Many trusts are facing issues for not filing the return of income in correct form No.7. This may be due to the fact that trusts do not have qualified staff with them or that at small places proper tax consultants are not available. May that be so. But, such returns are processed by CPC treating the income taxable and raising false demands. On trying for rectifications, the portal does not allow to change the return form and shows to file the rectification requests in the same form in which original return was uploaded. In response to the grievances uploaded, the returns are transferred to the jurisdictional AO and AO in turn reply that they do not have power to allow to change the return form. The demands are pending and assessee’s are pushed to unwarranted litigations.
Grievance-balls are pushed in one another’s court clearly circumventing the CBDT instructions vide letter No. D.O. F.No. Dir.(Hqrs.)/Ch.(DT)/39(2)/2015, dt.22nd June, 2016.
To resolve the issue following questions need to be analysed: –
1. What is the effect of filing the return in an incorrect form?
2. Does filing in the wrong form make the return defective and invalid?
3. Whether filing return in an incorrect form is a mistake?
4. Is this mistake apparent on record?
5. Is the “Form” prescribed under the Income Tax Rules 1962 overrides the law?
Let us analyse the questions.
1. What is the effect of filing the return in an incorrect form?
The law is silent on the question.
There is neither any provision specifying the consequences for filing the return of income in an incorrect form nor does it directly provide any solution to the same.
The CPC invariably processes the same and raises demands and it is followed by all other consequences as per law. This indicates that the returns are certainly not treated as invalid.
But, at present the return is not allowed to be changed from one form to the other. On pointing out to the officers about the power vested in them, there is a gloomy anarchy simply because there is no direct provision in the law to clearly say so. The idiosyncrasy to save self-skin, no officer wants to apply mind to these types of questions and assessees suffer.
2. Does filing in the wrong form makes the return defective and invalid?
2.1 Section 139 (9) defines what is a defective return and when it shall be treated as invalid. It reads as follows-
(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 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.
Explanation — For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely: —
(a) the annexures, 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 been duly filled in;
(b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return;
(bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report;
(c) the return is accompanied by proof of—
(i) the tax, if any, claimed to have been deducted or collected at source and the advance tax and tax on self-assessment, if any, claimed to have been paid:
Provided that where the return is not accompanied by proof of the tax, if any, claimed to have been deducted or collected at source, the return of income shall not be regarded as defective if—
(a) a certificate for tax deducted or collected was not furnished under section 203 or section 206C to the person furnishing his return of income;
(b) such certificate is produced within a period of two years specified under sub-section (14) of section 155;
(ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974);
(d) where regular books of account are maintained by the assessee, the return is accompanied by copies of—
(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 the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.
The sub-section gives a power to the AO to give an opportunity to the assessee to cure, when any return is considered as defective.
The proviso gives a power to treat the return as valid if conditions are met. The Explanation gives conditions, which unless fulfilled, the return shall be regarded as defective.
Para 27 in CBDT Circular No. 281 dt. 22-09-1980 explains the provisions and intentions of Secs. 139 and 143 as inserted/amended by the Finance Act, 1980.
However, a new section 139C inserted by Finance Act 2007 w. e. f. 1-6-2006 provides as under-
Power of Board to dispense with furnishing documents, etc., with return.
139C. (1) The Board may make rules providing for a class or classes of persons who may not be required to furnish documents, statements, receipts, certificates, reports of audit or any other documents, which are otherwise under any other provisions of this Act, except section 139D, required to be furnished, along with the return but on demand to be produced before the Assessing Officer.
(2) Any rule made under the proviso to sub-section (9) of section 139 as it stood immediately before its omission by the Finance Act, 2007 shall be deemed to have been made under the provisions of this section.
Sub-rule (2) of Rule 12 is substituted by IT (Third Amdt.) Rules 2011, w. r. e. f. 1-4-2011, which reads –
(2) The return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or Form SUGAM (ITR-4) or Form No. ITR-5 or Form No. ITR-6 or Form No. ITR-7 shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act:
Most of the documents to accompany the return of income are done away with by these two amendments to change the procedure.
Thus, the law provides instances when the return will be regarded as defective, and that the defects can be cured, and that if the defects are cured the return will be treated as valid. Consequently, if the defects are not cured, the return shall be regarded as invalid.
2.2 Naturally question arises as to whether the incorrect form of return is a defect or not?
2.2. 1 Sec. 139(9) specifies when the return shall be regarded as defective and that the AO has the power to allow the defect to be cured.
But, what about a defect not specified in the section? Is that defect not at all a defect? And ultimately any such defect makes the return permanently non-curable?
Hon. Calcutta High Court has decided one such case for a similar question for AY 1984-85. Explanation to s. 139(9), as it stood at the material time, inter alia, did not contain cl. (bb) providing for return to be accompanied by audit report. The assessee was a trust and filed its return for AY 1984-85 not accompanied by the audit report in Form 10B prescribed by Sec. 12A. The audit report dt. 12th Nov. 1984 was filed on 6th March 1987 before the assessment was completed. AO refused to allow exemption u/s 11, with the reason that the audit report was not filed “along with the return”.
Assessee challenged before CIT(A) contending that the return was defective and that the AO should have allowed an opportunity to rectify the same. However, CIT(A) did not accept and confirmed AO’s order on the ground of violation of Sec.12A(b).
Assessee went before Hon. ITAT contending that even otherwise the AO had the power to condone the delay and lower authorities took a highly technical view in the matter. Revenue took a view that filing the audit report cannot be treated as revised return u/s 139(5) and as Sec.139(9) does not specify this as defect, the same cannot be cured.
Hon. ITAT held that,
“the lower authorities took a highly technical view of the matter. The assessee, by filing the audit report on 6th March, 1987, purporting to act under s. 139(5) of the Act, removed the omission or defect which existed in the return furnished on 17th Sept., 1984. No mala fides were alleged and no case was made out to show that the delay in getting the accounts audited and in filing the report in Form No. 10B defeated the object of the Act. Thus, in the circumstances of the case, the Tribunal concluded that the authorities below were not correct in denying exemption under s. 11 of the Act to the assessee.”
Revenue took the matter before Hon. Calcutta High Court with a question-
“Whether, on the facts and in the circumstances of the case and having regard to the provisions of ss. 12A, 139(5), 139(9), 292B and the scheme of the IT Act as a whole, the Tribunal was right in law in holding that the lower authorities were not correct in denying exemption under s. 11 to the assessee for the asst. yr. 1984-85?”
Hon. High Court observed as follows-
9. …………..the assessee made an application dt. 18th June, 1984, seeking extension of time up to 30th Sept., 1984, as audit of relevant papers and statements was not completed and was likely to take more time. The said application was not rejected and it can safely be presumed that extension sought up to 30th Sept., 1984, was granted. The return submitted on 27th Sept., 1984, has to be treated as a return under s. 139(1). On completion of audit, the assessee furnished the report in Form No. 10B on 6th March, 1987, purporting to act under s. 139(5) of the Act. By filing the said report, the assessee definitely removed an omission or defect existing in the return furnished on 27th Sept., 1984. No mala fides have been alleged. No case has been made out that the delay in getting the accounts audited and in filing of the report in Form No. 10B defeated any object of the Act or the assessee’s action was in substance not in conformity with the intent and purpose of the Act.
11. As we have said, the only ground on which the exemption was denied to the assessee-trust under s. 11 of the Act is that the return was not accompanied by the audit report. Sec. 139(5) of the Act provides that, if any person, having furnished a return, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. The assessee in this case could have filed a revised return annexing a copy of the audit report. Had the assessee-trust done so, the exemption under s. 11 of the Act could not have been denied to it by the ITO.
13. It was contended that the provisions of sub-s. (5) were not applicable as the assessee did not furnish the report in Form No. 10B on 6th March, 1987, with a revised return and non-filing of the above audit report was not a defect covered under the categories specified in the Explanation to s. 139(9). This approach again disregarded the intent and purpose of the provisions and the scheme of the enactment as a whole. In our opinion, the defects specified in s. 139(9) are only illustrative and not exhaustive. This fact will be apparent from the amendment made by the Finance Act, 1988, w. e. f. 1st April, 1989, whereby cl. (bb) was inserted which reads as follows:
“the return is accompanied by the report of the audit obtained under s. 44AB.”
14. Of course, the Assessing Officer cannot ignore the specified defects and must get them rectified but to contend that only the defects specified can be got rectified and no other defects would be putting unnecessary restrictions on the power of the Assessing Officer leading to inconvenient consequences and absurd results not intended by the legislature. We do not see any such fetters on the powers of the Assessing Officer under s. 143. The Assessing Officer has power to ask the assessee to remove all defects in the return other than the defects making the return invalid.
15. The view of the lower authorities that the audit report submitted on 6th March, 1987, not being filed with the revised return did not satisfy the condition in s. 12A and that the provisions of sub-s. (5) and (9) of s. 139 were not applicable cannot be sustained. The object of both the sub-sections, in our view, is to get removed and rectified all defects and omissions in the return filed, whether discovered by the assessee or by the Assessing Officer. Both the provisions are enabling provisions inserted to facilitate reflection of correct income in the return and assessment thereof. These provisions can be simultaneously applied. Take for illustration the case of an assessee submitting a valid return but without proof of tax deducted at source which, for several reasons, was not available at the time of submission of the return. The said proof is later given to the Assessing Officer and is placed on record. It would be absurd to contend that credit for tax deducted would be given if the proof was asked for by the Assessing Officer in terms of s. 139(9) but not in a case where the assessee had placed the proof without filing a revised return under s. 139(9). This would defeat the intent and purpose of the enactment. If the object of sub-s. (5) of s. 139 is to rectify a wrong or omission in the return, then any act through which such rectification is carried can be treated as revising the return if, in substance and in effect, the purpose of the Act is achieved and is not defeated. Thus, documents placed on record with or without covering letters with the intention to remove any omission or wrong in the return or record cannot be ignored simply because the revised return was not furnished unless it is shown that the purpose of the Act is not satisfied.
16. In our view, therefore, the Assessing Officer ought to have given the assessee an opportunity to submit the audit report as the return was defective inasmuch as the audit report was not filed along with the return. In this case, as we have already noticed, the said defect was rectified by the assessee by filing an audit report in the prescribed form before the completion of the assessment. The IT authorities took a hyper technical view of this matter. Where the assessee has complied with the provisions of the Act in the course of the assessment proceedings by curing the defect in the return by filing an audit report, the ITO cannot ignore such audit report or the return in completing the assessment.
CIT vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust, (1992) 195 ITR 0825 (Cal.) dt. 12-4-1991- AY 1984-85
This clears the ground that the incorrect form of return is curable defect and the AO has the necessary power to do it, although not clearly mentioned in the section.
2.2.2 Hon. Allahabad High Court came across the question and has held that
I am unable to hold that the return filed by the assessee in June, 1961, was a nullity or suffered from such invalidity as to make it equal to no return within the meaning of s. 297(2)(a) of the 1961 Act. The defect that the return was in Form A which was not meant for the company will not vitiate the return. No error in the particulars supplied has been pointed out. Similarly, the mention in the verification clause of a “firm” instead of “company” will not make the return invalid as the signatures in the verifying clause did mention the name of the assessee as Dhampur Sugar Mills Ltd. The circumstance that the return was not accompanied by the profit and loss account or the balance-sheet will no doubt render the return incomplete, but will not make it invalid so as to be treated as non-est, for purposes of s. 297(2)(a) of the 1961 Act.
Dhampur Sugar Mills Ltd. vs. CIT, (1973) 90 ITR 0236 (All HC), dt.9-3-1972-AY 1961-62
2.2.3 Delhi High Court has examined the question and has held that,
11. This court is of opinion that the reliance on the Karnataka High Court ruling in K. Nagesh, [(376) ITR 473 (Kart)] is inapt. That court, with respect, appears to have overlooked the salient aspect underscored by the Supreme Court, i.e., the levy of tax is under Section 4 (1); the rates may vary. Likewise, filing of return, self-assessment tax, advance tax, etc. and provisions which flesh out the mechanisms under the Act for collection cannot be construed literally. Even Section 240 presupposes an order, leading to refund. Now, it is moot whether the nullification on ground of non-compliance due- not due to denial of liability – but other reasons, automatically leads to a situation contended by the assessee. Facially, the contention is insubstantial, because Section 139, even while obliging the officer to a course of action, i.e., declaring the return invalid, also says significantly that “and the provisions of this Act shall apply as if the assessee had failed to furnish the return.” Furthermore, as clarified by the Supreme Court, Section 240 itself is premised upon some authority of the revenue officials to decide whether the entire amount deposited, or part of it, or none at all, is to be refunded.
Shakti Bhog Foods Limited vs. DCIT (2016) 388 ITR 0280 (Delhi HC) 21-9-2016 AY 2013-14
2.3 Does a revised return u/s 139(5) cures the defect?
In a case for AY 2004-05, return filed by assessee on 01/11/2004 was found to be defective and AO called upon assessee to correct the defect. Instead of curing defect, assessee filed revised return u/s 139(5) within time specified after curing defect. Assessment was completed on 26/12/2006 determining loss and rejecting claim of assessee for carry forward of loss. AO declined claim on ground that since assessee did not file return u/s. 139(3), section 80 precluded assessee from claiming benefit of carry forward. CIT (A) confirmed order of AO.
Tribunal held that the revised return filed by the assessee under Section 139(5) has to be treated as a return filed under Section 139(3) of the Act and allowed the appeal in favour of the assessee.
Hon. Kerala High Court, in favour of the assessee, held in appeal that,
…….instead of curing the defects, the assessee filed revised return under Section 139(5) of the Act. Apparently, there was no substantial change in the two returns filed by the assessee. The only defect noticed was to submit the auditor’s report along with the return. It was submitted that the revised return was filed within the time prescribed by the Assessing Officer for curing the defects. If a hyper technical approach is taken in the matter, the assessee could not have filed a revised return as there was no situation warranting a revised return. But in the revised return filed by the assessee under Section 139(5) of the Act, there is no substantial change in the return filed earlier other than produced along with it the necessary audit report. (Para-3)
CIT vs. Alappat Consumer Electronics India (P) Ltd. (2014) 88 CCH 0302 KerHC, dt. 02-01-2014 – AY 2004-05
2.4 In the case before Hon. Madras High Court, the assessee filed revised return of income and reduced value of closing stock by Rs.5,83,275/- and also increased administrative cost by Rs.3,93,055/-. During assessment, AO found that change in figures was not supported by tax audit report u/s 44AB. However, in support of revised return, assessee filed a certificate stating that stock of soft drinks worth Rs.5,83,275/- was destroyed by Port Authorities pursuant to order passed by Deputy Port Health Officer. AO opined that in tax audit report filed along with original returns, closing stock was given at Rs.1,10,12,384/-, and that figure should had been arrived at after considering time expired stock of Rs.5,83,275/- and that further claim of reduction was not admissible and accordingly, claim in that regard was rejected. With regard to claim for bad debt to tune of Rs.3.93 lakhs, AO held that debt was not written off in books as on 31.3.1998 and that assessee preferred that claim in revised returns, thus condition stipulated to write off the bad debts during the year was not fulfilled. On appeal, CIT(A), as well as Tribunal confirmed decision of AO.
Hon. High Court held that,
S.S 139(5) permits an assessee to file a revised return and the said provision states that if any person, having furnished the returns under s.s. (1) or s.s. (4) of s. 139, discovers any omission or wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant AY or before the completion of the assessment, whichever is earlier. Admittedly, the assessee filed the revised return on 24.5.1999 well before the period stipulated u/s 139(5). This has not been disputed by the AO or the Appellate Authority or the Tribunal. However, after taking up the said revised return for scrutiny, the AO, while passing the order u/s 143(3), rejected the assessee’s claim, which was at the very threshold. (Paras 8&9)
If in the opinion of the AO, the return was defective, then the procedure contemplated under s.s. (9) of s. 139 ought to have been followed. This provision enables the AO to intimate the defect to the assessee and give an opportunity to rectify the defect within a period of 15 days from the date of such intimation or within such period, which, on an application made in this behalf, the AO, 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. The Proviso states 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 AO may condone the delay and treat the return as a valid return. (Para 10)
S.S. (9) of s. 139 is a beneficial provision to the assessee, which provides them an opportunity to rectify the defects. Since the intention being that the assessment proceedings are an outcome of dialogue and discussion, the AO is entitled to clarify all issues by issuing notice to the assessee and calling upon them to produce documents and explain their books of accounts, etc. Unfortunately, in the instant case, such procedure was not adopted when the revised return was rejected at the very threshold, which ought not to have been done. (Para 11)
Zeenath International Supplies vs. CIT (CENTRAL)-I, (2018) 103 CCH 0107 ChenHC, dt. 10-09-2018 – AY 1998-98
Both the above judgments clarify the position about revised return and confirm that the provisions of sec. 139(9) are beneficial provisions.
3. Whether filing return in an incorrect form is a mistake u/s 154? If yes, is this a mistake apparent on record? Can this mistake be rectified u/s 154?
3.1 What is a mistake – Hon. Apex court has analysed the word as follows-
“Mistake” is an ordinary word but in taxation laws, it has a special significance. It is not an arithmetical error which, after a judicious probe into the record from which it is supposed to emanate is discerned. …………The mistake to be rectified must be one apparent from the record. A decision on a debatable point of law or a disputed question of fact is not a mistake apparent from the record. The plain meaning of the word “apparent” is that it must be something which appears to be so ex facie and it is incapable of argument or debate……..
M/s. Deva Metal Powders Pvt. Ltd. vs Commissioner of Trade Tax, Civil Appeal NO. 5607 of 2007, Arising out of SLP (C) No.9396 of 2006. (2008) 2 SCC 439
Further Hon. Supreme Court in the case of ACIT vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 0227 (SC) dt. 15-9-2008 – AY 1996-97, has held that-
An error apparent on the face of the record means an error which strikes on mere looking and does not need long drawn out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record.
3.2 The ten-digit PAN system in India, indicates clearly the status of the PAN holder merely at the look at the fourth digit which is an alphabet and clearly shows the status as under-
A – AoP, B – BoI, C – company, F – Partnership firm, G – Government, H – HUF, L – Local authority, P – Individual person, T – Trust etc.
Thus, by just looking to its PAN, one easily knows the status of the assessee.
3.3 The word ‘record’ does not mean only the order of assessment, but it comprises all proceedings on which the assessment order is based – Maharana Mills P. Ltd. v. ITO (1959) 36 ITR 350 (SC).
The ‘record’ for the purpose of section 154(1) (rectification) is the record available to the authorities at the time of initiation of proceedings for rectification and not merely the record of the original proceeding sought to be rectified– CIT v. M.R.M. Plantations P. Ltd. (1999) 102 Taxmann 1 (Mad).
Power of rectification under section 154 is to be exercised with reference to the records of the assessee available with the assessing officer, and not with particular reference to the assessment alone. ‘Record’ cannot be said to be the record of one particular assessment, but the entire record of the assessee relating to all the assessment years – Upasana Hospital & Nursing Home v. CIT (2002) 253 ITR 507 (Ker).
3.4 If a return by a trust is not filed in correct form No.7, anybody can make out that the return is not filed in correct form.
The mistake of filing return in an incorrect form is not some error of law requiring a long drawn out discussion. It is merely an error of procedure which certainly can be corrected.
All the above discussion clearly shows that filing the return of income in an incorrect form by trusts, is a glaring mistake and strikes on merely looking to the return of income and its PAN and does not at all need any long drawn out process of debate or legal analysis.
But, the CPC, equipped with modern technology, does not send any intimation on this ground and raises false demands and adds avoidable litigations. It is possible to block the return at the filing stage itself if an incorrect return form is tried to upload.
It is obvious that if a return of income is filed in an incorrect form the same is a mistake apparent on record and can certainly be corrected u/s 154.
4. Is the “Form” prescribed under the Income Tax Rules 1962 overrides the law?
Section 139 asks an assessee to file the return of income in the prescribed form and to verify the same in the prescribed manner setting forth the prescribed details in it. The rules give the prescribed form, manner and particulars to be filled in. Does that mean the prescribed rules override the Act? The answer is clear no. The rules of interpretation have settled that,
Rules are made by the prescribed authority, while Act is enacted by the Legislature; hence rules are subservient to the Act and cannot override the Act. If there is conflict the Act would prevail over the rules. Rules are subordinate legislation. Subordinate legislation does not carry the same degree of immunity as enjoyed by a statute passed by a competent Legislature. (BCAS Publication “Rules for Interpretation of Tax Laws – A Compilation” – by Sr. Adv. N. M. Ranka, pg.31)
4.1 It has been rightly observed that the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect.
CIT vs. Taj Mahal Hotel, (1971) 82 ITR 0044 (SC), dt.12-08-1971-AY 1960-61
4.2 Hon. Madras High Court has observed that,
It is well accepted principle that the rule cannot affect, control, enlarge or detract or derogate from the full operative effect of the provision of section. If any rule purports to do so, it would be void and ultra vires and further the rule must be consistent or in conformity with the Act. If there is conflict between rule and the substantial provision of the Act, the rule must pave way to the provision of the Act. Further the delegating authority must exercise power strictly within the limit of the authority. Even though the rule making power is conferred on the said authority, and the rules made are in excess of such delegated power, the rules would be void even if the Act provides that they shall have effect as though enacted in the Act. The intention of the legislature is to give tax credit to tax and not to the tax and interest. Once the intention is clear, the Revenue cannot rely on Form No. 1 to say that the MAT credit under s. 115JAA should be given only after tax and interest. Further, it has already been held that the MAT credit under s. 115JAA should be given effect to before charging the interest under ss. 234B and 234C. Rule 12(1)(a) and Form No. 1 cannot go beyond the provisions of the Act. Form No. 1 cannot lay down the order of priority of adjustment of TDS, advance tax, MAT credit under s. 115JAA which is contrary to the provisions of the Act. The order passed by the Tribunal is in accordance with law and there is no error or illegality in the order of the Tribunal so as to warrant interference.
CIT vs. Chemplast Sanmar Ltd. & Ors. (2009) 314 ITR 0231 (Mad HC) 9-4-2009-AY 2002-03
5. CBDT’s Circular no. 014 (XL-35) DT. 11th April, 1955
This very old circular still holds good and the facts and instructions stated therein are applicable verbatim even today. The important para in the said circular read as under –
2. Complaints are still being received that while ITO’s are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds and giving reliefs due to assessees under the Act. Dilatoriness or indifference in dealing with refund claims (either under s. 48 or due to appellate, revisional, etc., orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs.
3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should: —
(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.
Question remains, why the CPC and the Officers are not bound to perform according to the intentions of the law and clear instructions of the Dept.?
All the foregoing discussion leads us to an inevitable conclusion that, even if a return of income is filed wrongly in an incorrect form, there is absolutely no legal bar to rectify and revise the return and to rectify the mistake, if any, while filing the return before the assessment is completed.
But, the procedure followed at present has created an interlocked situation giving no way out to resolve the issue without litigation.
If the ultimate aim of the assessee and the revenue is to collect the legitimate taxes correctly, then all the hurdles coming in the way must be removed, may it be of the law or the procedure.
Recently in a webinar with Shri. Sadhguru Jaggi Vasudeo, Hon. CBDT Chairman expressed a worry over the trust deficit between the tax collector and the tax payer. It is humbly felt that a correct approach will go a long way in bridging this trust deficit.
In conclusion Hon. High Court of Karnataka’s observations are worth quoting-
It is well settled that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It must be grasped that judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
– M/S. Kammavari Credit Co-Operative Society Ltd. Rep. By Its President, T. Bhadrachalam vs. ACIT & ORS. (2019) 416 ITR 0180 (Karn HC)