make the claim. It highlighted that failure to claim in the return might prevent the petitioner from raising it later. The court emphasized that the procedure should not hinder legitimate claims under the Act and suggested that the CBDT address such gaps in the form.

Issue 3:
The Assessing Officer maintained that only electronic filing was permissible under the Act and Rules, rejecting the acceptance of a paper return. The court acknowledged the legal provisions but highlighted the need for the CBDT to address situations where the prescribed form does not cater to specific claims. The court directed the petitioner to represent the issue to the CBDT and file both electronic and paper returns, ensuring no coercive recovery proceedings until CBDT's decision.

In conclusion, the court disposed of the petition, emphasizing the importance of the petitioner's representation to the CBDT to address the issue not limited to individual cases but potentially affecting all taxpayers seeking legitimate claims not accommodated in the prescribed form.