Belated Return Filed u/s 139(4) Satisfies Proviso to S.201(1) of Income Tax Act: ITAT Allows Appeal [Read Order]

The Raipur Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the appeal, stating that belated returns filed under Section 139(4) satisfy the "1st proviso" to Section 201(1) of the Income Tax Act,1961.

Meera Roadlines, the appellant-assessee,filed its return of income on 14.11.2019, declaring Rs. 87,490/-. The DCIT, CPC, disallowed Rs. 8,39,753/- in interest paid to NBFCs under section 40(a)(ia) of the Act, noting that the firm failed to deduct tax at source on payments to Cholamandalam Investment and Finance Company Ltd. and HDB Financial Services Ltd., leading to a 30% disallowance of the interest expenditure.

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The assessee firm appealed against the Assessing Officer(AO)’s assessment, which was primarily upheld. It was noted that the chartered accountant incorrectly reported the failure to deduct tax at source on interest paid to  Non-Banking Financial Company(NBFC)s, resulting in a complete disallowance of the interest under section 40(a)(i) of the Act. The disallowance under section 40(a)(ia) was subsequently limited to 30% of the total interest paid.

The Commissioner of Income Tax (Appeals)[CIT(A)] dismissed the assessee's claim based on the payees' certificates, as both payees had not submitted their income tax returns within the required timeline under section 139(1). Thus, the CIT(A) upheld the disallowance under section 40(a)(ia) but reduced it to 30% of the interest expenditure, leading to a partial allowance of the appeal.

Aggrieved by the decision of the CIT(A) the assessee appealed before the tribunal.

The tribunal held that a belated return under subsection (4) of Section 139 is valid under Section 139. The Hon'ble Punjab & Haryana High Court in CIT vs. Jagriti Agrawal ruled that subsection (4) of Section 139 extends the filing deadline in subsection (1), allowing the assessee to claim a deduction under Section 54 after purchasing a new property within the extended period, which led to the dismissal of the appeal in favor of the assessee.

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The bench held that since the "1st proviso" to Section 201(1) of the Act requires the payee to have filed their return under Section 139, the belated returns filed under Section 139(4) by the payees in this case satisfied the condition. Therefore, the tribunal disagreed with the CIT(Appeals), who had denied the concession and rejected the firm's claim for not being treated as an "assessee in default."

A single member bench of Ravish Sood(Judicial Member) allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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