2022 (11) TMI 182 - AT - Income Tax

Revision u/s 263 by CIT - assessment order arises out of the original return of income, which was processed u/s 143(1) - revised return filed u/s 139(5) - admittedly, the assessment order arises out of the original return of income, which was processed u/s 143(1) of the assessment order - HELD THAT - The undisputed facts are that the assessee had filed original return on 06.09.2017, which was processed on 26.11.2018 u/s 143(1) and the same culminated in an assessment u/s 143(3) on 28.11.2019. An admitted fact that the assessee had filed revised return on 07.03.2019. In the instant case, admittedly, the PCIT is seeking to revise the assessment completed u/s 143(3) which stems from the return of income filed u/s 139(1) - For doing so, PCIT states that the revised return of income has been filed beyond the time limit prescribed u/s 139(5) and the same is non est. This statement of the PCIT in the impugned order dated 30.03.2022 is factually incorrect. The revised return filed u/s 139(5) of the I.T.Act dated 07.03.2019 is well within the time limited prescribed and the same is not non est. In the case of CIT v. Mangalore Chemicals Fertilizers Limited 1991 (1) TMI 70 - KARNATAKA HIGH COURT had held that when the assessee files a valid revised return, it completely effaces and obliterates the original return, and therefore, it is only the revised return that has to be taken into account for the purpose of assessment. Since the assessee in the instant case has filed a valid revised return u/s 139(5) which effaces the return filed u/s 139(1) of the I.T.Act, the assessment order ought to have been completed from the figures disclosed in the revised return. In the instant case, admittedly, the assessment order arises out of the original return of income, which was processed u/s 143(1) of the assessment order dated 28.11.2019. Therefore, the said assessment order is bad in law. PCIT s order to revise the said assessment order u/s 263 is also bad in law. Hence, we set aside the impugned order of the PCIT passed u/s 263 - Appeal filed by the assessee is allowed.

Summary

Issues:
Initiation of proceedings u/s 263 of the I.T.Act based on the original return and revised return filed by the assessee.

Analysis:
The appeal was against the Principal Commissioner of Income-tax's order under section 263 of the I.T.Act for the assessment year 2017-2018. The assessee contended that the initiation of proceedings under section 263 was improper as the assessment order was based on the original return filed on 06.09.2017 and revised on 07.03.2019, which should replace the original return for assessment purposes. The Departmental Representative argued that both returns were processed on different dates, making the case laws cited by the assessee irrelevant. The Tribunal noted that the PCIT sought to revise the assessment based on the original return, claiming the revised return was filed beyond the time limit, which was factually incorrect. Citing the judgment in CIT v. Mangalore Chemicals & Fertilizers Ltd., it was established that a valid revised return replaces the original return for assessment purposes.

The Hon'ble jurisdictional High Court's decision emphasized that a valid revised return effaces the original return, and only the revised return should be considered for assessment. As the assessee filed a valid revised return under section 139(5) of the I.T.Act, which replaced the original return filed under section 139(1), the assessment order based on the original return was deemed incorrect. Consequently, the PCIT's decision to revise the assessment order under section 263 was also deemed incorrect. Therefore, the Tribunal set aside the PCIT's order dated 30.03.2022 and allowed the appeal filed by the assessee.

In conclusion, the Tribunal's decision highlighted the importance of a valid revised return in replacing the original return for assessment purposes, as established by relevant legal precedents. The judgment clarified that the assessment order based on the original return was flawed, and the PCIT's decision to revise it under section 263 was deemed improper. The Tribunal's ruling in favor of the assessee was based on the legal principle that a valid revised return supersedes the original return for assessment, as per established judicial interpretations.