Requirement to file return electronically but filed manually- Claim for set-off and carry forward of losses

This appeal is filed by the assessee against the order of the learned Commissioner (Appeals)-17, Mumbai dated 22-2-2016 for the assessment year 2011-12 arising out of assessment order passed under section 143(3) of the Act.

2. In this appeal, the assessee is challenging the order of the learned Commissioner (Appeals) in sustaining the order of the assessing officer in ignoring manual return filed by the assessee and considering the electronic return filed belatedly as the original return of income and denied carry forward of losses while completing assessment for the assessment year 2011-12.

3. Briefly stated, the facts are that the assessee for the assessment year 2011-12 filed its return of income on 30-11-2011 declaring loss of Rs. 5,40,03,070. This return was filed manually in the office of Dy.CIT 1(2), Mumbai. On the same day, the assessee also informed Dy. CIT 1(2) by letter dated 28-11-2011 that the assessee was trying to file income tax return online since 26-11-2011 but unable to file the return due to problem of login password. The assessee also informed that it will try filing the return online again but to be on a safer side it is filing return manually and requested that the same may be taken on record. The manual return filed by the assessee on 30-11-2011 is within the due date specified under the provisions of 139(1) of the Act.

4. Subsequently notice under section 142(1) was issued to the assessee on 27-9-2012 requiring the assessee to file return of income. In response to the said notice, the assessee filed return of income electronically on 11-10-2012. However, the assessee noticed that while filing the return of income electronically on 11-10-2012, business loss of Rs. 3,75,35,148 and unabsorbed depreciation of Rs. 1,14,60,217 was inadvertently not set off and therefore revised computation of income was filed on 11-10-2012. The assessing officer completed the assessment under section 143(3) considering the return filed electronically on 11-10-2012 as the original return of income and ignoring the return of income filed by the assessee manually on 30-11-2011. In the process, the assessing officer denied set off of carry forward of losses to the assessee observing that for the assessment year 2011-12, the assessee has to file return of income electronically and there are no instructions to accept the return filed manually as the original return. Since according to the assessing officer, the assessee has not filed return of income electronically within the due date as required under section 139(1) of the Act, the provisions of section 80 are attracted and the assessee is not allowed to carry forward business loss to the subsequent assessment year. Thus, the assessing officer computed the income of the assessee at Nil. The assessee preferred appeal before the learned Commissioner (Appeals) and the learned Commissioner (Appeals) sustained the view of the assessing officer that the return filed by the assessee manually on 30-11-2011 is not a valid return and the return filed electronically on 11-10-2012 is belated return and the assessee is not entitled to carry forward and set off business losses and unabsorbed depreciation.

5. The learned Counsel for the assessee before us submits that the assessee could not file the return electronically before due date under section 139(1) due to technical problems and therefore return was filed manually on 30-11-2011 and this was also informed to the assessing officer on the very same day as to why the return could not be filed electronically and the return was filed manually and requested to take the return on record. The learned Counsel submits that since the manual return was filed in time, there is no justification in not considering such return as original return and denying the set off and carry forward of losses. Referring to the decision of third member of Mumbai Bench in the case of Nicholas Applegate South East Asia Fund Ltd. v. ADIT (2009) 117 ITD 299 (Mum), the learned Counsel submits that in this case, the assessee filed four returns separately in respect of its four cells within the time prescribed under section 139(1) even though the requirement of law was that a consolidated return for all the four cells was required to be filed. Later, a revised return was filed on 29-10-2002 incorporating losses of all the four cells. However, the assessing officer considered the revised return as the valid return since this return was filed belatedly and he denied carry forward of losses to the assessee. The Hon’ble third member held that since the original return is filed within the due date under section 139(1) of the Act, the return filed separately are valid returns in terms of provisions of 292B of the Act. Therefore, he submits that this decision is squarely applicable to the assessee. He also placed reliance in the case of Morgan Stanley Asset Management Inc. v. DCIT (2009) 33 SOT 452 (Mum), wherein, the Coordinate Bench held that the verification column signed in the return in the name of SB Billimoria & Co. and not as one of the partners of the firm on behalf of the assessee is a curable defect under section 292B as the return is only a defective return and not an invalid return.

6. The learned DR strongly placed reliance on the orders of the lower authorities.

7. We have head both the parties, perused the orders of the authorities below and the decisions relied on. The undisputed facts in this case are that the assessee filed return of income manually on 30-11-2011 that is within the due date specified under section 139(1) of the Act. On the very same day, the assessee also intimated the assessing officer as to why it could not file the return electronically and the return filed manually be taken on record. In response to the notice under section 142, the assessee filed return on 11-10-2012. The assessing officer acting upon this electronic return denied the set off of carry forward of losses to the assessee on the ground that the assessee did not file the return of income electronically within the due date specified under the provisions of section 139(1) of the Act. The learned Commissioner (Appeals) agreed with the view of the assessing officer. Now the question before us to be addressed is as to whether original return filed manually can be treated as a valid return or not. No doubt, the requirement is that the assessees should file returns electronically within the due date specified under section 139(1) in order to be eligible for set off and carry forward losses. The mandatory requirement of law for set off and carry forward of losses is that the return should be filed within the due date under the provisions of section 139(1) of the Act. Here the assessee filed return of income under 139(1) manually instead of filing the return electronically. The reasons as to why the assessee could not file the return electronically was also given. In such circumstances, we are of the considered view that simply because the assessee could not file the return electronically within the provisions of section 139(1), the benefit of set off and carry forward of losses cannot be denied for the reason that the assessee did file return of income manually within the due date specified under section 139(1) of the Act. The claim for set off and carry forward of losses cannot be denied on a too technical reasons on the ground that the electronic return filed by the assessee is belated when the assessee filed return of income manually within the due date specified under section 139(1) of the Act.

8. The provisions of section 292B also comes to the rescue of the assessee in as much as the return filed cannot be invalid merely by the reason of any mistake, defect or omission in such return of income when in substance and effect if such return is in conformity with or according to the intent and purpose of this Act. The return filed manually may at best be said to be a defective return and not an invalid return. The third member of the Mumbai Bench held that the return filed separately by the four cells of the assessee declaring total loss claimed by the assessee did comply in substance and in effect within the intent and purpose of the Act and in view of the provisions of section 292B and the defect is not material in the light of the provisions of section 292B. While holding so, it was observed as under :–