Amrut Rajendrakumar Bora, Pune V. Deputy Commissioner of Income Tax, Circle-5, Pune, Pune

ITA 563/PUN/2023

AI Insights

The case involves Amrut Rajendrakumar Bora, the appellant, who contested the order of the Deputy Commissioner of Income Tax, Circle-5, Pune, which declared his income tax return for the assessment year 2018-19 as defective under section 139(9) of the Income Tax Act, 1961. The primary legal issue was whether the order under section 139(9) was appealable under section 246A of the Act. The CIT(A) had dismissed the appeal as non-maintainable, a decision which was upheld by the Tribunal. The Tribunal's decision was influenced by the absence of a specific provision in section 246A that allowed for an appeal against an order under section 139(9), and the interpretation of the law as per the Supreme Court's directive in Commissioner of Customs (Imports), Mumbai vs. M/s. Dilip Kumar And Co. & Ors.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137018 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2023
• Appeal Filed By: Assessee
• Order Result: DismissedDismissed
• Bench Allotted: A
• Next Hearing Date: 02-08-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 09-05-2023
• Other Referred Cases: Deere & Company vs. DCIT, CIT vs. B.R. Constructions
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Difference of opinion; Set aside; FORM 26AS
• Section: 139; 143(3); 143(1); 143(2); 246A; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No.563/PUN./2023 Assessment Year - 2018-2019 Amrut Rajendrakumar Bora, Samrat House, 39-D 2/6 Shankarsheth Road, Near Meera Society, Pune PIN – 411 037. Maharashtra PAN AOIPB4100Q vs. The DCIT, Circle-5, PMT Bldg., Shankarsheth Road, Swargate, Pune. Maharashtra. PIN – 411 037. Appellant Respondent For Assessee : Shri Nikhil S. Pathak For Revenue : Shri Ramnath P Murkunde Date of Hearing : 03.08.2023 Date of Pronouncement : 04.08.2023 आदेश / ORDER PER SATBEER SINGH GODARA, JM : This assessee’s appeal, for assessment year 2018-19, arises against the National Faceless Appeal Centre [in short “NFAC”] Delhi’s Din and Order No. ITBA/NFAC/S/250/2022- 23/1050679067(1), dated 13.03.2023, involving proceedings u/s. 143(1) of the Income Tax Act, 1961 (in short “the Act”). Heard both the parties at length. Case file perused. 2. The assessee pleads the following substantive grounds in the instant appeal : 2 I.T.A.No.563/PUN./2023 1) “The learned CIT(A) erred in holding that the appeal filed by the assessee against the order passed u/s 139(9) was not an appealable order u/s 246A and hence, the appeal filed by the assessee was not maintainable. 2) The learned CIT(A) failed to appreciate that an order passed u/s 139(9) was covered within the provisions of section 246A and hence, appeal filed by the assessee was a valid appeal and there was no reason to dismiss the same as non-maintainable. 3) The learned CIT(A) erred in not appreciating that the order passed u/s 139(9) treating the return filed by the assessee as an invalid return was incorrect in law and accordingly, the appeal of the assessee should have been allowed. 4) The assessee submits that his gross receipts from his business were less than Rs.1 Cr. and therefore, the assessee was no liable to get his books audited u/s 44AB and hence, the return filed by the assessee was valid one and there was no reason to treat the same as an invalid return u/s 139(9). 5) The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” 3. It is clear from a perusal of the assessee’s grounds that the CIT(A) has refused to admit his lower appeal for the sole reason of not being maintainable u/sec.246A of the Act. 3 I.T.A.No.563/PUN./2023 The “NFAC” quotes the CPC’s order dated 31.07.2019 treating the assessee’s return in question as a “defective” one u/sec.139(9) of the Act to hold that it does not constitute an order appealable u/sec.246A of the Act as under : 4. Mr. Pathak vehemently argued during the course of hearing that the CIT(A) herein has erred in law and on facts in declining the assessee’s lower appeal as not maintainable. His case before us is that not only sec.246A(1)(a)’s clinching statutory expression “against the assessee where the assessee denies his liability to be assessed under this Act” squarely applies herein but also case law [2022] 138 taxmann.com 46 (Pune-Trib.) Deere & Company vs. DCIT has rejected the Revenue’s very stand as under : 4 I.T.A.No.563/PUN./2023 “4. From the above reply, it clearly emerges that the assessee advanced three reasons leading to difference in the two figures, viz., conversion rates for recording the transactions; reimbursements; and reversals. Insofar as the first reason is concerned, rule 115 of the Income Tax Rules, 1962 (hereinafter called `the Rules’) provides that the rate of exchange for the calculation of the value in INR of any income accruing or arising etc. to the assessee in foreign currency etc. shall be the `telegraphic transfer buying rate’ of such currency on the `specified date’. The term `specified date’ has been defined in Explanation (2) to rule 115, providing through clause (c), in relation to `Income from other sources’ payable in foreign currency and from which tax has been deducted, as, the date on which the tax was required to be deducted at source. The term `telegraphic transfer buying rate’, in relation to a foreign currency, has been defined in the Explanation to rule 26 to mean the rate adopted by the State Bank of India for buying such currency, where it is made available to that bank through a telegraphic transfer. Pages 2 to 14 of the paper book contain invoice-wise conversion of the income of the assessee from USDs into INRs. The assessee claims that it converted income accruing in foreign currency into Indian rupees on the basis of SBI TT 5 I.T.A.No.563/PUN./2023 Buying rate on the date of credit to its account or the date of payment, whichever is earlier but the Indian entities converted the foreign currency into Indian rupees at a rate different from the SBI TT Buying rate. 5. The second reason for difference in the figures given by the assessee is `Reimbursements’. The Indian entity paid some amount to the assessee and deducted tax thereon. The claim of the assessee is that the receipt is in the nature of reimbursement and hence not chargeable to tax. If the amount is really in the nature of reimbursement, then tax deducted at source on such an amount would call for refund without the corresponding inclusion of the amount in the total income. 6. The third reason given by the assessee is the reversal of some entries. For example, the assessee raised invoice of 100 USD on the Indian entity, which deducted tax at source on 100 USD. However, later on the assessee issued credit note on that invoice, say, to the tune of 15 USD. Even though the tax was deducted at source initially on 100 USD by the Indian entity, but the ultimate amount includible in the total income of the assessee would be equivalent of 85 USD. 6 I.T.A.No.563/PUN./2023 7. On going through the assessee’s reply given to the DCIT (CPC), Bengaluru, it emerges that a case was set up that it did not omit to include any income in the total income. Rather, the difference arose either due to conversion of invoice value from the foreign currency into Indian rupees or certain amounts on which tax was deducted by Indian entities, which were not chargeable to tax in its hands by reason of reimbursement or reversal of some invoice value. The three reasons noted above are bound to bring difference in the figure of income reported by the assessee in its return and as appearing in Form No. 26AS. However, such a differential amount, in principle, would not constitute income chargeable to tax in the hands of the assessee. 8. Before coming to the core issue as to whether such a mismatch in the figures of income returned and as reported in Form 26AS constitutes a defect in the return so as to warrant initiation of proceedings u/s 139(9) of the Act, we need to consider the mandate of section 143(1) of the Act, which deals with the processing of return. This section provides that: “Where a return has been made u/s 139 ...., such return shall be processed in the following manner...”. Clause (a) contains a list of six items given in sub-clauses (i) to (vi), requiring the making of adjustments in computing total income. Sub-clause (vi) mandates the making of an 7 I.T.A.No.563/PUN./2023 adjustment in the total income towards `addition of income appearing in Form 26AS or Form 16A or 16 which has not been included in computing total income in the return’. The sub-clause (vi) was inserted by the Finance Act, 2016 w.e.f. 01.04.2017. The effect of this sub-clause is that if certain amount of income appearing in Form 26AS etc. is not fully or partly included in the total income returned by the assessee, then the AO will process the return u/s 143(1) and make adjustment by way of addition to the total income so computed by the assessee. The first proviso to the sub-clause (vi) provides that “no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode”. The second proviso further states that the “response received from the assessee, if any, shall be considered before making any adjustment....”. The effect of these two provisos to sub-clause (vi) of section 143(1)(a) is that the AO, at the stage of processing the return u/s 143(1), is required to increase the total income computed by the assessee in its return with the differential higher income as appearing in Form 26AS etc. However, this can be done only after giving prior intimation to the assessee about such proposed adjustment and that too, after considering the response of the assessee, if given thereto. Thus, it is overt that if the explanation furnished by the 8 I.T.A.No.563/PUN./2023 assessee is found to be satisfactory, then the AO cannot carry out any such adjustment at the time of processing the return u/s 143(1) of the Act. 9. The AO in the extant case has invoked Explanation (a) to section 139(9) of the Act on account of mismatch of the figures of income as returned and as per Form 26AS. Section 139(9) provides in the opening part that: `a return of income shall be regarded as defective unless the following conditions fulfilled’. Then there are clauses (a) to (f). The AO has activated clause (a), which states that: “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”. A cursory glance at the Explanation (a) manifests the nature of defect, being, not duly filling in 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. In other words, if all the annexures, statements and columns etc. of the return have been duly filled in, there can be no defect as per clause (a). The defect referred to herein is of non- filling of the requisite columns of the return of income and not filling of columns but non-tallying of the figures due to a valid 9 I.T.A.No.563/PUN./2023 difference of opinion. If the intention of the Legislature had been to treat the mismatch of income between Form 26AS and as shown in the return of income rendering the return defective, then there was no need to incorporate clause (vi) of section 143(1)(a) of the Act requiring the AO to carry out the adjustment during the processing of return of income on this score. 10. It goes without saying that if a subject is covered under a specific provision, then it cannot be included in any general provision. We are reminded of the latin maxim generalia specialibus non derogant, which means that special provisions override general provisions. In view of the fact that clause (vi) of section 143(1)(a) of the Act specially covers a situation of mismatch in the amount of income returned and as appearing in Form 26AS requiring the making of an adjustment and that too, subject to two provisos, the same subject matter cannot be covered within the purview of Explanation (a) to section 139(9) of the Act so as to render a return defective on this score. It is so for the raison d`etre that the adjustment u/s 143(1) at the time of processing of return and the return becoming defective u/s 139(9) entail different consequences. 11. At this juncture, it is relevant to note that the third proviso to section 143(1)(a)(vi) was inserted by the Finance Act, 2018 w.e.f. 10 I.T.A.No.563/PUN./2023 01.04.2018 providing: “that no adjustment shall be made under sub-section (vi) in relation to return furnished for the assessment year commencing on or after 1 st day of April, 2018”. A conjoint reading of the third proviso with the main sub-clause (vi) of section 143(1) along with the first two provisos amply demonstrates that the Legislature required the AO to make such an adjustment only for the A.Y. 2017-18. The Memorandum explaining the provisions of Finance Bill, 2018 justified the insertion of the third proviso, having the effect of omission of clause (vi) from the scope of prima facie adjustments during the processing of return of income, by stating that: `With a view to restrict the scope of adjustments, it is proposed to insert a new proviso to the said clause to provide that no adjustment under sub- clause (vi) of the said clause shall be made in respect of any return furnished on or after the assessment year commencing on the first day of April, 2018.’ A careful circumspection of the provision along with Memorandum makes it explicitly clear that the Parliament wanted to restrict the scope of adjustments and thus excluded the cases of such a mismatch from its ambit. The effect of the third proviso is that such a genuine mismatch will be resolved by taking recourse to assessment u/s 143(3) of the Act by issuing notice u/s 143(2) of the Act. In fact, section 143(2) unambiguously 11 I.T.A.No.563/PUN./2023 provides that “where a return has been furnished u/s 139 ...., the Assessing Officer ...., if considers it necessary or expedient to ensure that the assessee has not understated the income..., shall serve on the assessee a notice ....”. It means that where the assessee claims a particular amount as not chargeable to tax, with which the AO is not prima facie agreeable, as is the case under consideration, the only option with the AO is to take up the assessment after issuing notice u/s 143(2) of the Act. The position of law which prevails from the A.Y. 2018-19, that is, after the insertion of the third proviso to section 143(1)(a), is similar to what it was before the A.Y. 2017-18. Thus except for the A.Y. 2017- 18, when the AO could have made adjustment on account of such a mismatch while processing the return u/s 143(1), the AO has no power to correct a mismatch, as is instantly the case, otherwise than through making assessment u/s 143(3) in the years before or after that. We are concerned with the A.Y. 2016-17 and, as such, the DCIT (CPC), Bengaluru could not have taken action u/s 139(9) in an attempt to correct the mismatch and in the process declared the return as invalid, thereby depriving the assessee from refund claimed in the return of income. 12. Once a return of income is declared as non est as if it was never filed, there can be two possible situations. One, the assessee, 12 I.T.A.No.563/PUN./2023 knowing that it has income chargeable to tax, again files a fresh return and the second, the AO, having knowledge of the assessee having taxable income, issues a notice u/s 142(1)(i) requiring the assessee to file a return of income. Albeit section 142(1)(i) uses the word `may’, but when the AO knows for sure that the assessee has income chargeable to tax but not filed return, it becomes obligatory on the part of the AO to issue notice under this provision, in the same way as it is necessary for the assessee, having taxable income, to file return of income. Now we consider the effect of the two situations in the facts and circumstances of the case under consideration. In the first possible situation, the assessee would have again filed its return with income of Rs.474.37 crore and the AO, sticking to his earlier stand, would have held such return invalid on the same premise, throwing the proceedings in a vicious circle resulting in an impasse. In the second possible situation, the AO, knowing pretty well that the assessee has income chargeable to tax and the earlier return has been declared by him as never filed, should have issued notice u/s 142(1)(i) requiring the assessee to file a return of income. This would have resulted in the assessee filing its return and then the AO determining correct total income of the assessee as per law after making assessment u/s 143(3) of the Act. However, in the 13 I.T.A.No.563/PUN./2023 instant case, the AO did not issue any notice u/s 142(1)(i) and pushed the proceedings to a dead end, leaving the assessee without any apparent legal recourse. Left with no option, the assessee preferred an appeal before the ld. CIT(A) against the order u/s 139(9) of the Act, which has been dismissed as not maintainable on the ground that an order u/s 139(9) is not covered by the list of appealable orders given in section 246A of the Act. 13. Bearing in mind the pitiable condition of the assessee descending in a quagmire, having been created by the DCIT (CPC), Bengaluru, the assessee cannot be left remediless. It goes without saying that every piece of legislation ultimately aims at the well being of the society at large. No technicality can be allowed to operate as a speed breaker in the course of dispensation of justice. In the context of taxes, if a particular relief is legitimately due to an assessee, the authorities cannot circumscribe it by creating such circumstances leading to its denial. A look at different clauses of section 246A(1) transpires that an order u/s 139(9) is ex facie not covered therein. However, there are two clauses of section 246A(1), namely, (a) and (i), which can provide succor to the assessee. 14. Clause (a) of section 246A provides for filing an appeal before CIT(A), inter alia, against “an order against the assessee 14 I.T.A.No.563/PUN./2023 where the assessee denies his liability to be assessed under this Act”. It is pertinent to note that such an order has been covered in the provision separately and distinct from an intimation u/s 143(1) or an order of assessment u/s 143(3). The word `order’ in the expression `an order against the assessee where the assessee denies his liability’ is not preceded or succeeded by the word `assessment’. Thus any order passed under the Act against the assessee, impliedly including an order u/s 139(9) in the circumstances as are obtaining in this case, having the effect of creating liability under the Act which he denies or jeopardizing refund, gets covered within the ambit of clause (a) of section 246A(1). 15. Clause (i) of section 246A(1) of the Act deals with the filing of an appeal before the CIT(A) against an order u/s 237 of the Act. The latter section, in turn, provides that: `If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess.’ Technically speaking, the AO has not passed an order u/s 237 but only u/s 139(9) of the Act. We have noticed above that firstly, the AO could not have treated the return as 15 I.T.A.No.563/PUN./2023 invalid u/s 139(9) of the Act because of mismatch between the figure of income shown in the return and that in Form 26AS and secondly, if at all he did so on a wrong footing, he ought to have issued notice u/s 142(1)(i) of the Act for enabling the assessee to file its return so that a regular assessment could take place determining the correct amount of income and the consequential tax/refund. Here is a case in which the assessee has been deprived by the DCIT (CPC), Bengaluru of any legal recourse to claim the refund. Considering the intent of section 237 in mind and the unusual circumstances of the case, we hold that the order passed by him is also akin to an order refusing refund u/s 237 making it appealable u/s 246A(1)(i). We, therefore, set aside the impugned order and remit the matter to the file of the ld. CIT(A) for disposing off the appeal on merits as per law after allowing a reasonable opportunity of hearing to the assessee. 16. In the result, the appeal is allowed for statistical purposes.” 4.1. Mr. Pathak accordingly prays that the assessee’s instant sole substantive ground deserves to accepted in very terms and the CIT(A)/NFAC requires to adjudicate the assessee’s appeal on merits. 16 I.T.A.No.563/PUN./2023 5. The Revenue has placed strong reliance on sec.246A not containing any specific clause regarding maintainability of appeal against an order passed u/sec.139(9) of the Act. 6. We have given our thoughtful consideration to the foregoing vehement rival arguments and find no merit in assessee’s stand. We make it clear first of all that there is no dispute between the parties about the CPC having passed sec.139(9) order dated 31.07.2019 treating the assessee’s corresponding return as a “defective” one since the sole question before us is only that of maintainability of an appeal against the same before the CIT(A) u/sec.246A of the Act. We find that sec.246A is a self-exhaustive provision providing remedy of an appeal against the orders passed by lower authority(ies) in various clauses from (a) to (r) followed by Explanation(s) and statutory proviso(s); as the case may be. Learned counsel could not pin-point any appeal provision therein against sec.139(9) order. That being the case, we are of the considered opinion that only stricter interpretation in such an instance has to be adopted in light of hon’ble apex court’s landmark decision in Commissioner of Customs (Imports), Mumbai vs. M/s. Dilip Kumar And Co. & Ors. [2018] 9 SCC 1 (SC) (FB). 7. The assessee’s arguments based on sec.246(1)(a)(i) are found to be devoid of any merit as the above quoted 17 I.T.A.No.563/PUN./2023 statutory expression (supra) comes into play only when the concerned taxpayer “denies his liability to be assessed under this Act” which is not the case before us once we are dealing with an issue of validity of a return only. We observe in these peculiar facts that sec.246A envisages an appellate remedy before the CIT(A) not based on various consequences faced by an assessee or by way of necessary implications but as per various orders passed by the field authorities under the specified statutory provisions only. 8. So far as the assessee’s reliance on learned coordinate bench foregoing decision (supra) is concerned, we hold the same to be per inquirium only since not adopting stricter interpretation in above terms. Case law CIT vs. B.R. Constructions [1993] 202 ITR 333 (AP) holds that a judicial decision ceases to be a binding precedent in such a factual backdrop. We accordingly uphold the CIT(A)'s action rejecting the assessee’s lower appeal against sec.139(9) order as not maintainable u/sec.246A of the Act. Rejected accordingly. 9. We make it clear before parting that it shall be very much open for the assessee to take recourse to any other appropriate remedy under the law, if so advised. 8. This assessee’s appeal is dismissed in above terms. 18 I.T.A.No.563/PUN./2023 Order pronounced in the open Court on 04.08.2023 Sd/- Sd/- (DR.DIPAK P.RIPOTE) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated 04 th August, 2023. VBP Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The NFAC, Delhi. 4. The Pr. CIT-3, Pune. 5. DR, ITAT, “A” Bench, Pune. 6. Guard File. BY ORDER // True Copy // Senior Private Secretary ITAT, Pune.