2023 (11) TMI 643 - AT - Income Tax

Validity of revised return u/s 139(5) - Revision of belated return filed u/s 139(4) - Denial of benefit of exemption u/s 54F claimed in the revised return - assessee case selected for Limited Scrutiny under CASS - assessee had neither offered any income from Capital gain nor claimed any deduction/exemption under this head in the original return but only in revised return - HELD THAT - It was only in the revised return that the assessee offered income from long term capital gain after claiming exemption u/s. 54F. This shows that the return taken up for scrutiny was the revised return and not the original one. From para 1 of the notice u/s. 143(2), it is clear that it refers to the deduction claimed under the head Capital gains , which was claimed in the revised return filed u/s. 139(5). It thus become palpable that the revised return was considered for selection of the case under CASS and the notice u/s. 143(2) was also issued with reference to the revised return only. Revised return did not conform to the prescription of section 139(5), before its substitution w.e.f. A.Y. 2017-18, which provided for revision of a return filed u/s. 139(1) and not u/s. 139(4) of the Act. The substituted section 139(5) now liberalizes the revision of return originally filed under sub-section (1) or under sub-section (4). The amendment has come into vogue from the A.Y. 2017-18. The assessment year under consideration is 2015-16. It is the pre-substituted provision which will prevail for the year under consideration, debarring the revision of any return filed u/s. 139(4). Since the revised belated return filed on 11-02-2016 was an invalid one, the same could not have been acted upon for the assessment. Once the invalid return is excluded from consideration, what survives is the valid return filed by the assessee u/s. 139(4) on 11-09-2015. The assessment could have been taken place only with reference to such return filed u/s. 139(4) and not the invalid return filed by the assessee. The selection of the case under Limited Scrutiny under CASS on the basis of the invalid return and thereafter the issuance of jurisdictional notice u/s. 143(2) also qua such invalid return can have no consequence except the passing of an illegal assessment orde r. We, therefore, vacate the assessment order and the consequential proceedings flowing therefrom. Assessee appeal is allowed.

Summary

Issues involved: Appeal against order passed by CIT(A) in relation to assessment year 2015-16 regarding exemption u/s. 54F and selling expenses.

Issue 1: Validity of assessment based on revised return

The assessee filed a belated original return followed by a revised return declaring higher income and claiming exemption u/s. 54F. The AO completed the assessment based on the revised return. The contention was raised that since the revised return was based on the belated original return, which was invalid for revision, the assessment should not have been done on the basis of the revised return.

Details: The original return was belated and filed under section 139(4) of the Income-tax Act. The revised return was filed after the expiry of the time limit for revising belated returns. The AO acknowledged the invalidity of the revised return in the assessment order. The assessment was done based on the revised return, which was not a valid one, leading to the appeal before the Tribunal.

Issue 2: Jurisdictional validity of assessment under section 143(2)

The assessment was initiated under limited scrutiny for the deduction claimed under capital gains. The notice u/s. 143(2) referred to the revised return filed by the assessee, which was based on the belated original return. The question arose whether the assessment was conducted on the original or revised return, impacting the legality of the assessment order.

Details: The notice u/s. 143(2) specifically mentioned the revised return and the issue of deduction claimed under capital gains. The revised return did not conform to the provisions for revision of belated returns before the relevant amendment. As the assessment was conducted based on the invalid revised return, the Tribunal held that the assessment order was illegal and vacated it, emphasizing the necessity of jurisdictional validity for assessment under section 143(2).

Conclusion: The Tribunal allowed the appeal, emphasizing the importance of conducting assessments based on valid returns and jurisdictional provisions. The assessment order was vacated due to the reliance on an invalid revised return, highlighting the need for adherence to statutory provisions in assessment proceedings.