2023 (2) TMI 842 - AT - Income Tax

Procedural requirement of furnishing the acknowledgement of the electronically filed return - Carry forward of loss denied as assessee did not furnish the acknowledgement to the CPC at the material time - revised return filed - scope of revised return is filed within the time permitted u/s.139(5) - original return filed by the assessee was invalid for her non sending of acknowledgement to the Central Processing Unit (CPC) and hence, the claim of carry forward of the loss was not admissible in terms of section 139(3) - HELD THAT - It is evident that filing of return u/s.139(1) r.w.s.139(3) before the due date as per section 139(1) is sine qua non for carry forward of loss under the head Capital gains . In the instant case, the assessee furnished her original return electronically on 31-08-2015, which is otherwise before the prescribed due date. The only reason assigned for declaring the original return as invalid is her non sending of acknowledgement of such return to the Central Processing unit of the Department. Requirement of furnishing the return electronically had another procedural requirement of taking a print out of such electronically filed return and sending it to the CPC as an acknowledgement of having furnished the return electronically. A cursory look of these two requirement transpires that whereas the first one of furnishing the return electronically is a mandatory one, the second one of sending acknowledgement of such filed return to the CPC is only directory. Non-compliance or late compliance of the second procedural requirement cannot invalidate the compliance of the first mandatory requirement, so as to make an otherwise valid return a non est. Since the procedural requirement of furnishing the acknowledgement of the electronically filed return is only a directory requirement, one cannot equate the non-submission of such acknowledgement on one hand with not filing of the return at all, so as to make both the cases as those of non-filing of return. As assessee did not furnish the acknowledgement to the CPC at the material time but filed the same later on with a request to condone the delay. Evidence from the Income-tax Departmental portal in this regard has been placed before us, which records E-verified after due date. Your condonation request is forwarded for approval . Notwithstanding the fact that the assesee s request for condonation of the delay in furnishing the acknowledgement with CPC is still pending, in our considered opinion, this, being a procedural requirement, cannot invalidate the otherwise valid return filed u/s.139(1) of the Act. We order accordingly and hold that the assessee furnished original return within the time allowed u/s 139(1). Whether filing of the revised return, after the time stipulated u/s.139(1), claiming carry forward of loss at a higher level, can be allowed to be carried forward within the meaning of section 139(3) of the Act? - Once a revised return is filed within the time permitted u/s.139(5), it substitutes the original return in all respects. It is construed as if the particulars furnished in the revised return were the particulars furnished in the original return and that such return was filed on the date when the original return was filed. If that is the position, we fail to comprehend as to how the enhanced amount of carry forward of loss claimed in the revised return filed after the due date u/s.139(1) but within the time prescribed u/s.139(5) can be restricted only to the extent of loss claimed in the original return u/s 139(1) . Since the assessee furnished the revised return within the stipulated period claiming loss at a higher level, it is this enhanced amount of loss which will be considered for carry forward to the next year(s) as the original return has been held to be validly filed and consequently the revised return will substitute the original return in all respects including the aspect of date of filing also. We, therefore, overturn the impugned order pro tanto and direct to allow carry forward of loss. Appeal allowed.

Summary

Issues:
- Disallowance of carry forward of loss under 'Capital gains' by CIT(A)
- Validity of original return filed electronically by the assessee
- Filing of revised return after the due date for carry forward of loss

Analysis:

1. Disallowance of Carry Forward of Loss:
The appeal challenges the disallowance of carrying forward a loss of Rs.6,14,456 under 'Capital gains' by the CIT(A) in a National Faceless Appeal Centre. The assessee, a non-resident in the USA, initially filed a return claiming a loss of Rs.43,221, which was later revised to Rs.6,14,456. The CIT(A) rejected the revised claim citing the original return as invalid due to non-receipt of acknowledgment by the Central Processing Unit (CPC). The Tribunal held that filing the return electronically before the due date is crucial for carry forward of loss under 'Capital gains.' The failure to send the acknowledgment did not render the original return invalid, and the revised return was considered valid. Thus, the claim for carry forward of the increased loss amount was upheld.

2. Validity of Original Return:
The Tribunal emphasized that filing the original return electronically within the due date is essential for carrying forward losses. While acknowledging the procedural requirement of sending an acknowledgment to the CPC, it was deemed directory rather than mandatory. Non-compliance with this requirement does not invalidate an otherwise valid return. The Tribunal noted that the assessee's request for condonation of the delay in furnishing the acknowledgment was pending, indicating an attempt to rectify the procedural lapse. Therefore, the original return was considered valid, and the claim for carry forward of loss was upheld.

3. Filing of Revised Return After Due Date:
The Tribunal addressed the issue of filing a revised return after the due date for carrying forward losses. It was argued that only the loss amount in the original return (Rs.43,221) should be allowed for carry forward, not the enhanced amount claimed in the revised return (Rs.6,14,456). However, the Tribunal held that a revised return filed within the permitted time substitutes the original return entirely. Therefore, the enhanced loss amount claimed in the revised return should be considered for carry forward, as the revised return is treated as if filed on the original return's date. Consequently, the Tribunal directed the allowance of the carry forward of the increased loss amount.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of timely filing of returns and recognizing the validity of the revised return for carrying forward the increased loss amount under 'Capital gains.'