Analysis of Revised Return and Belated Return further specially linked with chapter VI of the income tax act, 1961 ” set off ” or “carry forward and set off of losses ” and with the  chapter of ” Assessment Proceedings”.

1) The last date Up to which the Return for the Assessment Year 2019-20 can be filled is Up To 30th of June, 2020 Now, instead of 31/03/2020.

2) The Cumulative effect of reading of section 139(4) and 139(5) is that Return which is filled us 139(1) and 139(4) can be filed Up To the end of the assesment year . However for assessment year 19-20 it is now 30/06/2020.

3) A layman often misinterpret the hardcore implications of above two sections.

There is a close link between these couples of sections specially with chapter VI , Assessment proceedings , landmark judgement of supreme Court like Dhampur Sugar Mill private limited ,Goetzee india limited, Gurjargraveurs limited, Jute india cooperation and NTPC Limited.

So l am trying to analyse the situation one by one by presenting it question answer mode.

A) The section said only the return  u/s 139(1) and 139(4) can be filed UpTo the end of the assessment year or ” before completion of the assessment”.

So, what About the other specified classes of the Assessee who filed the income tax return under certain specified sections?

for example charitable trust filed the ROI us 139(4C), Political parties us 139(4B),  investment fund, business trust, mutual funds, specified institutions like 10(23C) trusts, securitizations trust.

Can they revised the return ?

Ans- In the respective sections of filling of return of income of specified Assessee like trusts, political parties, scientific institutions,  we can find one thing common in the bare act and that is

“And all the provisions of this Act is applied as if it was a return filled us 139(1)” .

Here is the catch , no doubt trust  filled the return us 139(4C) , but if it is filled within due date it will be deemed as the return filled us 139(1)

Similarly,

if after the due date mentioned us 139(1), then it will be treated as a belated return us 139(4),

Similarly,

if the return is revised, then the revised return shall be known as return us 139(5) followed by the Dhampur Sugar Mills a landmark judgement of judicial authorities.

Hence if the charitable trusts fails to file the Return if income within due date mentioned us 139(1), then they can also filed the belated return us 139(4) or

if they filled the return within due date /after the due date, in both cases, they can filed the revised return us 139(5).

B) What is the relevance of using the words ” or before completion of the assessment” in those couple of sections?

Ans –  Assessment here means ” Assessment made to the best of the judgment of Assessing officer us 144 of the income tax act, 1961.

say , an Assessee is Mr X who is an individual and his due date of filling of ROI us 139(1) is 31/07/2019.

Now, he didn’t file the ROI UpTo 31/07/19.

In income tax , there is a very common phrase used which is follows” —

“once the due date u/s 139(1) is passed, the Assessee is exposed to the Risk of the best judgement assessment”.

The legal base of these phrases and other important aspects of chapter VI etc. is elaborated by me through various illustrations which are drafted on the basic of various scenarios Say, today is 01/08/2019.

There is section in income tax section 142(1)(i) , which states that if the Assessee fails to file the Return of income within due date, then by issuing this notice the assessing officer may called the Assessee to file the return of the income .

This notice us 142(1) may be issued even after the end of the assessment year.

And if Assessee fails to comply with this notice then assessing officer can make the best judgement assessment us 144 without providing the further opportunities of along with other consequences and calculate the ” Tax payable” by the Assessee..

Further it is to be noted that Section 144 is only for the benefits of the Revenue , Since AO will not calculate the refund due to the Assessee, or increased the losses of the Assessee.

Now , consider various cases.

Case 1- if the notice us 142(1) is issued on 01/08/2019 to filled the return of the income and assesse comply with the notice,  and filed the return on 30/08/2019 and shows total taxes payable is Rs 16 lacs.

Further on 30/01/2020 Assessee filed the Revised ROI and Shows a total income Rs 12 lacs.

Since Assessee comply with the notice and hence the proceedings us 144 will not be initiated.

Ans – See what happens , although the notice is issued us 142(1) , but the last date of filling of belated and revised return ie 31/03/2020 is yet not passed.

And hence this Return will be considered as a return filled us 139(4) and a valid return.

Revised Return filed us 139(5) is totally valid and the total tax payable shall be considered to be 12 lacs.

Later if the department wants, the following case may be opened for Scrutiny assessment us 143(3)/147 which is totally a different issue.

Case 2- Keeping other data as same as case 1, but in the Revised Return Assessee shows income as follows.

This is a Comprehensive example.

Please read it thoroughly.

1) Total income under the head PGBP

Business1 – 40 lacs

Business 2- 60 lacs (losses of current year)

Business 3- 20 lacs ( bought forward losses )

Business 4 – (specified business us 35AD)- losses of current year 10 lacs

Business 5- speculation business (A)  losses of  14 lacs

Business 6 – Speculation business (B) income of Rs 8 lacs

Business 7- income from owning and maintaining Race Horses – 3 lacs

Depreciation us 32 of current year – 18 lacs

Opening balance if depreciation (commonly known as unabsorbed depreciation ) is Rs 25 lacs..

2) Income From salary (doing part time work ) and

Earn a taxable salary of Rs 1,50,000

after allowing a standard deductions of Rs 50,000.

3) Income From House property –

House 1 –  losses of Rs 7,00,000

House 2-  Taxable income of Rs 3,00,000

Compute the taxable income covering other aspects of the related provisions of the income tax act, 1961.

Ans – Related Chain of Provisions which will work is

Section 70+ Section 71+ Section 72 , Section 71B+ Section 32+ 32(2)+ Section 80+ Section 139(3)/(4)/(5)+ Section 35AD.

Let’s cover legal aspects one by one.

➡️Income tax is payable on the total income. Total income includes ” Losses” also. The provisions of treatment of losses is contained in Chapter VI of the Act which consists of Section 70 to Section 80.

➡️ The heading of the chapter VI is

” Set off ” or

” carry forward and set off losses”.

Means there are two different words whereas the first words ie ” set off ” dealt with the manner how to ” Settle those losses which are the part of the current year.”

The provisions of how to set off the current year losses is contained in Section 70 and section 71.

And the other words ie ” carry forward and set off the losses.

” Which means if any of the losses in the current year is not fully absorbed after applying the provisions of section 70 and Section 71 , then this losses will be allowed to ” carry forward to the next assessment year and can be set off against the income of those Assessment year subject to the provisions of Section 72 to 80 of the Act and also

Followed by the Historical Judgement of  supreme Court in the case of

” CIT. Vs ” Madhukant M Mehta”.

The current year losses which is being carried to the next year will known as ” bought forward losses for the next assessment year.”

A very interesting thing can be noted that laws laid down the manner of how you can carried forward the losses. But if you see in the Income tax computation , that there is a bought forward losses, then there will no conditions require to check.

Let’s take an example –

say for assessment year 19-20 , the Assessee Mr X incurred current year Losses of Rs 1 lacs.

In the computation sheet, it had been observed that there is also a brought forward losses of 1,50,000.

Section 80 states that

” To carry forward the losses under the head P/G/B/P ,  the return must be filled within due date us 139(1)”.

Now suppose Assessee actually filled the ROI for assessment year  19-20 on 31/08/2019 i.e after the due date. Hence he will not eligible to carry forward the current year losses of Rs 1 lacs.

What about the bought forward losses of Rs 1.5 lacs can this losses be carry forward to next assessment years means AY 20-21.

The answer is “Yes”.

Since this losses of 1.50 lacs is actually the current year losses of earlier years. Assume it was the CY losses of Assessment year 18-19, and if this losses is seems as ” bought forward losses for AY 19-20, it is itself a clear cut evidenced , that ROI and other conditions in the AY 18-19 , for the purposes of carry forward the losses of AY 18-19 was already fulfilled. And Hence they can easily be carrier forward.

Hence, we can make a conclusion that

“once Assessee filled his Return of Income /Losses within Due date us 139(1), then such losses will be carried forward to the Next assessment years and be allowed to be set off in next assessment year, even if the ROI of the next Assessment years is filled after the due date mentioned us 139(1) or even if the Return of the income is not filled.”

➡️ Analysis of Section 70

which deals with ” intra – head ” adjustments of losses.

Means

if within same head say ” P/G/B/P head”

if Assessee earn income from 1 sources and the losses from other sources , then he can easily set off such losses without any restrictions normally.

Generally there is no restrictions..

However , if there is a ” loss” under the head P/G/B/P from specified business us 35 AD, Speculation business, income from owning and maintenance of race horses ” and Loss from the sources which is in nature of long term capital gains can’t be set off against the income from short term capital gains within same head ” Capital Gains”.

Hence, losses of Speculation/Specified/Owning and Maintaining Race Horses/ losses from long term Capital Gains only can be set off against the income from the of the same nature within Head not from any other sources of Income.

Means within the same head there is a restrictions imposed .

Note :-

There is a difference between ” income from owning and maintaining  Race Horses and ” income from Winning of Racing of Winning of Horse Race.”

The activities of owning and maintaining the Race Horses is the part of the business income and income from ” Winning the Horse Race” is the part of the “income From Other sources”.

The income earned by the ” the person who arrange the entire racing ,Courts etc will be its business incomes and the person’s who plays the Bet over the Race, that income will be the part of  ” Income From Other Sources“.

The provisions of TDS is applicable on 2nd type of income , which is normally known as “Casual Incomes”.

✔️However, whether  the losses from the normal business can be set off against the income from specified business or Speculation business or Income from owning and maintaining Race Horses?

The answer is straight forward yes.

Since Restrictions imposed us 70 to set off the intra head adjustment of ” current year losses” is with respect to losses of the business other than normal business.”

Hence The losses under the normal business source of income can easily set off against income from Speculation business,

since we can sett off the losses of Normal business activities and not the losses of Speculation business for which section 70 imposes restrictions.

means the entire focus of chapter VI is on ”set off of losses and not for income set off.”

Generally Students misinterpret the above differences.

✔️ Now , Come to House property losses. means in one house Assessee earned a gain and from other house Assessee earned a loss of Rs 3,00,000.

✔️Whether the Assessee will be eligible to set off the current losses of 3,00,000 with other house income and if  yes then what about the limit of Rs 2,00,000?

The answer is very much yes.

Assessee will be eligible to set off the entire losses of 3,00,000 us 70 .

The restrictions to Impose the set off of HP losses of Rs 2,00,000 only be applicable for “inter Head Adjustments'” it means under Section 71 which deals with “Inter -head adjustments of “CY losses ” is elaborated below.

➡️section 71 deals with “Inter head” adjustments of set off of  losses of one head with other heads of income.

I reiterate once again that section 71 only deals about current year losses which remains after intra head adjustment.

( Means It can said that Just after implications of section 70, Section 71 comes into play)

✔️ Normally there is no restrictions for inter head adjustments of ” current year losses”.

✔️ Apart from the restrictions mentioned in Section 70 ,
there are two other restrictions .

first is losses from the head house property can be set off against any other head only to the extent of Rs 2,00,000.

✔️Means suppose House property losses (Net ) is Rs 5,00,000 and Business head income is Rs 4,00,000 , then only 2,00,000 losses is allowed to be set off and balance losses of Rs 3,00,000 have to be carried forward..

✔️Took a reverse situation, say HP income is 8 lacs , and the normal business
Losses is Rs 5,00,000…

Will this losses of 5,00,000 be allowed to set off fully or only to the extent of 2,00,000..

The answer is that entire 5,00,000 will be allowed to be set off since restrictions on set off of the losses of ” house property head ” and not on the losses of business head..

✔️Will the answer be different if the given losses is from Speculation business ,

The answer is yes and in that cases the losses of Speculation business will not be allowed to be set off against the HP income.

✔️Will the answer be same if the HP losses is Rs 3,00,000 and the speculation business income is Rs 4,00,000 and no other income exists in “PGBP” head .

The answer is no and the losses to the extent of Rs 2,00,000 shall be allowed to be set off against the speculation business income , since it is the HP losses which is to be set off.

✔️ And the other restrictions is that business losses can’t be set off against the salary income.

➡️Now , come to “carry forward and set off the losses “.

So much of the losses which are remains to set off after applying the provisions of Section 70 and Section
71 , can be allowed to carry forward to the next assessment year and be allowed to be set off in accordance with the provisions of Section 72 to Section 80. There is one standard rule for next year set off that the losses will be set off against the same head in the next year Exceptions are There.

For Example,

✔️ Losses of Normal business can be carried Forward and Set off with income of P/G/B/P whether it is Speculation income or normal income.

✔️ losses from the speculation/Specified/owning and maintaining Race Horses Will be allowed to carried forward and set off only against the income of same nature in the next assessment year and not against the normal business activities.

✔️ Losses under the Head Capital Gains which consists of Long term capital losses will be allowed to carried forward and set off in the next assessment year only against the income of Long term capital gains.

✔️ Losses under the Head capital gains which Consists of Losses from the Sources of income which is short term in nature will be allowed to be carried forward and set off in the next assessment year from both Long term capital gains and short term capital gains.

From the above illustrations , it can be understood that in the next assessment year ” Inter – Head Adjustments”  can’t be possible at any Cost.

➡️ Section 80 said that The losses under the Head P/G/B/P,  Speculation business , loss under the Head capital Gains, Losses of Specified Business , Losses of Activities of Owning and Maintaining of Race Horses will be allowed to be carry forward and Set off the losses only if the Return of the Income is filled within Due Date mentioned us 139(1).

Section 80 doesn’t mentioned the Losses under the Head House it means that even if the Return of income is not filed with the due date mentioned us 139(1) or even if the Return if income is not filled, then the

“losses under the house Property to be carried forward and set off “.

It means say from House property there is a net Loss of 6,00,000 and the Assessee couldn’t set off such losses then he will eligible to carry forward and set off such losses and by how much.

The answer is that assessee is eligible to carry  forward the entire losses even he failed to file the return of the Income within due date us 139(1) or even if they fails to file the return of Income at all.

The restrictions of Rs 2,00,000 is applicable only on the set off of current year losses in inter head adjustments and not be applicable on intra head adjustments and on carry forward of losses under the House property us 71B.

Further Section 80 Does not mentioned Section 32 or “over – rides” it, which dealt with the treatment of Current Year and Unabsorbed Depreciation.

Hence it means if the return of the Income is filled after the Due Date mentioned us 139(1) or even if the Assessee doesn’t file the ROI,
he is still be eligible to set off or carry forward and set off” the ” current year & Unabsorbed Depreciation”.

Hence in income tax , First the current year affairs are adjusted , then bought forward, and then if balances of losses remains , then carry forward provisions are apply.

Now , Coming to the solution of Comprehensive illustration. I am presenting the Entire Illustrations once again Here,

The other data relevant is that assessee didn’t file the ROI and on 01/08/2019  he received the notice us 142(1)(i) and he filed the ROI and subsequently revised the belated return on 30/01/2020 as Follows.

1) Total income under the head PGBP

Business 1 – 40,00,000

Business 2- losses of 60,00,000 of current year

Business 3- 20,00,000 ( bought forward losses )

Business 4 – (specified business u/s 35AD)- losses of current year 10,00,000

Business 5- speculation business (A) loss 14,00,000

Business 6 – Speculation business (B) income of Rs 8,00,000

Business 7- income from owning and maintaining Race Horses – 3,00,000

Depreciation us 32 of current year – 18,00,0000

Opening balance if depreciation (also known as unabsorbed depreciation ) is Rs 25,00,000

2) Income From salary (doing part time work ) and

Earn a taxable salary of Rs 1,50,000

after allowing a standard deductions of Rs 50,000.

3) Income From House property (Computed)

House 1 –  losses of Rs 7,00,000

House 2-  Taxable income of Rs 3,00,000

Compute the taxable income covering other aspects of the related provisions of the income tax act,

Solution-

Firstly we will compute the income of House property.

↔️ Since the income from both houses is given as computed , it means standard Deduction is already allowed. And No further Deductions us 24 is allowed.

↔️ Applying the Section 70, the losses of house 1 can easily be set off against the profit of House 2.

However there is still losses of Rs 4,00,000 of house property head which is unabsorbed after implications of Section 70.

This losses to the Extent of Rs 2,00,000 can be set off against both the head salary and PGBP.

However , we will set off against the salary Income Reason prima facie it is seen that Business head is already at a loss.

Hence, if we add such losses with PGBP, it will only enhanced the total losses under the head PGBP , Hence we Reduce the salary income to the extent of 1,50,000 and balance 50,000 can either be set off or can be carried Forward to the next year demand upon the choice of the Assessee .

Suggestions will be work on those cases , where Assessee earns income under the head Capital Gains specially long term capital gains and assesse is company , in that case since the rates of taxation is differ of long term capital gains and other incomes but it is the case of individual. Since for a company Assessee if he earned business income then it will be taxable @ 30% normally and LTCG is taxable @20% and hence in that case, The balance loss should be set off against business income to lowered the higher tax rates income. But it is not that case.

Now,

↔️ Total position after making the above adjustments..

Income from House Property – NIL

Income from Salary – NIL

(after making the adjustments us 71 to the extent of Rs 1,50,000 )

Balance House Property loss of Rs 2,50,000 i.e. (7,00,000-3,00,000-150,000) shall be carried Forward to the next assessment year.

We decide to carry forward the entire losses of INR 2,50,000 to carry forward.

Hence it will be carried to the next AY even If the ROI is Filled after the Due date ie us 139(4) or even if no return have been filled.

Now come to the Head PGBP..

↔️First we have to adjust the current year affairs..

Business 1-   40,00,000

Less – Current year Depreciation –   18,00,000

Less – B/F Depreciation 25,00,000

And hence the total income from Business 1 is Nil and there is Still Rs 3,00,000 of unabsorbed depreciation remaining.

↔️
This unabsorbed shall be set off against Business 7 ie income from owning and maintaining Race Horses. And hence till , the taxable income shall be NIL.

↔️ Now, Come to other business..

Business 2 – Loss of 60 lacs can’t be set off against any other business activities.

since there is no normal business income or other business be its a specific business or other remains and hence it has to be carry forward.

however , since the assesse fails to file The ROI us 139(1) , then such losses can’t be carried forward and Hence can lapsed..

However Assessee can use circular no 09/2015 and make an application to the CBDT or Respect authorities , and can claim to carry forward of the losses in the Return on a sufficient and good reason to failure.

since the losses is exceeded Rs 50 lacs , in this case , application shall be made to the CBDT.

↔️ Business 4 and 5 both deals with Speculation nature, and The losses to the Extent of Rs 6,00,000 which can’t set off is not eligible to carried Forward since the ROI is not filed within due date.

However, the option to make the application to the board is still open to the Assessee.

On a similar note, Losses of Specified business us 35AD , can’t be carry forward , since the return us 139(1) is not filled.

However again he can move application to CBDT to condone the delay and allow him to carry forward the losses.

↔️ However , the most important is that losses of business 3 , which is brought forward to AY 19-20 can be carry forward to AY 21-22 despite of the fact that Return is not filed within due date. Since the restrictions is on carry forward of losses.

Hence the total taxable income shall be NIl and Assessee Will eligible to carry forward the losses  of Rs 2,50,000 of House Property and Rs 20,00,000 of Business 3.

And the losses of 76,00,000 ie ( 60,00,000 + 10,00,000+6,00,000) is lapsed, provided he doesn’t file application to the CBDT or Application got rejected

Case 3-  suppose, Assessee filed the Return us 139(1) and the return got subsequently processed us 143(1) and on 05/09/19 ,

the case is selected for Scrutiny assessment and accordingly the notice us 143(2) is issued and

asked the Assessee to provide information about his business activities and other information.

However he fails to comply and accordingly assessing officer computed his income to the best of his judgement us 144 on 31/12/2019.

Since AO have the power to make the best judgement Assessment u/s 144 if Assessee fails to comply with the terms and conditions laid down in notice issued us 143(2).

In the given cases the Revised Return can be filed UpTo 31/12/2019 ie UpTo the date of signing of the best judgement order..

Suppose in the above cases , Assessee filed the revised return before 31/12/19, then AO have to consider it and will allow all the losses since original return was filled within due date. Held in the case of Dhampur Sugar Mills Limited , Revised Return is deemed to be filed on the day , when the actual  original return is filed.

Hence , in the above case revised return is deemed to be filed on or before the due date , and accordingly as per section 80 , Assessee will allow to carry forward the losses.

However , if Assessee filled the Revised Return after 31/12/19 , it us null and void and then Assessee will not be eligible to carry forward the losses.

This is actually the importance of word ” UpTo the best judgement assessment” used in Section 139(4) and 139(5).

Hence for a precautionary measures, Assessee who have losses, should do following things.

➡️ Always file the ROI within Due date.

➡️ Even there data is not ready, they should file blank return , and such return can be subsequently revised and in such a way , they can carried forward the losses. As per Dhampur Sugar Mills limited , Revised Return steps into the Shoes of Original Return.

➡️ If the notice us 143(2) is issued, and return is filed before time without considering the losses, then he should file the ROI revised before the end of the AY.

3)

D) what are the legal aspects when assessee fails to file the ROI within due date and

on 20/03/2020 Assessee recieve the notice us 142(1)(i) to file the ROI within 30 days of the receipt of notice, and

subsequently Assessee filed the Return of income showing total tax payable Rs 20,00,000 on 04/04/2020.

However Assessee shows by mistake tax in excess of 6,00,000. Now can he revised the return. What are the remedy available to him?

Ans – In that case, The return filled pursuant to the notice us 142(1) is deemed as the Return Filled us 142. And it will not be treated as return us 139(4).  As per Section 139(5) only the return which us filed us 139(1) and 139(4) and hence it can’t be revised.

The remedy available to the Assessee in this case is subject to the action of the department.

↔️If the case of the Assessee is opened in Section 143(3), then he can claim the lower tax Liabilities during the proceedings. Since for initiate Scrutiny assessment , only a valid return is required. All the returns which is filed us 139 and in pursuance of the notice us 142(1)(i) can be subject to selection of Scrutiny Assessment.

Since it is the return us 142(1)(I) and department can go for Scrutiny Assessment us 143(3) in this case.

↔️I want to reiterate if the cases is opened us 147, then again assessee can’t claim lower tax Liabilities since section 147 is for benefits of the Revenue.
Again if the AO deny the claim, then Assessee can go to appeals /revision and claim lower tax Liabilities there.

↔️Further if the order if the AO us 143(3) is passed , denying the Assessee claim, then whether he can move application us 154.

The answer is no , since in 154 only those matters are considering which are arising out of the Assessment proceedings and which are ” mistake apparent on record”.

↔️Whether Assessee can claim the claim of lower tax Liabilities through the letter since he can’t able to file revised return since portal don’t allow him to file the revised return on 04/04/2020.

The answer is No and the base of the answer will found in another historical judgement given by the Hon’ble Supreme Court in the case of Goetzee india Limited ,
that assessee can’t claim any deductions before the AO through a letter /application. He can claim so only by through a Revised Return.

↔️If the AO denies the Assessee claim to lower his tax Liabilities, and against the order, AO move appeal to the CIT (A) , then whether the CIT(A) can approve Assessee claims?

The answer is normally no.. since CIT(A) considered only those matters which are arising out if the assessment order. (SC in CIT vs Gurjargraveurs Private Limited).

However supreme Court held in the case of Jute Cooperation if india, that if the Assessee fails to claim the lowered tax Liabilities or a particular deductions in income tax returns due to the circumstances could not have been raised earlier.

It means if Assessee got succeed in explaining that deductions are bonafide  and  couldn’t been raised before passing of the assesment order, then he can claim the deductions before CIT(A).

↔️However if the Assessee fails to prove that whether he can raised the same before ITAT..

The answer is yes. Held in the Historical Case of NTPC Limited, Assessee can raised the claim before ITAT , even if such claim was raised for the first time.

↔️what are the legal aspects when assessee fails to file the ROI within due date and on 20/03/2020 Assessee recieve the notice us 142(1)(i) to file the ROI within 30 days of the receipt of notice, and

subsequently Assessee filed the Return of income showing total tax payable Rs 20,00,000 on 25/03/2020.

However Assessee shows by mistake tax in excess of 6,00,000. Now can he revised the return. What are the remedy available to him?

Ans – in that case, Assessee simply filed the revised return ,since it is the return us 139(4) and can be revised in or before the end of the assesment year and it’s not the case of loss return.

Hence Assessee can easily claim the lower tax Liabilities by Rs 6,00,000.b y filling the revised return on or before 31/03/2020.

E) what are the legal aspects when the Scrutiny Assessment us 143(3) is completed before the end of the relevant assessment year ie on or before 31/03/2020.

Ans- Suppose Assessee filled the ROI on 25/07/19 ie before the due date us 139(1) and Shows tax Liabilities of Rs 8,00,000.  The intimation us 143(1) is generated and served on 31/07/2019.

And the case is selected for Scrutiny Assessment and accordingly notice us 143(2) is issued on 05/08/2019. However Assessee fails to claim a deduction X which would lowered his tax Liabilities by INR 3,00,000 which he realised after the Assessment Order is passed.

However the order us 143(3) is passed as per section 153(1) on 31/12/19 .

And enhanced the tax Liabilities by 1,50,000 and completed the assessment us 143(3) on Total income of Rs 9.50 lacs and create the demand of 1,50,000 and accordingly demand notice us 156 is prepared and served on the Assessee and penalty proceedings accordingly initiated by issuing a show case notice us 270 for penalty for underreporting or Misreporting of income.

This entire process is completed on 31/12/2019. Now following questions can arises..

Q- whether Assessee can filed the Revised Return?

Ans – Yes, Assessee can revised the Return of the Income. Although its a fact, that assessment is already completed, but in Section 139(5) , the words “Assessment ” used there is connected with assessment us 144. And hence in this case revised return will be considered as a valid return .say Assessee revised the Return on 31/01/2020.

Q- what about the claim made of deduction by the Assessee, whether AO can reopened the case us 143(3)?

Ans – No , Assessing officer can’t reopen the case us 143(3) since Reassessment is not possible us 143(3).

Q- whether AO can reopen the case us 147 since the Reassessment is allowed in Section 147?

Ans – No, since 147 is solely made for the benefits of the Revenue.

Q- whether Assessee can move rectification application us 154?

Ans – No, he can’t even move the rectification application since this matters is even not considered in the assessment proceedings and in order. For the purposes of application of 154 , There must be a mistake apparent on record.

And to commit a mistake on anything, firstly the matter have to be taken into consideration.
Since the matter is not yet taken into consideration, do the question of mistake doesn’t arise at all, and  hence 154 can’t be possible.

Q- Whether AO open the case under section 144 to allow the benefits to the Assessee ?

Ans- No, because if two reasons, First Benefits to the Assessee can’t be passed by the Revenue while passing the order us 144 and the Second reason is that Reassessment is not possible in 144.

Q- whether He can claim the Deductions before CIT(A)?

Ans- Now, here the answer may be presented to the best of my knowledge. Please enlightened me if any corrections/Suggestions required.

There is a case law of Gurjargraveurs Private limited, in which it was held by the Supreme Court , that if the Assessee fails to claim the deductions in the “Return of income” and accordingly AO not allowed the deductions, such deductions can’t be claimed before CIT (A) by raising additional grounds if appeals.

However given the circumstances here, and when assessee revised the ROI on 31/01/2020 and as per Dhampur Sugar Mills this Return will be deemed to filed when the original return was Filed. And Hence it is deemed that Assessee filed the revised Return on 25/07/19 . The case law of Gurjargraveurs limited will be apply when there is no claim in the Return of income.

However after applying the deeming provisions this Revised Return is filled on 25/07/19 means it substituted the original return and hence we can conclude that “yes” there was a return on which a claim for deduction is made by the Assessee is presented before the CIT(A) .and hence the case law of Gurjargraveurs limited should not be applicable in this scenarios.

The mere reasons that assessee couldn’t able to claim the deductions because of the various restrictions under different types of proceedings like 143(3)/144/147/154 etc..

Hence it may be reasonably presumed that CIT(A) in such a case can allow the deductions to the Assessee.

Q- whether CIT us 263 revised the order of the Assessing Officer us 143(3) to allow the deductions to the Assessee?

Ans- No, because of the following reasons .Since , section 263 is also made for the Solely benefits of the Revenue.

 Q- Whether Assessee can move revision application to section 264 to claim the relief ?

Ans- yes, he can claim the relief before CIT us 264 on the basis of reasonable assumption.

Q- If CIT(A) doesn’t entertain the Assessee claim , then whether he can claim the deductions of expenditures before ITAT ?

Ans – Yes, held in the case of NTPC Limited, the Assessee can raise any ground which he fails to raise before lower authorities or he raised but didn’t entertained at lower authorities .

Hence in such a scenarios to avoid the litigations, it is better to claim the deductions before AO when the proceedings is going on , since once the order is passed, then consequences may be cumbersome. Hence, As soon as the proceedings are started, Assessee should scrutinized their books of the accounts self and should raise the forgotten claim before the AO. Since section 143(3) is revenue neutral section, means the case may be passed in the favour of assessee also.

Also, if the Above situations persists, then first thing Assessee should do is to take a stay on demand by moving application us 220(6) to the AO otherwise he will be treated to be an Assessee in default and consequently he will be liable to pay interest us 220 and penalty us 221.

If assessee forgot to take the stay from AO, then he can also take such stay from CIT(A) held in the case of CIT vs Debashish Maulik.

Further , if Assessee wants he can also take the stay of demand from ITAT for a Maximum of 365 days provided the related conditions are satisfied.

However High Court and Supreme Court are not powered to grant to stay of demand since they are not income tax authorities us 116. Since, only income tax authorities mentioned us 116 are eligible to grant the stay on demand.

Disclaimer :-

This article is for the purposes of information and shall not be treated as solicitation in any manner or of for any other purposes whatsoever.

For the benefits of reader a short glimpse of provisions is presented in my personal language as per my capabilities. It shall not to be used for any legal advice /opinion and shall not to be used to rendering any professional opinion. Readers are advised to kindly go through to original government publications and published case laws and judicial pronouncements. Errors may creep in and hence it will be highly appreciable to highlight such errors or providing suggestions for effective improvements.

Happy readings..

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