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FAQs on Advanced ICITSS-Test
January, 08th 2018

                                              Date of decision: 04.01.2018

+      ITA 897/2016

                                               ..... Appellant
                    Through: Mr. Asheesh Jain, Sr. Standing


                                              ..... Respondent
                    Through: Mr. Ved Jain and Mr. Pranjal
                             Srivastava, Advocates.



       1.      The question of law framed in the case, is, as follows:-

               "Did the Income Tax Appellate Tribunal (ITAT)
               fall into error in holding that the notice under
               Section 143(2) of the Income Tax Act, 1961 ('the
               Act,) was barred by time, in the facts and
               circumstances of the case?"

ITA 897/2016                                                              Page 1 of 9
       2.      The brief facts are that the assessee filed its returns for A.Y.
       2009-10 on 01.09.2010, choosing the electronic mode, in accordance
       with the then prevailing Rule 12(3) of the Income Tax Rules read with
       Sections 139C and 139D of the Income Tax Act. It is not in dispute
       that the returns were filed in an electronic mode, however, the ITR-V
       form i.e. the verification was not so filed. Again, it is not in dispute
       that there was no facilitation for filing of ITR-V forms electronically.
       What was expected of the assessee was that the ITR-V forms be
       mailed through a hard copy to the Headquarters at Central Processing
       Centre (CPC), Bengaluru. This is evident from the Circular No.3 of
       2009 issued by the Board. That circular provided 30 days period to
       the parties, who did not have digital signatures, but, had filed their
       returns through electronic mode under Rule 12(3)(iii) of the Rules.
       By Circular of 01.09.2010, the Central Board of Direct Taxes (CBDT)
       extended the period of filing of ITR-V forms in such cases till
       31.12.2010. The assessee filed its ITR-V form on 01.12.2010. The
       assesse's returns, in the meanwhile, were not processed and Revenue
       treated the documents filed as "Nil" return. An order was thereafter
       made under Section 143(3) of the Act and the assessment made at
       Rs.48,55,39,800/-.      Penalty proceedings too, were initiated. The
       assessee appealed successfully to the Commissioner, who accepted its
       plea and the contention that in the absence of a notice under Section
       143(2) of the Act within the time stipulated, scrutiny assessment under
       Section 143(3) of the Act could not have been completed.            This
       argument was further accepted, upon appeal by the Revenue to
       Income Tax Appellate Tribunal (`ITAT').

ITA 897/2016                                                          Page 2 of 9
       3.      The Revenue urges that the Tribunal erroneously held that the
       return had been filed correctly. In doing so, it places reliance upon
       Circular No.3 of 2009, to say, that the only manner known in law for
       the assessee's return to have been valid, would be, if, the verification
       form ITR-V was received by the Revenue Authorities i.e. the
       concerned Authority CPC, Bengaluru, within 30 days period, provided
       for, in the circular. Learned counsel relying upon Rule 12(3) of the
       Income Tax Rules contends that a combined reading of Sections 139C
       and 139D leads to the conclusion that in the absence of an ITR-V
       Form, i.e. the verification, no return is deemed valid, and, till such
       time, a valid return comes on record, which, in the present case
       occurred after 01.12.2010, the question of issuing any notice under
       Section 143(3) of the Act did not arise. Elaborating further, it was
       further argued by the Revenue that in the present case, the assessee
       had, in fact, participated in the proceedings through its representatives
       and the plain textual interpretation would rather work against the
       assessee, who was aware of the Circular No.3 of 2009, which had
       enabled the parties to furnish the ITR-V form within 30 days of the
       furnishing the return electronically.     In his submissions therefore,
       when the assessee did not do so, the Authorities were within their
       rights in treating whatever was filed as a "nil" return.

       4.      Learned counsel for the assessee contends that the circular of
       01.09.2010 was in fact formulated precisely, to cater to the exigencies
       in the present case. It is pointed out that CBDT was aware of the
       chaos and confusion, which prevailed after its earlier circular of 2009.

ITA 897/2016                                                           Page 3 of 9
       It is also contended that the assessee had in fact furnished the ITR-V
       forms within the period of 30 days through mail and the Circular No.3
       of 2009 had not formulated any specific procedure i.e. furnishing of
       such form under registered post or any other stable form, to enable
       due verification. In the circumstances, the assessee cannot be placed
       at a disadvantage for having filed the ITR-V forms again within the
       extended time on 01.12.2010.        Since the statutory period under
       Section 143(2) of the Act had gone past, the assessment completed
       under Section 143(3) could not be treated as valid and was correctly
       invalidated by the Appellate Commissioner and the ITAT.

       5.      The relevant part of Rule 12 of the Income Tax Rules was
       amended through the Income Tax Fourth Amendment, which was
       brought into effect on 14.05.2007. Rule 12(3), reads, as follows:-

               "(3) The return of income or return of fringe benefits referred
               to in sub-rule (1) may be furnished in any of the following
               manners, namely:--

                     (i)   Furnishing the return in a paper form;
                     (ii) Furnishing the return electronically under digital
                     (iii) Transmitting the data in the return electronically
                     and thereafter submitting the verification of the return in
                     Form ITR-V;
                     (iv) Furnishing a bar-coded return in a paper form."

       6.      Para 6 of the Circular No.3 of 2009 referred to Section 139C
       and 295(2) and stated that the returns required to be furnished in the
       concerned forms were not to be accompanied by attachment or

ITA 897/2016                                                           Page 4 of 9
       annexures. Having regard to this problem, it was imperative to enable
       assessees, such as the present, to file electronic forms without
       attaching the necessary ITR-V, which was mandatory, facilitating it
       furnishing to the Central Processing Centre. This part was spelt out in
       the said circular, at para 10, as follows:-

               "10. Since the Form ITR-V is bar-coded, assessee is
               advised not to fold the same and post it in A4 size
               envelope. The assessee shall furnish the Form ITR-V to
               the Income-tax Department by mailing it to "Income Tax
               Department- CPC, Post Box No - 1, Electronic City Post
               Office, Bangalore - 560100, Karnataka" within thirty
               days after the date of transmitting the data electronically.
               The Post Box shall deliver all the Form ITR-V to the
               Centralized Processing Centre (CPC) of the Income-tax
               Department in Bangalore. Upon receipt of the Form ITR-
               V, the CPC shall send an e-mail acknowledging the
               receipt of Form ITR-V. The e-mail shall be sent in due
               course to the e-mail address furnished-by the tax-payers
               in his return. No Form ITR-V shall be received in any
               other office of the Income-tax Department or in any
               other manner."

       7.      In the present case, the Appellate Commissioner in his detailed
       order, was of the opinion that when the furnishing of the ITR-V form
       on 01.12.2010 was in accordance with the Circular of 01.09.2010
       (which had provided for an extended period up to 31.12.2010 to the
       assessees to do so), the return filed originally i.e. on 30.09.2009, was
       deemed to be valid one. The discussion by the CIT (A) in this regard
       is as follows:-

ITA 897/2016                                                            Page 5 of 9
               "4.4      The E-Filing of Return Scheme of CBDT provides
               that where the return has been filed electronically without
               digital signature, on successful transmission the
               acknowledgement in form ITR-V will be generated by
               computer. The said computer generated form ITR-V shall be
               downloaded & after taking a print out it shall be physically
               verified under the signature of the taxpayer & shall be
               forwarded to the CPC, within the prescribed time period. If
               the said ITR-V in physical form is not sent to the CPC within
               the prescribed time period, then the return filed
               electronically will be considered as an invalid return. The
               scheme further provides that the date of e-filing of the return
               shall be considered as the date of furnishing of return if the
               computer generated ITR-V is furnished in the prescribed
               manner & within the prescribed time period. The CBDT
               vide its press release dt. 1.9.2010, has extended the time
               limit for filing ITR-V forms relating to ITRs for AY 2009-10
               filed electronically (without digital signature) upto
               31.12.2010 or within a period of 120 days of
               uploading/filing of the electronic return, whichever is later.
               There is no dispute that the assessee company has filed its
               ITR for the AY 2009-10 electronically on 30.9.2009 i.e.
               within the stipulated time period as prescribed u/s 139(1).
               The computer generated ITR-V was received by CPC
               Bangalore on 01/12/2010 within the prescribed statutory
               time limit. From the copy of the acknowledgement of the
               receipt of the said ITR-V issued by CPC the receipt of the
               same on 1.12.2010 & the e-filing of the ITR for AY-2009-10
               on 30.9.2009 is clearly evident. In view of the above, as the
               duly verified and signed computer generated ITR-V was
               received by CPC, Bangalore before 31/12/2010, therefore,
               the e-return filed on 30/09/2009 is a valid return. On
               identical issue, Hon'ble ITAT Cochin Bench in the case of

ITA 897/2016                                                               Page 6 of 9
               EKK & Co. vs. ACIT in ITA Nos.138 & 223 (Coch.) of 2012
               in its decision dt.16/11/2010 held:

                 "Para 5. The scheme framed by the CBDT clearly says
                 that where the return was filed electronically with
                 digital signature the acknowledgement generated
                 electronically shall be evidence for filing of the return.
                 Wherever, the return was filed electronically without
                 digital signature, on successful transmission, the
                 computer shall generate acknowledgement in form ITR-
                 V. The form ITR-V generated by computer shall be
                 downloaded and after taking a print out it shall be
                 physically verified under the signature of the taxpayer
                 and forwarded to the CPC. The scheme has also
                 clarified that the date of transmitting the return
                 electronically shall be the date of furnishing of return if
                 the form ITR-V is furnished in the prescribed manner
                 and within the period specified. In this case, the period
                 specified is 31-12-2010 or 120 days from the date of
                 uploading the return whichever is later. Admittedly
                 form ITR-V was received by CPC on 29-11-2010 is
                 within the prescribed time in the prescribed manner in
                 the prescribed form. Hence, for all practical purpose,
                 the date of filing of the return shall relate back to the
                 date on which the return was electronically uploaded
                 i.e 25-09-2009. Therefore, the contention of the ld.DR
                 that receipt of Form ITR-V is the date of receipt of
                 return has no merit at all.

                 6.     In view of the above, the date of filing of the
                 return of income is 25-09-2009. Therefore, the notice
                 served on the taxpayer u/s 143(2) on 26-08-2011 is
                 beyond the period of six months from the end of the
                 financial year in which the return was furnished.

ITA 897/2016                                                                   Page 7 of 9
                Therefore, the notice issued by the assessing officer u/s
                143(2) is invalid. Hence, it cannot be acted upon.
                Consequently, the assessment order passed by the
                assessing officer cannot stand in the eyes of law.
                Therefore, the same is quashed."

       8.       The con-joint reading of para 10 of Circular No.3 of 2009 and
       the circular dated 01.09.2010 makes it clear, beyond any manner of
       doubt, that, CBDT itself was alive to the difficulties faced in
       implementation of Section 139C, having regard to the phraseology in
       Section 295B. In the event of assessee choosing to file without digital
       signatures as per Rule 12(3) of the Income Tax Rules, there was a gap
       in the Statute ­ even a conflict. The Rule was, in essence, at war with
       the express provision of the Statute, which required assessees not to
       attach annexures or documents. Thus, the assessee could not attach the
       ITR-V form or provision or even send any scanned form. To mitigate
       the hardship, the CBDT felt that it was imperative to provide 30 days'
       period as it did through Circular No.3 of 2009. It later, realised that
       more confusion arose on account of limited period and the procedure
       provided, and therefore, it extended the period on 01.09.2010 upto
       31.12.2010 or 120 days from the filing of the return, whichever was
       later.     In the present case, the assessee had filed its return
       electronically on 30.09.2009. It says that it availed of the filing of the
       ITR-V forms through post. The Revenue is not in a position to verify
       either way. It is precisely to cater to this circumstance that the circular
       of 01.09.2010 (especially para 2) extended the period. The extension
       of this period necessarily meant that ITR-V forms received during

ITA 897/2016                                                                Page 8 of 9
       such extended period validated the returns originally filed. The
       interpretation sought to be placed by the Revenue now that fresh
       returns were necessary, in the opinion of the Court, flies against the
       opinion of the CBDT and the circumstances, under which, both the
       circulars were framed and published. In other words, these circulars
       were necessitated on account of the legislative gap ­ even conflict
       between the Rules on the one hand, which mandated electronic filing
       and other provisions of the Statute, which prohibited the attachment of
       annexures along with returns, which resulted in ITR-V form, as were
       in the present case.

       9.      Having regard to the above discussion, the Court is of the
       opinion that the question of law framed in this case is to be answered
       in favour of the assessee and against the Revenue. The appeal is
       therefore dismissed. No orders as to costs.

                                                     S. RAVINDRA BHAT, J

                                                         A. K. CHAWLA, J

       JANUARY 04, 2018

ITA 897/2016                                                         Page 9 of 9
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