2017 (7) TMI 866 - AT - Income Tax

Validity of return filed manually - benefit of set off and carry forward of losses denied - Held that - Simply because the Assessee could not file the return electronically within the provisions of section 139(1), the benefit of set off and carry forward of losses cannot be denied for the reason that the Assessee did file return of income manually within the due date specified u/s 139(1) of the Act. The claim for set off and carry forward of losses cannot be denied on a too technical reasons on the ground that the electronic return filed by the Assessee is belated when the Assessee filed return of income manually within the due date specified u/s 139(1) of the Act. The provisions of section 292B also comes to the rescue of the Assessee in as much as the return filed cannot be invalid merely by the reason of any mistake, defect or omission in such return of income when in substance and effect if such return is in conformity with or according to the intent and purpose of this Act. The return filed manually may at best be said to be a defective return and not an invalid return. The third member of the Mumbai Bench held that the return filed separately by the four cells of the Assessee declaring total loss claimed by the Assessee did comply in substance and in effect within the intent and purpose of the Act and in view of the provisions of Section 292B and the defect is not material in the light of the provisions of Section 292B. Thus the return filed by the Assessee manually within the due date specified u/s 139(1) is a valid return - Decided in favour of assessee.

Summary

Issues:
Challenge to sustaining order ignoring manual return, considering belated electronic return as original, denial of carry forward of losses.

Analysis:
1. The appeal was filed against the order of the Ld. CIT (Appeals) for the assessment year 2011-12, where the Assessee contested the decision to uphold the Assessing Officer's choice of ignoring the manual return and treating the belated electronic return as the original, leading to the denial of carry forward of losses.

2. The Assessee filed the return of income manually on 30.11.2011, within the due date, declaring a loss. Despite technical issues preventing electronic filing, the Assessee informed the Assessing Officer the same day and requested acceptance of the manual return. Subsequently, in response to a notice, the Assessee filed an electronic return on 11.10.2012, which omitted setting off certain losses.

3. The Assessing Officer, considering the electronic return as original, denied the carry forward of losses, citing non-compliance with the electronic filing requirement under Section 139(1). The Ld. CIT (Appeals) upheld this decision, leading to the appeal before ITAT Mumbai.

4. The Assessee argued that the manual return, filed within the due date, should be considered valid, as per provisions of Section 139(1), despite the electronic filing issue. Citing precedents, the Assessee contended that technicalities should not override substantial compliance with the law.

5. The ITAT Mumbai, after reviewing the facts and legal arguments, held that the manual return filed within the due date was valid. They emphasized that denying carry forward based on a technicality when the return was filed on time would be unjust. The provisions of Section 292B were also invoked to support the validity of the manual return.

6. Relying on previous decisions and the intent of the law, ITAT Mumbai allowed the Assessee's appeal, directing the Assessing Officer to recompute the income/losses after considering the manual return as valid. The judgment emphasized the importance of substantial compliance over technicalities in such matters.