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TMI Blog2020 (10) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be passed u/s 154 of the Act, it is required to be shown that there is a mistake apparent from record in the original order - rectification of order cannot be carried out without giving notice of hearing to the assessee - even u/s 154 of the Act, entire order cannot be recalled. If any of the order so passed by an assessing authority is erroneous and prejudicial to the interests of revenue, then revision proceedings can be initiated u/s 263 by the Ld CIT. Hence the letters dated 24.3.2017 issued by the AO on his own directing the assessee to ignore its earlier orders is not in accordance with law. Hence the said letters are nullity in the eyes of law. Accordingly, we are of the view that the said letters cannot validate an invalid return. Processing of returns of income for both the years, after holding them as invalid, is not in accordance with the law. Hence the Ld CIT(A) was justified in holding that the AO is not correct in processing the returns of income. Accordingly, in terms of sec.139(9) of the Act, it should held that the assessee has not filed returns of income for AY 2014- 15 and 2015-16. Once the returns of income have been held to be invalid, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, when the assessee is not substantially financed by the Government and grants received from Government of Karnataka is less than 50% as per rule 2BBB of the Income tax Rules. Consequently, not eligible for exemption u/s 10(23C)(iiiab) of the Act. 3.1. The Ld. CIT(A) erred in holding that the assessee is substantial financed by the Government therefore, eligible for exemption u/s 10(23C)(iiiab) of the Act when the total grants from Government of Karnataka is less than 50% of the gross receipts. In nutshell, the revenue is contesting the decision of Ld CIT(A) in holding that the returns of income filed by the assessee for AY 2014-15 and 2015-16 are invalid in terms of sec.139(9) of the Act and after holding so, he was not justified in allowing the claim for exemption u/s 10(23C)(iiiab) of the Act for both the years under consideration. 3. The facts relating to the case are stated in brief. The assessee is an educational society registered under the Karnataka Societies Registration Act. The assessee is running educational institutions. For both the years under consideration, the assessee filed its returns of income claiming exemption u/s 11 of the Income-tax Act,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not rectify the defects pointed out by CPC u/s 139(9) of the Act. It was submitted that, after having held that the returns of income are invalid returns, the AO/CPC could not state that their earlier order should be ignored. It was contended that there is no provision in the Act to reconsider the said decision and ignore the orders so passed by it. In this regard, the assessee placed reliance on the decision rendered by Hon ble Punjab Haryana High Court in the case of CIT Chandigarh Vs. Harjinder Kaur (2009) 180 Taxmann.com 23, wherein it was held as under: The procedure for the assessment under the Act is laid down in the provisions contained in Chapter XIV. A perusal of sub-section (9) of section 139 leaves no room for doubt, that in case of a defective return, the Assessing Officer is required to afford an opportunity to the assessee to rectify the defect. Having given the aforesaid opportunity to the assessee, if he/she fails to rectify the defect, the Assessing Officer is authorized to treat the return as an invalid return and to make the assessment, as if the assessee had failed to furnish any return. It is, therefore, apparent that the Assessing Officer cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the returns of income as invalid returns shall be final and there is no provision under the Act to recall them. He submitted that the provisions of sec.139(9) clearly states that, if the defect pointed out by the AO in the return of income is not rectified within the prescribed time limit, the return of income shall be treated as invalid return. He submitted that the orders passed by AO can be rectified only u/s 154 of the Act, but the assessee should be given notice of hearing before carrying out the rectification. He submitted that no such notice has been issued for these two years. Accordingly he submitted that the returns of income filed by the assessee for AY 2014-15 and 2015-16 remain as invalid returns as per the orders passed by AO/CPC. 13. We heard the parties on this issue and perused the record. The provisions of sec.139(9) read as under:- 139 (9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f- ( i ) manufacturing account, trading account, profit and loss account or, as the case may be, income and expenditure account or any other similar account and balance sheet; ( ii ) in the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, association of persons or body of individuals, personal accounts of the partners or members; and in the case of a partner or member of a firm, association of persons or body of individuals, also his personal account in the firm, association of persons or body of individuals; ( e ) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance sheet and the auditor's report and, where an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section; ( f ) where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act by the Ld CIT. Hence the letters dated 24.3.2017 issued by the AO on his own directing the assessee to ignore its earlier orders is not in accordance with law. Hence the said letters are nullity in the eyes of law. Accordingly, we are of the view that the said letters cannot validate an invalid return. Accordingly, we are of the view that the processing of returns of income for both the years, after holding them as invalid, is not in accordance with the law. Hence the Ld CIT(A) was justified in holding that the AO is not correct in processing the returns of income. Accordingly, in terms of sec.139(9) of the Act, it should held that the assessee has not filed returns of income for AY 2014- 15 and 2015-16. 16. The Ld D.R pleaded that the Tribunal may give direction to the AO to assess the income of these two years as per the provisions of sec.150(1) of the Act. In our considered view, the Tribunal has no power to give any such direction, since such direction is not necessary to adjudicate the dispute before the Tribunal. The AO, however, proceed in accordance with law to assess the income of both the years, since the provisions of sec.139(9) clearly state that the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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