2024 (2) TMI 607 - AT - Income Tax

Processing of invalid return u/s 143(1) - Denial of exemption u/s 10(23C)(iiiad) - Non-filing of ITR-V within 120 days made the assessee s return as invalid being deemed to have been never filed which was picked for processing - Assessee filed 2nd belated return u/s 139(4) - As the 1st return had become nonest and it is the 2nd return which was a valid return in the eyes of law, despite this, the CPC picked 1st return, processed same and issued intimation u/s 143(1). HELD THAT - 1st return filed by assessee was an invalid return because of non-filing of ITR-V within prescribed period of 120 days. Therefore, the intimation dated 27.03.2017 issued by CPC on the basis of said return was also invalid. Since the assessee had already filed 2nd return on 04.03.2017 which was a valid return u/s 139(4) and which was available in the departmental database on 27.03.2017 at the time of processing u/s 143(1), the CPC ought to have taken into consideration the 2nd return and subject it to processing. Therefore, we set aside the order passed u/s 154 and 143(1) and remand the matter to the record of the AO to verify and examine the relevant record and then consider the claim of assessee u/s 10(23C)(iiiad) of the Act. Before passing order, the assessee shall be given an appropriate opportunity of hearing. Appeal of assessee allowed.

Summary

Issues involved:
The judgment involves the validity of the return filed by the assessee, the processing of the return by the CPC, and the entitlement of the assessee for exemption under section 10(23C)(iiiad) of the Income-tax Act, 1961 for Assessment Year 2015-16.

Validity of Return:
The assessee filed a return on 08.02.2016, referred to as the "1st Return," but failed to submit the ITR-V within the prescribed 120 days, rendering the return invalid. Consequently, a new return, the "2nd Return," was filed on 04.03.2017. The CPC processed the invalid 1st return and issued an intimation under section 143(1) on 27.03.2017, which was deemed invalid. The AR argued that the 2nd return should have been processed instead, citing a similar decision by ITAT Cuttack.

Errors in 2nd Return:
The AR acknowledged two errors in the 2nd return. Firstly, the assessee mistakenly selected "revised return u/s 139(5)" instead of a belated return u/s 139(4), which was permissible until 31.03.2017. Secondly, the assessee incorrectly indicated "No" against eligibility for exemption u/s 10(23C)(iiiad) in the "OTHER DETAILS" section. The AR contended that these errors were inadvertent and should not deprive the assessee of the entitled exemption.

Revenue's Response and Tribunal's Decision:
The Revenue did not contest the AR's submissions, leaving the matter for the Tribunal's decision. The Tribunal found the 1st return invalid due to non-compliance with ITR-V submission within the stipulated time, making the subsequent intimation also invalid. As the 2nd return was valid and available during processing, the Tribunal directed a reexamination by the AO for the assessee's entitlement to exemption under section 10(23C)(iiiad), ensuring a fair hearing for the assessee. Consequently, the appeal was allowed, and the matter was remanded for further consideration.

Conclusion:
The Tribunal ruled in favor of the assessee, emphasizing the importance of processing the valid 2nd return and considering the assessee's eligibility for exemption under section 10(23C)(iiiad). The decision highlighted the need for procedural compliance and fair treatment of the assessee's claims, ultimately setting aside the previous orders and providing an opportunity for a thorough review.