DEFECTS OF SUBSTANTIVE NATURE IN INCOME TAX RETURN CANNOT BE CURED

[Mr. M. GOVINDARAJAN]

                        Sec. 139(1) of the Income Tax Act, 1961 ('Act' for short) provides that every person-

a)      Being  a company or a firm; or

b)      Being a person other than the company or a firm, if his total income or the total income of any other person in respect of which he is assessable under the Act during the previous year exceeded the maximum amount which is not chargeable to income tax

Shall on or before the due date furnish a return of his income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.

                        Sec. 140 of the Act that the return shall be signed and verified-

(a)    In the case of an individual-

         i.            By the individual himself;

        ii.            Where he is absent from India, by the individual himself or by some person duly authorized by him in this behalf;

        iii.            Where he is mentally incapacitated from attending to his affairs, by his guardian or any other person competent to act on this behalf; and

        iv.            Where for any reason, it is not possible for the individual to sign the return, by any person, duly authorized by him in this behalf.

If a person is authorized to sign the return, the person signing the return holds a valid power of attorney from the individual to do so, which shall be attached to the return.

(b)   In the case of a Hindu Undivided Family, by the Karta, and, where the karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family;

(c)    In the case of a company, by the Managing Director thereof, or where for any unavoidable reason such Managing Director is not able to sign and verify the return, or where there is no Managing Director, by any Director thereof.

                        Sec. 139(9) of the Act provides that where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return;

                        If the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.

                        For the purposes of Sec. 139(9) a return of income shall be regarded as a defective unless all the following conditions are fulfilled, namely:

§         The annexure, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in ;

§         The return is accompanied by a statement showing the computation of the tax payable on the basis of the return;

§         The return is accompanied by the report of the audit referred to in Sec. 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;

§         The return is accompanied by proof of the tax, if any, claimed to have been deducted or collected at source and advance tax and tax on self assessment, if any, claimed to have paid.

Sec. 139(9) leaves no room for doubt, that in case of a defective return, the Assessing Officer is required to afford an opportunity to an assessee to rectify the defect. Having given the aforesaid opportunity to the assessee, if he fails to rectify the defect, the Assessing Officer is authorized to treat the return as an invalid return and to make an assessment, as if the assessee had failed to furnish any return. It is, therefore, apparent, that an Assessing Officer cannot make an assessment on an invalid return.

                        In 'Commissioner of Income Tax V. Harjinder Kaur' - [2009 -TMI - 32692 - PUNJAB AND HARYANA HIGH COURT] the High Court held that defects of substantive nature in a return cannot be cured. In this case the return under reference was neither signed by the assessee nor verified in terms of the mandate of Section 140 of the Act. It is in the aforesaid circumstances the tribunal set aside the assessment of income rendered by the Assessing Officer.

                        The Department has invited the court's attention to Section 292 B of the Act which reads as follows:

292 B. Return of Income, etc., not to be invalid on certain grounds- No return of income, assessment, notice, summons or other proceedings, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act

The Department required setting aside the order the tribunal on the strength of the provision of Sec. 292 B of the Act. It is further contended that defects in returns filed by the assessees depicting mistakes or omissions of income, assessment, notice, summons or other proceedings, should be overlooked and need not be given effect to. It is further contended that the assessee in the present case had filed the return in response to a notice issued to her under Sec. 148 of the Act and the return earlier filed by her as a member of Hindu Undivided Family, was treated as a defective return.

                        The High Court is of the view that the provisions of Sec. 292B of the Act do not authorize the Assessing Officer to ignore a defect of a substantive nature and it is, therefore, that the aforesaid provision categorically records, that a return would not be treated as invalid, if the same "in substance and effect is in conformity with or according to the intent and purposes of this Act". As far as this return is concerned the same cannot be treated to be even a return filed by the assessee as the same does not even bear her signatures and had not even been verified by her.   It is not possible for the court to accept the return was in substance and effect in conformity with or according to the intent and purpose of this Act. The Court held that the return under reference which had been into consideration by the Revenue, was an absolutely invalid return as it had a glaring inherent defect which could not be cured in spite of the deeming effect of section 292B of the Act.

                        The Court dismissed the appeal of the revenue.