Procedure for implementation of Sec.139(9). - Income Tax - 1348/CBDT

INSTRUCTION NO. 1348/CBDT Dated: September 3, 1980 Sub-section 9 has been inserted in section 139 of the I.T.Act by the Finance Act of 1980 and comes into effect from 1st September 1980. It lays down the procedure to be followed by the ITOs if a return of income furnished is considered defective by him. 2. Two important points are to be noted with great care in invoking sec.139(9). The first is that it will apply to returns of income filed on or after 1st September, 1980 and it cannot be invoked for returns filed before 1st september, 1980 for any assessment year will come within the purview of sec.139(9). 3. The second important point to be noted is that it is not incumbent or mandatory to treat a return of income as invalid even if the return is defective under any of the sub-clauses of the explanation to sec.139(9). The provision makes a distinction between a defective return and an invalid return. A defective return is not IPSO FACTO to be regarded as an invalid return. It is only when a return contains any of the specified defects and the ITO in his discretion intimates the defect to the assessee and the assessee fails to rectify the same within a specified period of 15 days or such further period as the ITO on an application made in this behalf allows that the return shall be treated as an invalid return. If it is considered that the return of income does not require any correction amendment or validation the assessment may be completed on the basis of the return filed. 4. The board has decided the the functions of the ITO u/s.139(9) will be exclusively carried out by ITIs by virtue of orders to be passed in writing by CsIT u/s.125(1)(b). Commissioners will please ensure that specific orders in writing by them or the IACs exists or are now made, posting Inspectors to particular circles/wards. The Inspector of Income-tax will for the purposes of scrutinising the return issue of deficiency letter and getting it rectified by the assessee, function as Inspector authorised u/s.125(i)(b) and the ITO will be relieved of this function so as to enable him to make assessment. 5. Section 139(9) envisages the issue of a deficiency letter if it is considered that a return of income is defective. The explanation lists the defects. The first defect mentioned is that the enclosures, 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 not been duly filled in. A return of income shall not be considered as defective under this clause merely because the inapplicable columns have not been filled up or against applicable columns the assessee has indicated that information as per statement is attached and the attached statement gives the relevant information. Again, clause of the explanation requires that where the accounts of the assessee have been audited, the return should be accompanied by copies of the audited profit and loss account, balance sheet and the auditors report. The omission to enclose copies of the audited profit and loss accounts, balance sheet and the auditors report should be treated as defect in all cases requiring statutory audit. If the return indicates that the audit has not been completed and hence audited accounts and auditors report could not be enclosed, the return should not be treated as defective. 6. Section 139(9) envisages a scrutiny of the returns filed to determine whether a return is defective or not. The various administrative measures that will have to be taken by all CsIT to implement sec.139(9) are listed herein below:- i) Annexure to DOMS circular No.13 dated 3rd June, 1976 will continue to be followed with the following modifications. If the mistake is not rectified on the spot no rejection slip will be issued by the counter clerk. He will receive the return in such cases and issue a receipt. ii) All returns will immediately be forwarded to the ITI attached with the ITO. iii) The Inspector will scrutinise the return of income and divide them into two categories. The first category will be of those which do not have any of those defects mentioned in the explanation. The 2nd category will be the returns which have one or more of those defects. A rubber stamp as under will be affixed on the first page of each return and duly signed by the Inspector after striking out the inapplicable portion. NO DEFECT U/S.139(9)/DEFECTIVE U/S.139(9) SIGNATURE: DATE THE RETURNS FALLING UNDER THE FIRST CATEGORY WIL BE PROCESSED FOR FINALISATION OF ASSESSMENT. As regards the returns which are defective, the deficiency letter would be prepared in the proforma given in Annexure II. This deficiency letter will be sent under the Inspectors Signature to the assessee at the address given by him in the return of income. The letter should be sent by registered post/A.D. giving a suitable date, the date being at least 22 days from the date of issue so that it provides for time taken for service and the statutory period of 15 days. 7.The Board desires the Commissioners to report the progress in the matter of checking the returns received during September and October 1980 in Annexure III so as to reach the Board by the 15-12-80 8. CsIT will no doubt organise meetings at various levels in the department for discussing the amendment and in particular the procedure u/s.139(9) in the light of the above instructions. 9. This instruction deals only with the procedure for implementation of sec.139(9). Detailed instructions on the provisions of Finance Act, 1980 will be issued separately.