An assessee can now claim deduction by filing a revised income tax return even after the issue of notice by the Income Tax Department.
Good news for taxpayers. They can now not only file a revised income tax return (ITR) after a notice has been issued by the Income Tax Department, but even the tax benefit claimed by them in the revised return can’t be denied by taxmen simply on the ground that the revised ITR has been filed after the issue of notice.
In the case of Mahesh H. Hinduja Vs Income Tax Officer, Mumbai, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has recently held that a revised return can be filed after the issue of a notice and the benefit claimed therein can’t be denied, although the revised ITR has to be filed within the time limits set out in the Income Tax Act.
Thus, as per the landmark judgement by the Income Tax Tribunal, now a taxpayer can claim deduction by filing a revised IT return even after the issue of notice by the Income Tax Department, provided the revised return is filed within the time limit prescribed under Section 139(5) of the IT Act.
Let’s study the facts of the case in detail:
What had happened
Mumbai-based Mahesh Hinduja (the assessee) had filed his original return of income for FY 2010-11 on 28th July 2011, declaring a total income of Rs 4,91,750, but without declaring long term capital gains (LTCG) and not claiming deduction u/s 54 of the Income Tax Act. Later, on issue of scrutiny notice u/s 143(2) by the IT department, the assessee filed his revised return on 20th October, 2012 within the time limit as per Sec 139(5). In the revised return, he submitted a rental income of Rs 6,24,050. Further, he declared net LTCG of Rs 49,96,681 and claimed this whole capital gain as deduction u/s 54 by investing an amount of Rs 1,15,00,000 in new house property.
“The Assessing Officer, accepted the rental income and net LTCG as income, but rejected the deduction claim on grounds that the assessee had filed the revised return after issue of notice u/s 143 (2). On appeal by the assessee, the ITAT said that A.O. has followed a very selective approach in this case. He accepted the income offered by the assessee to tax, but denied the deduction on the basis of late filing of revised return,” says CA Abhishek Soni, Founder, tax2win.in.
Ruling by Tax Tribunal
The ITAT upheld that as per Sec 139 (5) of the IT Act, an assessee can file a revised return before the end of relevant assessment year or completion of assessment, whichever is earlier. However, the law nowhere states that an assessee cannot file a revised return after issue of notice by the IT Department.
The ITAT – in its order dated 20.06.2018 – also said that “when the assessee has made a claim of deduction under section 54 of the Act, it is incumbent on the part of the Departmental Authorities to examine whether assessee is eligible to avail the deduction claimed under the said provision. The Departmental Authorities are not expected to deny assessee’s legitimate claim by raising technical objection.”
It held that the Assessing Officer has adopted a very selective approach in respect of the revised return of income filed by the assessee. A careful reading of the provisions contained under section 139(5) of the Act will make it clear that if an assessee discovers any omission or wrong statement in the original return of income, he can file a revised return of income at any time before the expiry of one year from the end of the relevant assessment year or before completion of the assessment, whichever is earlier.
The Tax Tribunal then set aside the order of the Commissioner (Appeals) and restored the issue to the file of the Assessing Officer for examining and allowing the assessee’s claim of deduction under Section 54 of the IT Act, subject to fulfillment of conditions of section 54.
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