As per the provision of Section 139(9) of the income tax act, 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 made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return.
Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.
Accordingly, if an assessee forgets to file the reply of defective notice within a period of 15 days then he may proceed with any of the following options:
1. First of all, the assessee should immediately file a condonation application to the assessing officer to condone the delay in filing the reply of defective return notice, because proviso to section 139(9) itself gives the power to the assessing office to condone the delay and treat the return as valid return.
2. Secondly, the assessee may file an application under section 119(2b) of the income tax act, where the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorize any income-tax authority to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;
3. Third, if there exist no defect in the notice/order issue under section 139(9), and even if the assessee fails to file a reply with in a period of 15 days of the notice, then the assessee may file a rectification application under section 154 of the income tax act against the order issued under section 139(9) since such order suffers from mistake apparent from record and which is duly rectifiable under the provision of section 154(1)(a) of the act. For the sake of ready reference, the provision of section 154(1) is reproduced here under:
(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,—
(a) amend any order passed by it under the provisions of this Act ;
(b) amend any intimation or deemed intimation under sub-section (1) of section 143;
(c) amend any intimation under sub-section (1) of section 200A;
(d) amend any intimation under sub-section (1) of section 206CB.
Accordingly, the order passed under section 139(9) is duly covered under section 154(1)(a) of the act and rectification application can be made against the same.
The assessee can also place reliance on the decisions of followings honorable tribunals where the courts have directed the assessing office to treat the return as valid return.
i) Honorable ITAT, Jaipur in the case of Wholery Infrastructure Private Limited Vs The DCIT, Circle-2, Kota in ITA No. 525/JP/2023, dated 30.10.2023
It is noteworthy to mention that if the order passed by the AO u/s 139(9) of the Act contains apparent mistake then it is curable u/s 154 of the Act. Since there is no defect in the ITR filed by the assessee, therefore it is a valid Income Tax Return. The submission of the assessee was that the order passed by the CPC u/s 139(9) of the Act was having the apparent mistake of law which resulted the wrong invalidation of return of the assessee. It is also noted that the gross receipts from the business of the assessee is less than Rs.1.00 crore then it is not required to get the accounts audited u/s 44AB of the Act. It is imperative to mention that the gross receipt of the assessee from the business carried out by the assessee was not more than to Rs. 1 Crore, therefore the assessee was not required to get his accounts audited u/s 44AB of the Act. In this regard the reference is drawn at Page 10 of ITR form (Copy at PB Page 11) and Profit and Loss A/c at PB page 58 and on perusal of the record, it is found that the revenue from operation i.e. from business operation was of Rs. 69,43,977/- only, which is less than to Rs. 1 Crore. The other receipts of Rs. 74,58,325/- was “Profit on Sales of Fixed Assets”, which for the purpose of section 44AB of the Act cannot be included in gross receipts of the business. In this regard reference is drawn towards the Guidance Note on Tax Audits under section 44AB of the Act issued by ICAI and on perusal of Para 5.13 of the Guidance note (Copy at PB Page 89) it is apparent that the Sales proceeds of Fixed Assets would not form part of gross receipts in business for the purposes of section 44AB of the Act. In this view of the matter, we respectfully following the decision of ITAT, Mumabi Bench in the case of Y.K. Patel Securities (P) Ltd. vs ADIT-CPC, Bangalore on similar issue are of the view that the defect notice issued by CPC u/s 139(9) of the Act is not in accordance with law and accordingly, we quash the said defect notice, meaning thereby, the return of income filed by the assessee should be considered as valid return. Accordingly, we direct the AO/CPC to treat the return of income filed by the assessee as valid return and process the same in accordance with law. Thus the appeal of the asseessee is allowed.
ii) Honorable ITAT, Mumbai in the case of V. K. Patel Securities and Private Limited Vs ADIT-CPC, Bangalore in ITA No. 1009/MUM/2023, dated 20.06.2023
We heard Ld. D.R and perused the record. On a perusal of the Profit and Loss account of the assessee for the year under consideration, we notice that the gross business receipts was Rs.92,95,722/-, which is less than the threshold limit of Rs.1.00 crore prescribed u/s 44AB of the Act for getting the accounts audited. The Statement of Total income furnished by the assessee would show that the other income has been declared either under the head Capital gains or under the head Other Sources. Hence, there is merit in the submission of the assessee that it is not required to get its accounts audited u/s 44AB of the Act. Accordingly, we are of the view that the defective notice issued by CPC u/s 139(9) of the Act is not in accordance with law and accordingly, we quash the said defect notice, meaning thereby, the return of income filed by the assessee should be considered as valid return. In view of the above, the response given under “E-Nivaran” would get nullified. Accordingly, we direct the AO/CPC to treat the return of income filed by the assessee as valid return and process the same in accordance with law.
iii) Honorable ITAT, Pune in the case of Mahila Seva Mandal Vs ITO (2022 (8) TMI 248)
In this case the assessee filed its return of income for the present assessment year on-line. The ACIT (CPC), Bangalore issued communication stating the return filed on 17-06-2015 is inconsistent and defective u/s. 139(9) of the Act and requested to rectify the return within the period of 15 days from the receipt of notice. Consequently, the CPC, Bangalore passed an order u/s 139(9) by treating the return filed on 17-06-2015 is invalid return. The assessee filed an application u/s. 154 of the Act before the jurisdictional AO vide application dated 18-08-2016. The AO rejected the application filed u/s. 154 of the Act vide its order dated 27-02-2017. Aggrieved by the same, the assessee preferred an appeal before the CIT(A), wherein, the CIT(A) confirmed the order of AO. On appeal Hon’ble ITAT Pune Bench held as under:-
“6. Heard both the parties and perused the material available on record. We note that the assessee filed its return of income on 17-06-2015. The assessee claimed application of income to its objectives to an extent of Rs.61,07,545/-, accumulation of income of Rs.18,86,808/-. The objection of CIT(A) was that the assessee claimed excess accumulation to the tune of Rs.45,84,366/- and no details regarding investments/deposits were filed with the return of income, though the said discrepancies was brought to the notice of assessee by the AO (CPC), but no compliances made by the assessee in order to rectify the said mistake. We find the rectification application u/s. 154 of the Act is placed at pages 1 and 2 of the paper book, wherein, it is noted that the assessee enclosed the details of investments/deposits for ready reference of AO and requested the AO to accept the same. The AO did not consider the same and held the return of income as invalid. The contention of ld. AR is that the assessee ready to file all the investments/deposits, because of treating return of income as invalid, the proceedings u/s. 11 will go against the assessee. We find on similar issue the Coordinate Bench of this Tribunal in the case of Deere & Company (supra) held that, no technicality can be allowed to operate as a speed breaker in the course of dispensation of justice. If a particular relief is legitimately due to an assessee, the authorities cannot circumscribe it by creating such circumstances leading to its denial. We find the order of CIT(A) in confirming the order of AO in treating the return of income as invalid, made the assessee remediless and there is no option to claim exemption u/s. 11 of the Act. In such circumstances, we find force in the arguments of the ld. AR that the assessee shall get an opportunity to file details of investments/deposits before the AO. Therefore, we deem it proper to remand the issue to the file of AO with a direction to treat the return of income filed by the assessee on 17-06-2015 as valid return and complete the assessment thereon. The assessee is liberty to file evidence, if any, in support of its claim. Thus, the grounds raised by the assessee are allowed for statistical purpose.”
Conclusion: Navigating a defective income tax return can be daunting, but understanding the provisions of Section 139(9) empowers taxpayers to take corrective action. Whether through condonation applications, rectification under Section 154, or legal precedents, taxpayers have avenues to rectify errors and ensure their returns are deemed valid.
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